By Lloyd Graff.
This modest 1300 square foot 3-bedroom 2-bath home in Palo Alto, sold for $1,750,000 in February of 2014.
What’s going on in the world? This is how it looks to me after two weeks in Silicon Valley, on sort of a vacation.
The U.S. economy continues to rebound – but rather like a partially deflated basketball. Growth is tepid after a rough first quarter when the ferocious five-month winter in the North killed retail. Yet the numbers show unemployment receding, with some of the long-term unemployed actually finding work, but wage growth is still very light.
New home sales are mediocre, mortgage rates are trending down again. Home re-sales are robust in San Francisco, San Diego and Boston, but mediocre in Chicago and New York. Detroit is bouncing back again, but it is long way from getting out of the toilet. Some people expected Baby Boomers to be moving en masse to apartments but it is not happening. A weak home market, especially in suburban markets, and high prices for apartments and condos in city centers make an exodus by boomers to the city uneconomic. A Boomer exodus to warmer climates has been slow to happen, probably because 60-70-year-old folks feel they need to work more to afford a pensionless retirement with incredibly minuscule interest on savings.
I have an unusual view of the housing, Baby Boomer and unemployment world. I live in the depressed area of the Southern Suburbs of Chicago, in the once high-end suburb of Olympia Fields. It is the home of the elite Olympia Fields Country Club, which hosted the 2003 U.S. Open Golf Tournament. Back in the day, it allowed no Blacks, Jews and probably not Eskimos, if any ever applied. Today it cannot afford to be quite as restrictive. A middle class Navajo might pass muster. Olympia Fields ranked in the top five Chicago suburbs 35 years ago. Today it might make the top 40 in the Chicago metropolitan area.
My 3000 square foot home is worth slightly more than the $136,000 we paid for it in 1979. My wife and I have put a ton of money into improvements for it. It is within walking distance of the Metra commuter train. You can get to downtown Chicago in a half hour on the express train.
During the housing boom of 2004-2007, many African Americans used 100% financing to buy homes in Olympia Fields. A lot of them lost their homes a few years later. Several neighbors of ours are now renting their homes from lenders and speculators who are still buying up more homes in the neighborhood for a song. Half of the re-sales in Chicago’s suburbs are for cash these days. Low mortgage rates are for the few in 2014, not the masses. My neighbors, at least those that I know, are an eclectic group of bus drivers, teachers, doctors, lawyers and retired folks.
When my wife and I travel to Silicon Valley to see our daughter’s family, we see the bungalows built in 1959 up for sale, with full page ads in local newspapers. Usually they are unoccupied, staged with brought-in furniture, carpeting, lighting and landscaping to give the small houses drama. Prices start in the $1.5 to $1.8 million range and often attract overbids. It is unusual for a house to last a month on the market near Stanford University.
New multi-family housing is going up, but there are no available vacant lots to build single family houses. If you want to buy into the area, you play the game, otherwise, head 30 miles down the freeway where more affordable housing still exists.
We’ve now had the opportunity to see both ends of the housing spectrum. Chicago is generally still soft, but where we live it is toasted marshmallow soft. Some people see depressed housing prices as part of a conspiracy against African-Americans. This month’s cover story in The Atlantic is a long diatribe, arguing for reparations for Black people as compensation for 500 years of persecution. The story focuses on Chicago.
I’m wondering. Should I be paying reparations to my next door neighbors in Olympia Fields? I get the writer’s point, but America is not Nazi Germany. Olympia Fields is not Nuremberg.
America is a country of rich and poor, to be sure, but I do not feel the outrage that I see in the popular press or from self-serving politicians and professional do-gooders.
At Graff-Pinkert we recently hired several men, comprised of Hispanics, Whites, and African Americans, for our machine cleaning department at $10.50 per hour, no benefits. They are eager to work and found the job vacancy on Craigslist. Most of them are turning out to be good workers who don’t mind working hard and getting dirty.
It’s America, summer of 2014. Boomers keep on trucking. People are finding work if they are smart enough to read Craigslist, take their hats off, and make appointments on time. Googlers are paying $2 million for homes in Palo Alto that bus drivers would pay $150,000 for in Olympia Fields. If you mow grass for a living you make the same in both locations, but the season is longer in the Valley.
Question: Do people work harder today than they used to?