Tag Archives: American Dream

McKinsey predicts drop in car ownership (after 2040) due to self-driving cars

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McKinsey suggests one side effect of self-driving cars will be less need for owning one:

But it’s in Phase 3, after 2040, that the fun begins. This is the point where autonomous cars become our primary means of transport, and all the rules are up for debate. Just as car design will fundamentally change once things like forward-facing seats, mirrors, and pedals are no longer necessary, the way we structure physical space could evolve: McKinsey predicts that by 2050, we might need just 75 percent of the space we now reserve for parking our cars. Because this is America, that means we get back 5.7 billion square meters of space—enough to hold the Grand Canyon and then some. That’s because autonomous cars can pack themselves together tightly (no need to allow space for human to exit).

More than that though, our entire idea of car ownership could change. Currently, cars sit unused about 95 percent of the time. That leaves a lot of room for improvement in terms of how we allocate resources.

We won’t stop buying cars altogether—people will still want the option to “independently drive and use the vehicle, and have fun doing so,” says Kaas— but we will buy fewer cars. Without the need for a human at the helm, one autonomous vehicle could take the place of two conventional vehicles: If Joan is going golfing and Joe needs to go shopping, a single car could drop Joan off at the club, swing back to the house to take Joe to the supermarket and back, then return to the club and get Joan. Kaas also predicts you could see the rise of private commuting services, shuttling customers around for a fee.

The recurring theme in the McKinsey report is that the consumer wins. Yes, cars crammed full of high-end technology will likely cost several thousand dollars more than they do today. But “drivers” will save money in the form of regained time (spend your commute working instead of driving!) and many fewer accidents: McKinsey pegs the savings on repair and health care bills alone at $180 billion in the US, predicting a 90 percent drop in crashes.

Cars are expensive so this could theoretically save money (as long as the new autonomous cars have reasonable price tags) and offer more convenience. Yet, it could take a lot to overcome the American love of cars. They aren’t simply about convenience or getting from Point A to Point B (and Americans would always choose mass transit if it were more convenient and effective). It is about other ideas in the American Dream, about freedom and independence and having a status symbol and being mobile. Perhaps by 2040, these things won’t matter as much as we all adjust to autonomous vehicles (and perhaps legislation that makes them the norm for safety’s sake). But, this isn’t just a technological change; this requires some big cultural changes as well.

Expanding beyond making furniture for McMansions

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Ashley Furniture has its sights on global markets as it moves past McMansion furniture:

His son, Todd Wanek, the company’s chief executive, says simply: “We want to grow in the 7% to 10% range every single year”—or more than twice the rate of U.S. furniture-industry sales growth in recent years.

Those ambitions are taking the Waneks outside their comfort zone of making furniture styled for American McMansions. Ashley is now trying to sell furniture in Asia, where it is making a much bigger bet than its U.S.-based rivals.

For example, a local partner of Ethan Allen has opened 75 retail outlets in China to showcase upscale products. Ashley is aiming for 1,000 stores in Asia in 10 years, up from its current total of 35. The company also is opening stores in the Middle East and Central America, among other places, partly to reduce its reliance on any one market.

No other U.S. furniture maker has tried to expand internationally on the scale planned by Ashley, and it hasn’t been easy. On a recent Sunday, only a couple dozen customers were browsing at Ashley’s 35,000-square-foot store on four levels in Shanghai’s Zhong Shan Park neighborhood.

Two thoughts:

1. This hints at the larger economic impact of McMansions. While people may focus on the real estate and development aspects (land, constructing homes), there are numerous other goods associated with McMansions from certain kinds of vehicles (the ubiquitous SUVs) to furniture to fill all of those rooms. If real estate has slowed down in the United States in recent years, then such companies will need to change their strategies.

2. This also highlights globalization in one particular industry. Ashley first had to figure out in the 1980s how to compete against global manufacturers and now is looking to capitalize on growing markets elsewhere (even as the American market shows its limits). But, it isn’t just about selling furniture; such furniture requires higher incomes, more middle-class tastes in other countries, and homes where this furniture will fit right in. In other words, this furniture is just a part of exporting the American middle-class dream where one can walk among rows and rows of furniture and easily plunk down some money (or access credit) or update one’s home furnishings.

Loss of housing wealth hits black suburbanites hard

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The housing and economic crisis of the last decade has hit black suburbanites particular hard:

But today, the nation’s highest-income majority-black county stands out for a different reason — its residents have lost far more wealth than families in neighboring, majority-white suburbs. And while every one of these surrounding counties is enjoying a strong rebound in housing prices and their economies, Prince George’s is lagging far behind, and local economists say a full recovery appears unlikely anytime soon…

The recession and tepid recovery have erased two decades of African American wealth gains. Nationally, the net worth of the typical African American family declined by one-third between 2010 and 2013, according to a Washington Post analysis of the Federal Reserve’s Survey of Consumer Finances, a drop far greater than that of whites or Hispanics…

Not only is African American wealth down, but the chances of a quick comeback seem bleak. Just over a decade ago, homeownership — the single biggest engine of wealth creation for most Americans — reached a historic high for African Americans, nearly 50?percent. Now the black homeownership rate has dipped under 43?percent, and the homeownership gap separating blacks and whites is at levels not seen in a century, according to Boston University researcher Robert A. Margo…

Many researchers say the biggest portion of the wealth gap results from the strikingly different experiences blacks and whites typically have with homeownership. Most whites live in largely white neighborhoods, where homes often prove to be a better investment because people of all races want to live there. Predominantly black communities tend to attract a narrower group of mainly black buyers, dampening demand and prices, they say…

Scholars who have studied this dynamic and real estate professionals who have lived it say the price differences go beyond those that might be dictated by the perceived quality of schools, or the public and commercial investment made in particular neighborhoods. The big difference maker, they say, is race.

In other words, simply promoting homeownership – a key part of the ideal of the American Dream and also something taken as a sign that various groups have made it – is not the complete answer for thinking about equality among different groups. What homes people own and where they are located also matter. Decades of research in urban sociology and related areas shows that blacks and other minorities often don’t live in the same suburban settings as white suburbanites. Their homes tend to be located in poorer neighborhoods and neighborhoods that have higher non-white populations. This is due to a variety of reasons including long-term white wealth that gives whites better opportunities to move to wealthier and whiter places, zoning practices in wealthier communities that tend to limit cheaper or affordable housing (examples here and here), mobility patterns among whites that show they leave neighborhoods and communities as they become more non-white (the process of “white flight” continues in some suburban areas), and patterns of mortgage lending as well as renting that tend to take advantage of poorer and non-white residents. Tackling the issue of residential segregation still matters today even as more minorities and poor residents move to the suburbs.

 

Immigrants might save the American housing market?

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The real estate market may be sluggish but some data suggests immigrants offer hope with their desires to own homes:

But in some groups the dream, at least of homeownership, is alive and well. During the past two decades, immigrants have accounted for 27.5 percent of all household growth, according to the Harvard Joint Center for Housing Studies. When it comes to growth among younger generations, the foreign-born population is even more significant, accounting for nearly all the household growth for those under the age of 45.

Last year, immigrant households made up 11.2 percent of owner-occupied housing according to the JCHS—that’s up from only 6.8 percent in 1994…

The exact rate of homeownership varies among different immigrant groups, but overall the share of immigrants who own homes is growing. In 2000, the rate of homeownership among immigrants stood at 49.8 percent, according to a study by the Research Housing Institute of America. By 2010 the rate was 52.4 percent, and by 2020 that number will climb to about 55.7 percent, the study predicts. In the third quarter of 2014 the overall homeownership rate in the U.S. was 64.4 percent, according to the Census Bureau.

There are several reasons behind the growth rate in homeownership for immigrants, but part of the impetus may be that many immigrant populations are less cynical about the idea of homeownership than their American-born counterparts. “They view homeownership as a piece of the rock. It’s a benchmark of being settled,” says Dowell Myers, a professor at the Sol Price School of Public Policy at USC. “They view homeownership as the American Dream and they buy into that.”…

Even more compelling are the possibilities for homeownership among the children of immigrants. “When you look at the children of immigrants they actually exceed the native born on a lot of measures: on income, on education, on homeownership,” says Masnick.

Is there some irony here if it is conservative and older whites and immigrants who buy into the American Dream of owning a home the most? Of course, they may not be buying homes in the same places given ongoing patterns of residential segregation as well as different preferences of urban, suburban, and rural living.

The American Dream and how Chicago magazine determined “Chicago’s Best Places to Live”

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Chicago has a new list of the best places to live that includes 12 Chicago neighborhoods and 12 Chicago suburbs. Here are the factors the magazine used to identify these communities

First we looked at the factor that tends to be uppermost in the minds of families these days: safety. We eliminated from contention all community areas that notched violent crime rates higher than 7.0 offenses per 1,000 inhabitants last year (the city average: 9.3 per 1,000). That meant tossing out the Loop (9.9 per 1,000) and the historic South Side neighborhood of Pullman (11.2 per 1,000), for example. And we eliminated suburbs with violent crime rates above their county’s average—which removed from contention such otherwise appealing places as Evanston (2.2 per 1,000) and Oak Park (2.7 per 1,000), both in Cook County (2.1 per 1,000).

Then we turned to education. If a town or community lacks a public school whose students score above average on standardized tests, we dinged it. And because raising kids in an area that’s at least somewhat diverse is a goal of most parents, we nixed spots where more than 92 percent of residents are of any one race. (Bye-bye, Kenilworth, Western Springs, and Winnetka.)

For the places that remained, we looked at ease of transportation downtown, giving extra points to those that have several el stops and at least one Metra stop. (Places with outstanding schools and low rates of property crime also got bonus points.) And we considered how home prices in these places have fared in recent years compared with prices in neighboring areas, as well as whether buyers there can get good value for their money—which is not the same thing as paying the smallest amount. (For detailed price charts covering all Chicago suburbs and neighborhoods with at least 20 home sales in 2013, see this page with all the housing data.)

Finally, I hit the pavement to assess which spots possess those hard-to-define qualities that matter hugely when you’re looking for somewhere to live. Things like vibrancy (are there lots of bustling restaurants and shops?). Beauty (are there architecturally interesting buildings or just cookie-cutter developments?). Friendliness (does the community have a natural center that brings people together?). Is it, quite simply, a great place to call home?

So it boils down to safety, good schools, good transportation, higher than average housing values, and quality of life. Such measures are not uncommon on Best Places to Live lists.

However, it struck me upon reading this list that these traits tend to match a particular vision of a good community. If I may put it this way, it is a middle to upper-class ideal where kids are safe and nurtured and communities are protected from the difficulties of the world. It roughly matches the American Dream where people can live in small-town type places (even though most Americans do not live in such areas, they harbor the ideal of living in a tight-knit community – even if they may not want to contribute much to it) in relative comfort.

Just to take the two examples from DuPage County, Wheaton and Hinsdale, these communities partly derive their ranking from protecting this particular vision over the decades. Not everyone can move into these communities; it requires a certain amount of money as the affordable housing the communities discuss has much more to do with allowing senior citizens and recent college graduates to have somewhere to live rather than truly addressing low-income residents.

Maybe this methodology does reflect what many Americans want. The suburbs on the list are nice and the Chicago neighborhoods, while having more diversity, tend to be the more sought-after ones. At the same time, such lists could reinforce the notion that protected and wealthy places are the best ones, the ones we should all aspire to live.

Reactions “when your childhood home becomes a ‘teardown’”

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A reporter describes seeing her childhood home make way for a teardown:

I understand why the house is being torn down. The stairs aren’t up to today’s construction codes. The bathrooms and kitchen are small. When someone slams the door in the garage, you can feel the vibrations upstairs in my brother’s old bedroom. The plumbing, windows and electric wiring haven’t been touched in decades. The metallic wallpaper with blue flowers in the bathroom my brother and I once shared says it all: The house is clearly outdated.

Still, I dread its rendezvous with a wrecking ball. When my childhood BFF’s century-old house was bulldozed last spring (goodbye high ceilings and ornate mantelpieces), the teardown trend in our old neighborhood suddenly became personal. Was some nefarious force—McMansion mania? Voldemort?—out to destroy my childhood haunts?

And what might explain such emotions?

Irene Goldenberg, a family psychologist and professor emerita at the University of California, Los Angeles, says teardowns can be more traumatic for former owners, and their children, than sales in which a house survives.

For one thing, she says, it’s hard to escape the finality of a teardown, which makes it all the more obvious “that you can no longer go back to the safety and comfort” of childhood. “It’s in your face,” she says.

There is also an obvious analogy to my aging parents. With new construction springing up all over the neighborhood, the house suddenly looks like a relic of another era. Still, when I came across the property records in my parents’ files last spring, the comparison that immediately sprang to mind was to myself. Although I had always assumed the house was older, it was actually erected just a few years before I was born in 1964.

For many people, childhood homes function like a psychological safety net, says Gerald Davison, a professor of psychology at the University of Southern California. “Even if you don’t feel comfortable knocking on the door, it’s nice to know that it’s always possible to do so” and reconnect with childhood, he says.

Neighborhoods do change over time but homes often represent permanence. This hints at the broader ideology of the American Dream as well as childhood. The first refers to the emotional attachment to single-family homes on plots of land, places that people can call their own. The second involves the development of childhood as a sort of “golden age” in the lifecourses filled with good experiences and exploring the world.

It would be interesting to hear more about the expression of and limits to such emotions. Perhaps we can add “McMansion mania” to the list of childhood bogeymen…

How life stages affect decisions about housing

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Life stages, including cohabitation or kids leaving the house, can trigger different housing choices:

Unmarried. Singles are more likely to rent and live in locations that are closer to entertainment and employment, which is why these areas are more in demand today than usual.

Togetherness. Cohabitation has been on the rise in recent decades, but homeownership rates for these couples are much lower than rates for their married counterparts.

Marriage. Marriage often increases the desire to own a home; many location and housing choices depend on income and nearby family.

Children. The addition of little ones makes owning a home feel like a necessity for many, given the desire for yards, good schools and social circles for the kids.

Children moving out. An empty nest often results in lifestyle changes, including different home-size preferences, social circles and floor-plan needs. Locational preferences also begin to shift.

The first two stages suggest a decrease in homeownership, the next two based around marriage and kids involve the more traditional American Dream, and the last seems to revert to the first two when more options are available. Are we headed toward a housing market where owning a home is primarily about kids? This has always been a key factor in moving to and living in the suburbs, which is closely linked to homeownership.

The flip side of this is to ask how real estate agents and builders will respond to these life stages. Can they afford to target each stage with specialized housing? Are there ways to have more flexible housing that can transition as the lifecourse changes?

Watch for more personal appeals from home sellers

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Personal appeals from home sellers may be the next big thing in real estate:

Watch for this to take off in home listings: Sometimes, in a bidding war, you hear about homebuyers writing love letters about themselves — words that explain what wonderful families they have, how they’re crazy about the house, etc., in order to persuade sellers to choose them over other bidders.

Now comes a vaguely comparable feature for sellers: Coldwell Banker Real Estate recently revised its listings to allow home sellers to post personal stories, photos and videos about their homes, with the aim of making their listings stand out. Among the first to take up the offer were actors William Macy and Felicity Huffman, who explained their affection for the house they’re aiming to sell in Colorado: “Felicity and I love to hike up toward Sopris Mountain, right out the back door. … We put a secret door between the kids’ bedrooms, which has been a huge hit.” The brokerage says that all of its seller-clients can add their own content to their listing pages, although it must be approved by their agents.

Positive emotions seem to be the key to such appeals. If the opposite party is touched, the home can be sold for more or bought for less. It all may seem cheesy but selling and buying a home can be a very emotional process. As economic sociologists and others have found in recent decades, such decisions are not just about dollars and cents but often include complex emotional reactions. Buying and selling certainly counts as an emotionally fraught process from the amount of money involved to the transitions involved (changing communities, jobs, etc.) to the commonly-invoked American ideals of “making it.”

I would love to see some data on this: how much does an effective letter change the price? And, on the flip side, how might a poorly worded letter damage the party who wrote it?

Gas prices go down, SUVs and Hummers return. Could the same idea hold for McMansions?

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SUV sales have picked up in recent months as gas prices dropped across the United States:

Over the last month, auto analysts say, consumers have shown a fresh interest in the kind of SUVs — Hummers, Lincoln Navigators, Ford Explorers — that typified America’s bigger-is-better mindset of twenty years ago. The new mindset among some car buyers is one of the most unexpected consequences of a domestic oil boom that has helped cause global crude prices to plummet in recent months, with the cost of a gallon of gas now below $3.

As oil prices hit a three-year low, Americans are starting to see price changes that could ultimately influence everything from their grocery shopping to their heating bills to their travel. The lower prices — should they be sustained, as expected, for the next few months — have the potential to nudge the U.S. further away from its dreary post-recession mindset, leaving instead a nation with more affordable air and road transportation options, higher consumer confidence, and yes, a few more gas guzzlers driving around…

One measure is the share of “trucks” — including pick-ups, SUVs and crossovers — among total vehicles sold. Before the financial crisis, trucks almost always outsold cars, in some months grabbing as much as 59 percent of the market. Post-recession, the industry has flip-flopped; cars are more popular.

But not in recent months. In September, the truck market share was 53.5 percent. In October, it was 53.6. That is the best sustained two-month stretch since 2005.

As for those Hummers? Autotrader.com said interest in Hummer H1s on its site rose 11 percent last month, making it the fastest-growing older model among all vehicles.

As gas prices drop, Americans are returning to some of their consumption patterns from the late 1990s and early 2000s when the economy was doing better. Even though they have seen higher gas prices (which could return soon), gone through a great recession, and government regulations encourage more MPGs across all vehicles in the coming years, some Americans want bigger vehicles that require more gas.

This is interesting in itself but I wonder if the same general concept could apply to McMansions. One argument about reducing purchases of SUVs and McMansions, often paired symbols of excessive consumption, is that Americans needed to be shocked by high gas prices and hard economic times before they would change their behavior. Yet, the recent data about gas prices suggests Americans might just return to their spending patterns once things look better. (And, with the gas prices, it is not like they are likely returning to the $1.20-$2.00 range of not that long ago.) Might the same apply to McMansions? Even with all the fanfare about smaller homes, more reasonable debt loads (whether through mortgages or car loans), and critiques of the kind of sprawling communities in which communities are often built, will Americans return to McMansions once the economy picks up?

I, for one, wouldn’t be surprised. Even during the recession, people with money continued to purchase and build large homes. Homes do require a larger financial commitment than SUVs but they also are highly symbolic and linked to suburbs, all dealing with the American Dream. Perhaps the best hope for fighting these consumerist impulses is pervasive generational shifts, particularly kids, teenagers, and young adults who don’t want cars and suburban houses in the same way over time.

Fortysomethings have more influence on sluggish housing than millennials

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While millennials currently have lower homeownership rates than in the early 2000s, Derek Thompson suggests fortysomethings are the bigger issue for the sluggish housing market:

The economy has a Gen-X problem. It’s a small cohort with a much-smaller-than-usual homeownership rate. And people wonder why the housing market is sluggish.

Update: Read Trulia’s Jed Kolko on why the middle-aged are the true lost generation of homeowners. In short: They bore the brunt of the foreclosure crisis:

In 2005, the year when the true homeownership rate peaked for most age groups, 25-to-29 year-olds were the age group for which homeownership was highest relative to the demographic baseline, followed by 30-to-34 year-olds. These were first-time home-buyers getting easy credit for overpriced homes; then, they bore the brunt of the foreclosure crisis, losing their homes and wrecking their credit history…

The millennial generation was still in their early 20s or younger in the mid-2000s–too young to have bought during the bubble and then to have suffered a foreclosure: Only the oldest among the 18-to-34 year-old group in 2013 would have been of home-buying age during the bubble.

Interesting data. Generation X had bought into the American Dream and the importance it places on owning a home but they were badly burned by the housing collapse. They were in the wrong place at the wrong time: eager to buy homes, able enough to overpay based on decent jobs, and particularly indebted when their housing values tanked.

There is another issue at play here: while millennials may not have been very involved in the economic crisis, they are the generation that could continue the homeownership ideal among Americans. If they choose otherwise – and perhaps they are watching those older than them – then there may not be much of an upward tick compared to Generation X.

Side note: a funny quote from earlier in the article.

It is a truth universally acknowledged that a journalist in possession of a negative statistic must find a way to blame Millennials for it.

Generational blame is alive and well even in our advanced rational and enlightened age. Talking about generations is an easy shorthand for analyzing social trends. Whether such talk holds water compared to other age breakdowns or other data may be another matter…