Tag Archives: economic crisis

Americans want smaller homes but are still looking online at big ones

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There have been several indicators in recent months that Americans are interested in smaller homes. But what if they say they would purchase smaller homes but are still looking at bigger homes? An economist for Trulia.com discusses this:

We asked people to tell us their ideal home size. They’re shunning super-sized homes, the McMansions. Only 6 percent of Americans say their ideal home size is more than 3,200 square feet. Thirty-two percent said they see the ideal home at 1,401 to 2,000 square feet. About 27 percent said 2,001 to 2,600 square feet.

This is partly due to the economic troubles of the recession and recovery. But this could be part of a permanent shift toward smaller homes. And it could reflect baby boomers wanting to downsize and increasing environmental awareness, with some people wanting a smaller environmental footprint.

On the other hand, when we look at the homes that people view on our site — even though only 6 percent of the people in our survey said the McMansion size range was ideal — 27 percent of the property views people are looking at are of that size. So even though people aren’t saying those large homes are their ideal size, they want to see what these homes look like and want to dream big.

This disconnect could be explained in several different ways:

1. Americans look at bigger houses online because it is free. These days, one can look at hundreds of homes and get a good idea what is on the market. Perhaps we would need to ask realtors about what sized homes people actually ask to see.

2. Americans actually do want to buy bigger homes but they know the economic realities and perhaps even the cultural shift and so say they would want a smaller home. As the economist suggests, Americans simply like to dream big. This certainly wouldn’t be the first time that self-reported actions and aspirations don’t match up. If the economy picked up, we could then figure out whether the shift toward smaller homes is real or was a reaction to the economic crisis.

3. Americans want to look at bigger homes because they want the features of the bigger homes in a smaller home.

Time will help us figure out which of these interpretations is most accurate as would more data.

You can read Trulia.com’s press release concerning the survey here and a more  interpretation here. The web survey involved some weighting:

Figures for age, sex, race/ethnicity, education, region and household income were weighted where necessary to bring them into line with their actual proportions in the population. Propensity score weighting was used to adjust for respondents’ propensity to be online. These online surveys are not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodologies, including weighting variables, click here.

“Not based on a probability sample” is usually a problem for surveys, even if proper weights are assigned to results. I would like to see some more thorough survey data on some of these issues.

Poor in the suburbs: a growing plurality in the United States

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After a headline earlier this week about a “suburban depression,” more data shows the suburbs contain a growing plurality of the poor in the United States:

Significantly, the 2000s also marked a turning point in the geography of American poverty. The 2010 data confirm that poor populations continued their decade-long shift toward suburban areas. From 2000 to 2010, the number of poor people in major-metro suburbs grew 53 percent (5.3 million people), compared to 23 percent in cities (2.4 million people). By 2010, suburbs were home to one-third of the nation’s poor population—outranking cities (27.5 percent), small metro areas (20.5 percent), and non-metropolitan communities (18.7 percent)…

The magnitude and pace of growth in the suburban poor population over the past decade caught many communities unprepared and ill-equipped to deal with the growing need. In many suburbs, the safety net is patchy and stretched thin to begin with. The suburban social services infrastructure is not as developed or robust as in urban centers with a longer track record of addressing the challenges of poverty, nor is it as funded. And as governments continue to tighten their belts and philanthropic resources dwindle, safety net service providers are increasingly asked to do much more with significantly less.

There is also an interesting map showing the differing rates of growth in the suburban poor population across major metropolitan regions in the United States.

What’s the long-term solution to this? From what politicians seem to be suggesting, middle-class suburbanites need help keeping/buying a home, middle-class tax breaks, and good jobs. How exactly can the typical suburban communities provide services in this era of economic crisis? I wonder how much politicians and suburban communities are willing to truly deal with this or whether the ones that can afford to (or think they will afford to) will act like the issue doesn’t really exist and can’t be allowed to threaten the image of prosperous suburbs.

How the recession is affecting American society

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USA Today looks at “the sociology of recession” – how the economic crisis is changing some key features of American society. A quick overview: Americans are getting married later, the birth rate for 20 to 34 year olds has dropped, the divorce rate has dropped, more Americans are now living with relatives, the home vacancy rate is up, driving alone more, and fewer children are attending private schools.

This article suggests these features could become “the new normal,” particularly for younger generations who are facing more uncertain futures, but I’m not so sure. If the economy turns around, which of these would continue to decline and which ones would reverse direction? I suspect the marriage age and birth rate would still decline – these are longer term trends in the United States that also mirror patterns in other industrialized nations. The divorce rate was declining prior to the economic recession, at least according to the 2011 Statistical Abstract (see Table 1335), so perhaps this would continue. The last four I suspect would change course with a better economy.

The “suburban depression”

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The ongoing economic crisis has hit a lot of sectors of American society. Some new data suggests the economic crisis has particularly hit the suburbs, the proverbial “land of milk and honey” in American life:

There has not been so large a portion of Americans in poverty since 1993. But this time the growth in poverty is different, hitting whites and suburbia harder than it did during the early 1990s slump…

The suburban poverty rate is 11.8 percent, a level not seen since 1967…

A key factor in the rise in suburban poverty may be the fact that the housing market has played such a central role in the economic slump.

Many suburbs have seen a vast amount of wealth erased by declining housing markets and mortgage foreclosures, resulting in a great deal of economic dislocation. Since white Americans are more likely to own homes than African Americans, this could also explain why whites have fared worse than they did in the 1990s while African Americans have fared better.

The interpretation here is that with homes losing a significant portion of their value, an investment vehicle that many suburbanites had relied on has proven to be a hindrance instead. I would want to see more data: how does the growth of the poverty rate in the suburbs compare to cities and rural areas? If you look at the Census 2010 figures, the poverty rate for central cities is 19.7% (14.8% for metropolitan regions) and it is 16.5% outside of metropolitan areas. While falling housing prices may be part of the problem, what about jobs – are a higher percentage of lost jobs suburban jobs? I haven’t seen anyone write about this jobs link.

This data also affects two other larger ideas narratives about suburbs:

1. Life in the suburbs is not supposed to get worse; rather, it is supposed to always get better. Have we simply reached the point where the standard of living and incomes simply can’t rise much more?

2. There is evidence from recent years that more poor people live in the suburbs than in cities. While the percentages of poor people are lower in the suburbs, the absolute numbers are higher. This is part of a growing trend: the suburbs aren’t just (and never totally were) where wealthy whites can live.

Bill Clinton: “The American Dream has been under assault for 30 years”

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Former President Bill Clinton, speaking as part of the 10 year anniversary of his foundation, said “The American Dream has been under assault for 30 years.” He says this has happened for two (actually three?) reasons:

1. The challenges of globalization and the information age “which eliminated a lot of intermediate jobs.”

2. Corporations once had more equal responsibility among shareholders, communities, and workers (roughly 35-40 years ago and earlier) whereas today they act as individuals only beholden to shareholders.

3. A thirty year long anti-government rant that says “the government is the source of all our problems.”

Is this just a list of Democratic Party talking points?

More seriously, Clinton’s first point is well accepted: the world has changed. Globalization and information have changed the American and global economy and America is still struggling to catch up. The Rust Belt cities of the Northeast and Midwest are a great example: the departure of good-paying manufacturing jobs has shifted the landscape and cities and states are still scrambling to fill this void. The second issue regarding corporations is also notable: the quest for profits and meeting shareholder’s expectations has seemed to increase. The gap between CEO pay and that of the average worker has only widened. The median income for all Americans has dropped while some corporations earn record profits. The third point sounds more like a political argument though Clinton’s suggestion that there has been a relative lack of interest in public-private partnerships to address some of these issues may have some merit.

Clinton is in a long line of presidents who have promoted the American Dream which is typically thought to include homeownership, a good education, and middle-class standard of living. It would be interesting to hear what Clinton now considers to be the American Dream to be and how individuals and the country can achieve it. A measure of the American dream, homeownership, actually had increased in the last 30 years until the last few years of economic crisis. Is Clinton suggesting that fewer people now have access to the American Dream or something else?

Additionally, Clinton’s words have some sway since the public perception is that he was the president who presided over the last boom era in the United States.

It doesn’t matter which party is in charge when an economic crisis happens; they will be punished

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As part of a piece looking at whether President Obama should have ever been compared to FDR, Megan McArdle suggests one of the cultural narratives of the Democratic Party doesn’t hold up: the Great Depression wasn’t a “Republican problem” because when looking at other countries, whichever party was in power at the start of the Depression was punished at the polls:

Yet even recognizing that FDR got tremendously lucky in his choice of election years does not cause McElvaine to question the Ur-Myth; instead, he segues into a complaint that Obama needs to be feistier, like FDR was.

Smart progressive Ezra Klein, however, offers what I think is the correct take:

The pat story behind FDR’s victory and the ensuing decades of mostly Democratic dominance is that the president got the policy right and the politics followed. Whatever you believe about FDR’s policies, a more international perspective will disabuse you of the notion that the golden age for the Democratic Party was an ideological triumph rather than an accident of history. As Larry Bartels, a political scientist at Vanderbilt University, has written, globally, the pattern is clear: Whichever party was in power when the Great Depression hit was booted out of office, and whichever party was in power when the global recovery took hold reaped huge political benefits.

“In the U.S.,” wrote Bartels, “voters replaced Republicans with Democrats and the economy improved. In Britain and Australia, voters replaced Labor governments with conservatives and the economy improved. In Sweden, voters replaced Conservatives with Liberals, then with Social Democrats, and the economy improved.

Of course, cultural narratives aren’t necessarily rooted in facts but rather in the story that a group or nation or other party wants to tell. Looking at data can help us figure out the veracity of a narrative. This sounds like a good example of using comparative data: by looking at other cases, one can see that what might seem to be a “common sense” observation based on the United States doesn’t necessarily hold up. What we would also want to do is to look at other economic crises, both in the United States and abroad, to see how the severity of the crisis, length of the crisis, relative standing of other countries, and other historical and social factors affect election outcomes after the economic crisis starts.

The takeaway for politicians and political parties? Beware of running for election if the economy took a dive while you or your people were in office.

Whether corporate tax breaks help the average citizen

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Phil Rosenthal tackles an interesting question that pertains to Illinois and Chicago after recent news about certain companies threatening to leave unless they get more tax breaks: do such deals help the average citizen? While the conclusion is unclear, here is a bit about the effect of TIF (Tax Increment Financing) Districts which typically generate funds for localized development and infrastructure:

The TIF has become a fashionable way for a municipality to encourage a business to set up shop in a particular locale it might not have chosen otherwise.  Some, however, see TIFs as too often just a handout for businesses that want to go somewhere.

“They’re a very popular tool for economic development,” Rebecca Hendrick, an associate professor in political science at the University of Illinois at Chicago, whose book, “Managing the Fiscal Metropolis,” is due out in November. “There are a lot of discrepancies in the empirical research as to whether they’ve had the intended effect. Would the steel company have come in but for the TIF, or would it have come in anyway?”…

“But it turns out that tax rates go up in the entire jurisdiction in the city of Chicago as a result of a TIF being created in the city of Chicago because the way the property tax works is kind of a zero-sum game. If someone gets money, someone else has to pay for it. … Plus, it’s also off-budget.”

Chicago has a lot of TIF districts so this is not a small issue. Of course, there are different ways to measure the benefits of such development for the average citizen: should it lead to a smaller property tax bill? Should it lead to more city and state services since they should have more tax dollars? Should it lead to a better quality of life in rebounding neighborhoods? Should it lead to more jobs? The common focus seems to be on jobs, as the recent offer from Amazon.com to the State of California illustrates. But these tax breaks often lead to a very limited number of jobs.

The article also hints that certain kinds of economic change receive press coverage while others do not:

A steel company moving to Chicago gets our attention. One person losing his or her home generally doesn’t. Even 100 people losing their homes might not make the papers.

“One hundred people losing their mortgages may involve the same amount of money as a steel company moving to Chicago,” Bowman said. “One of the reasons that TIF money is provided to these businesses is it does get more attention, and people feel like, ‘Maybe things are starting to turn around if Chicago’s more attractive than Cleveland.'”

So is this more of a journalism problem? If newspapers and other media sources are more interested in the “movers and shakers,” typically politicians, business leaders, and entertainment/celebrity figures, does this help the average citizen? I assume the media would suggest that they are the public “watchdog,” helping inform people about abuses of power. But, the media, often in big corporations themselves, can also easily be cozy with these bigger interests and also want to be boosters and help improve the image of their community.

In these poor economic times, I imagine we will be hearing more about corporate tax breaks and whether local, state, and national governments should be in the business of handing them out.

More bad economic figures: median household income down, poverty up

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The effects of the economic crisis are reflected in two key updated figures just released by the US Census Bureau:

Data released by the Census Bureau today showed the proportion of people living in poverty climbed to 15.1 percent last year from 14.3 percent in 2009, and median household income declined 2.3 percent. The number of Americans living in poverty was the highest in the 52 years since the Census Bureau began gathering that statistic. Those figures may have worsened in recent months as the economy weakened…

The ranks of people in poverty increased to 46.2 million from 43.6 million. The last time the poverty rate reached 15.1 percent was in 1993. It climbed to 15.2 percent in 1983. Median household income in 2010 was $49,445, down from $50,599 the year before…

The income figures declined even as the U.S. economy expanded 3 percent in 2010. Growth has slowed this year to an annual rate of less than 1 percent, raising concern that the financial struggles of families will continue to worsen and hamper the recovery…

It was the third consecutive annual increase in the poverty rate, a trend that won’t reverse itself without “concerted action” on the part of policy makers, said Melissa Boteach, who leads a campaign to reduce poverty at the Center for American Progress, a Washington-based research group with ties to the Obama administration.

I would love to hear politicians talk about this ahead of the 2012 elections and to do so in ways that go beyond typical “political speak.” Talking about taxes and jobs might make some sense: they have an effect on incomes and poverty rates and every politicians loves to promise more jobs. However, there are other factors involved as well and talking about taxes and jobs means that the conversation never really turns to these indicators but only stays on “safe” ground.

UPDATE 9/13/11 3:20 PM: Here is some more data on the topic, including time-series charts that give some perspective on poverty rates and median incomes by race.

Should kids be playing Monopoly rather than Settlers of Catan during this economic crisis?

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This Chicago Tribune article rehashes an argument I’ve written about before: a newer set of European games, epitomized by Settlers of Catan, allow all players to build and compete in a way that is quite different from classic American games like Monopoly or Risk where one players crushes the others. However, Monopoly defenders say the classic game may just be the perfect game for our troubled economic times:

Games like Monopoly and The Game of Life and upstarts such as Settlers of Catan come with powerful lessons about personal finance, experts say. Just don’t expect the experts to agree on which lessons are best.

University of Texas at Austin professor Daniel Hamermesh said he demonstrates in his introductory economics class the concept of diminishing returns through a Monopoly property deed…

The game [Settlers of Catan] involves a bit of nation-building. Players are settlers of a new land and trade for commodities like sheep and lumber as they build roads and towns, but no one is eliminated during play.

The whole idea irks Orbanes, who believes that the lessons of the traditional games — there is one and only one winner in the jungle — are being lost.

Here is a summary of Orbanes’ perspective: in a cutthroat world, game players, particularly younger children who are learning about how the world works, should practice being cutthroat. Games like Settlers of Catan are not realistic enough for an economic world where everyone does need to fight each other.

This all sounds to me like it could be another generational argument: the younger generations are too soft as they play games where “everyone is a winner.” It could also be that Orbanes thinks that a classic piece of Americana is being lost – Americans once flocked to Monopoly during the Great Depression but aren’t turning to it during this period. Or perhaps he is motivated by business: these European games are taking away market share from American games in a sector that has had some difficulty in recent years.

Regardless, he is right to suggest that games and play can teach kids and others about cultural values. This article hints at a larger cultural argument that we could have: should kids learn about teamwork or winning?

Frustration of Millennials in personal anecdotes and experiences; need sociological perspective

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Reading through these stories of Millennials regarding the tough economic times they face, I came to a realization: this is almost exclusively based on personal anecdotes and experiences. The comments are not much better were Millennials and Baby Boomers engage in unhelpful discourse about which generation did the worst things.

In these particular situations, a sociological perspective would be quite helpful. Yes, the economy is bad and Millennials face unique challenges. But, every generation has faced its own crises and challenges. Citing one’s own personal experience and perhaps those of friends and relatives can only go so far in illuminating the bigger picture. We need a broader, less emotional view of the whole situation: Millennials aren’t the only ones feeling the effects of a weak economy or a society that is adjusting to new globalized realities. Looking back, I suspect we will see this period as a fairly important moment in the United States and the world as economies, governments, and societies change their course.

It is interesting to read that some Millennials suggest that “society” suggested one path would be open (generally, the quick realization of the American Dream) but in reality, this path was much harder to walk or is impossible to even start on. This disconnect between expectations and outcomes is intriguing in itself.

One other thought: while there are just a few stories here, I see little mention of where Millennials turn in these times of difficulty. To families? To friends? To religion? Is a job/career really all there is?

Bonus coverage on the theme of generational conflict: a higher percentage of Baby Boomers than one might think plan to leave their children no inheritance.