Tag Archives: wealthy

From subprime mortgage issues to superprime mortgage issues

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The most recent financial uncertainty includes mortgages in a superprime era:

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This is quite the turnaround. After 2008, banking the rich was often touted as a far better model. Even the biggest banks began aiming more of their consumer lending and wealth management at relatively better-off customers, and they scaled back on serving subprime customers. Wealthy customers seldom default, they bring lots of cash and commercial banking business and pay big fees for investments and advice, the thinking went.

But when interest rates shot up last year, it exposed weaknesses in the strategy. It isn’t that the rich are defaulting on loans in droves. But the most flush depositors with excess cash last year started taking their cash and seeking out higher yields in online banks, money funds or Treasurys. On top of that, startups and other private businesses started burning more cash, leading to deposit outflows…

A major way that the better-off do borrow from banks is to buy homes, and often in the form of what are known as jumbo mortgages. Jumbos are for loan amounts over $726,200 in most places, and over $1,089,300 in high-cost cities such as New York or San Francisco. Jumbo mortgages bring wealthy customers with lots of cash. They also are typically more difficult to sell to the market, in part because they aren’t guaranteed by government-sponsored enterprises such as Fannie Mae or Freddie Mac. So banks often sit on them. But the value of these mortgages, many of which are fixed at low rates for the foreseeable future, have dropped as interest rates have risen.

To be sure, not all banks that focus on wealthier individual clients are under intense pressure. Shares of Morgan Stanley and Goldman Sachs, are down less than half as much this month as the nearly 30% decline for the KBW Nasdaq Bank index. But those banks are more diversified and focus more on the steadier, fee-generating parts of the wealth business, such as stock trading and asset management, than on mortgages or deposits.

I interpret this to mean that there is less money – or lower rates of return – to be made on big mortgages. Wealthy people will want to buy real estate, particularly because it is often assumed that the value of real estate will be good long-term, but the money does not generate the amount of money banks want.

If mortgages are too “boring” or do not generate enough money, could we be headed to an era where banks do not want to do mortgages? Money for mortgages could come from elsewhere.

Are there wealthy American residents in favor of denser housing near their home?

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If basketball stars and billionaires are opposed to denser housing near them in Atherton, California, where are there wealthy residents of the United States willing to have denser housing near them?

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Atherton is a small suburb – under 7,000 residents – with a median household income of over $250,000. In question is a California effort to increase affordable housing.

Are there any or many communities in the United States where the wealthy do not pursue NIMBY policies?

Could it be different in places where wealthier residents can escape by living high up in the air? I am thinking of residences like the pencil skyscrapers just south of Central Park or the new condos south of downtown LA.

Or, could it be different in places that are more rural? According to Wikipedia, Atherton “has very restrictive zoning, only permitting one single-family home per acre and no sidewalks. This policy that prohibits homes from being on less than an acre.” But, imagine a place with even bigger lots and more room. Would denser housing in part of the community be perceived as less problematic by neighbors?

I am open to hearing about wealthy communities where affordable housing is desired and pursued.

American political leaders tend to be homeowners

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A recent study looked at how many political leaders in the United States are homeowners or renters:

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The researchers identified 10,800 representatives across city halls, state houses, and federal offices in 2019 and cross-referenced their home addresses with tax records. They found that about 93% of US senators, congressional representatives, federal judges, city council members, state senators, state representatives and governors definitely or likely owned a home.

In another sample of 1,800 city-level officeholders, the discrepancy between voters and their electeds was stark: For the 190 municipalities researchers examined, citywide homeownership rates were around 50%, while 83% of mayors owned their residences…

Despite these high-profile exceptions — both young people of color, like Azeem — researchers found that in city after city, the broader homeownership trend held, even in costly cities like Miami and Boston, where renters dominate. “There aren’t really any cities where large numbers of renters have been elected to local, state or federal office,” Einstein said.

The paper describes two “bottlenecks” that could prevent renter representation: Either fewer renters run, or fewer voters are willing to elect them. By analyzing the housing status of city council candidates in California between 2017 and 2018, they found that the former is more likely…

Elected officials are even more out of step with their communities when it comes to where and how they live. Researchers found that the homes occupied by local, state and federal officials were worth an average of 50% more than their zip code’s median value. The higher the level of public office, the greater the ratio. Nearly 80% of officeholders who owned their houses lived in single-family homes, while only 67% of houses across the country are considered single family.

Who will represent the renters in a country that loudly proclaims its preference for homeownership?

If you have a list of steps one needs to take to be a successful politician, add this one to early in the list: own a residence.

How exactly does wealth play into this? Does wealth lead to both homeownership and the possibility of running for office?

A possible follow-up study: do political candidates run markedly different campaigns given their homeownership status or do they generally play to the ideals of homeownership?

Filming a wealthy home exterior, McMansion interior

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A film production designer describes the problem of finding a home for filming:

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We were looking for the Voze mansion and having trouble finding an exterior and interior to match, as most wealthy estate-type people heavily renovate their interiors and look more McMansion inside. The exterior was a house in Pasadena.

I think this is saying that they had a problem finding a home fit for wealthy characters because the homes with the gravitas-invoking exterior did not necessarily have the same kind of interior. Having lots of money can be associated with a particular aesthetic. Describing a portion of the home as having a McMansion look is not usually a good thing. It is a negative term. I imagine a McMansion interior could involve the latest trends, having large spaces, and going for shock and awe rather than refined details.

Through the magic of filming and editing, a different exterior and interior can be put together without too much evidence otherwise. Of course, it is also fun to watch for situations where they do not exactly match.

A marker of a certain kind of community: lots of Teslas on suburban roads

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I believe I have seen a growing number of Teslas on local suburban roads. How much is this tied to the kind of community I live in plus the character and demographics of nearby communities? A few thoughts:

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  1. Teslas are not cheap. There is not a big used market. People need money to purchase Teslas. (New cars are not cheap in the US overall.)
  2. Teslas are electric and electric car owners may have particular political and social patterns. This area has leaned slightly Democratic in recent national elections. As a company, Tesla itself may be more aligned with libertarian or conservative causes, but I do not see large numbers of other electric vehicles. (There are plenty of Prii.)
  3. Teslas are a particular status symbol. They are cool. Some have a cool matte finish or special trim levels. Particular suburbanites want to have one. (Particularly compare them to other “cool” suburban driving options, whether the latest SUV or a sports car.)
  4. The people here take a lot of shorter trips and/or have access to electric chargers. Even the vacation destinations of many in this area – whether Wisconsin or southwest Michigan – are within a single charge.
  5. They are available at local showrooms and dealers. One can go to a nearby suburban shopping mall and check out a Tesla.

If it is true that you can tell something about a community by looking at what cars are in parking lots or driveways, all of these Teslas say something.

Decline in luxury home sales – but few have to buy or sell

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Reading this overview of the decline of sales in the luxury housing market, a few quotes stood out to me about a particular aspect of this segment of housing:

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As for purchasing real estate in all cash, Treasurys seem like a better bet than real estate right now, Ms. Fairweather said. “No investor wants to put their money into an asset that is going down in value,” she said.

Mr. Chan said he believes the slowdown in activity is more severe in the luxury market because high-end homeowners have a greater degree of discretion about when to sell and at what price. Often, sellers face no financial pressure to move, he said; they can just wait it out…

Many sellers, however, haven’t adjusted to the new realities of the market, Mr. Chan said. Some of his buyers have made lowball offers on homes, only to be met with significant resistance. “It’s a stalemate,” he said. “Sellers are living in the past, the buyers are living in the future.”…

One of her listings, a $14.95 million oceanfront mansion in Carlsbad, Calif., has been on the market since June. While the seller received one verbal offer, a sale never materialized. Still, she said, her client is wealthy and isn’t desperate to sell. “They don’t have to ever sell—they can carry these properties in perpetuity,” she said.

If housing has become more of an investment among all Americans, this segment of the market might exemplify this the most. Housing is a commodity that needs to be at the right price to buy or sell. Even as these homes signify status and a certain lifestyle, they are also a commodity with perceptions about what is a “good price.” When wealthy people have money – the economy is good, corporate profits are up, interest rates are relatively low – they want to purchase expensive and exclusive properties. When economic times are not as good – interest rates are higher, there is more uncertainty – luxury housing might be just that: a luxury.

If everyone is trying to get ahead with the best deal, how many people end up profiting compared to the other actors in this market? There are other motivations for moving beyond making money or getting a good return on investment; this helps guarantee there is some real estate activity in more troubled economic times.

Should millionaires and billionaires in the suburbs count when looking at the wealthiest cities in the world?

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A new list ranks the wealthiest cities in the world by the number of the wealthiest residents. Do the wealthy in suburbs count? For New York City, the top city on the list, they appear not to:

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The Big Apple is home to 345,600 millionaires, including 737 centi-millionaires (with wealth of USD 100 million or more) and 59 dollar billionaires. New York is the financial center of the USA and the wealthiest city in the world by several measures. It is also home to the world’s two largest stock exchanges by market cap (the Dow Jones and NASDAQ). Perhaps most notably, total private wealth held by the city’s residents exceeds USD 3 trillion — higher than the total private wealth held in most major G20 countries…

It should be noted that there are several affluent commuter towns located just outside New York City that also contain a large amount of top-tier wealth. Notables include: Greenwich, Great Neck, Sands Point and Old Westbury. If these towns were included in our New York City figures, then billionaire numbers in the combined city would exceed 120.

The San Francisco listing, #3, includes a broader set of communities:

The San Francisco Bay area — encompassing the city of San Francisco and Silicon Valley — is home to 276,400 millionaires, including 623 centi-millionaires and 62 billionaires. Home to a large number of tech billionaires, Silicon Valley includes affluent towns such as Atherton and Los Altos Hills. This area has been steadily moving up the list of millionaire hubs over the past decade and we expect it to reach the top spot by 2040.

Los Angeles, #6, also includes suburbs:

This area is home to 192,400 resident millionaires, with 393 centi-millionaires and 34 billionaires. Our figures for this area include wealth held in the city of Los Angeles, as well as nearby Malibu, Beverly Hills, Laguna Beach, Newport Beach, and Santa Monica. Key industries include entertainment, IT, retail, and transport.

And the methodology suggests there are six cities on the list where the city is defined more broadly.

There could be a variety of reasons for looking at wealthy residents just in cities or also including metropolitan regions. Depending on setting these different boundaries, how much might it change the rankings?

Good for preserving suburban green space…but is it also contributing to inequality?

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A group in the northwest suburbs of Chicago announced an agreement to buy and preserve nearly 250 acres of land:

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In a watershed moment for suburban land preservation efforts, a Barrington-based conservation group announced Monday it is buying the Richard Duchossois family’s 246.5-acre Hill ‘N Dale Farm South, long considered one of the most important and desirable tracts of open space in northern Illinois.

Citizens for Conservation’s acquisition of the land near Barrington Hills will ensure it remains protected open space and provide a critical wildlife corridor with the 4,000-acre Spring Creek Forest Preserve next door…

All told, the acquisition and restoration carries an estimated $10 million price tag, according to the organization. Citizens for Conservation received nearly half that through a $4.9 million grant from the Illinois Clean Energy Community Foundation, the largest such grant awarded for a single-parcel purchase…

Although not within Barrington Hills’ corporate limits, the property is surrounded by the village. Village President Brian Cecola was enthused by Citizens for Conservation’s acquisition of the land.

“Citizens for Conservation’s dedication to land preservation aligns with our village’s objectives of preserving open spaces and maintaining our 5-acre zoning. It’s a win-win for everyone involved,” he said.

With all of the concerns about land use and environmental degradation due to suburban sprawl, isn’t preserving space for animals, plants, and nature a win?

Here is another possible way to read this: the purchase of this land continues patterns of uneven development and inequality in metropolitan regions. How this might happen:

-Who has this kind of money to purchase the land? In this particular case, a non-profit secured a sizable grant – not an easy task in itself – and found other money. This group purchased and maintains property on its own and has contributed to Forest Preserve acquisitions.

-This green space is in a wealthier suburban setting. According to 2020 Census data, Barrington Hills has a median household income of over $157,000.

-As described above, Barrington Hills has a guideline involving 5-acre zoning. Such zoning practices mean properties are larger and both the land and housing is more expensive. This limits who can live in the community.

Hopefully, there is some consideration given to who benefits from using this green space and how all people in metropolitan regions could benefit from proximity to and access to nature and green spaces.

What will be the first “city of the future”?

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Multiple efforts are underway around the globe to construct new kinds of cities. Here is an overview of some of this work:

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Telosa is set to be built on 150,000 acres in either Nevada, Utah or Arizona, and 50,000 “diverse” people will call it home by 2030, according to newly released details from Lore — a serial entrepreneur who sold Jet.com to Walmart for $3.3 billion and the parent company of Diapers.com to Amazon for $545 million.

“We’re not just building a new city — this is a new model for society,” Lore said at a Telosa “town hall meeting” in July, adding that he wants his new city to be “sustainable and equitable to all.”

It’ll be governed by a principle he calls “equitism,” which seems to be a mashup of democracy, capitalism and socialism…

Floating City in the Maldives is envisioned as a large cluster of hexagonal structures that rise and fall with the sea, with room for up to 20,000 people. It’s set to be completed in 2027

Toyota Woven City is a company town being built in the foothills of Japan’s Mount Fuji. The proposal calls for a 2,000-person city where Toyota “will test autonomous vehicles, smart technology and robot-assisted living,” per CNN.

Masdar City in Abu Dhabi is a “master-planned eco-complex designed to show off the UAE’s commitment to sustainability,” Bloomberg has reported.

Net City in Shenzhen, China, is another company town being built by tech giant Tencent. It’ll be a Monaco-size metropolis for 80,000 workers, CNN reports.

Several other projects are briefly mentioned in the article. Across all of these proposed communities, there are several patterns:

  1. Created by the ultra-wealthy or corporations.
  2. Incorporating sustainability or new technology.
  3. A limited population.

It strikes me that we now have a good sense of what megacities are around the world: they have a certain population and share common traits regarding land use, economics, and social life. Such cities are relatively new in human history but now they are common. So then what exactly needs to be different for a new community to be a futuristic city? A different aesthetic? No cars or limited cars? Much greener? Smaller in scale? Different social arrangements?

Owning and selling over $1 billion in art

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The art collection of Paul Allen will soon go to auction with the proceeds going to charities:

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In a statement, Christie’s said that the famed auction house will sell off more than 150 ‘masterpieces’ belonging to Allen’s foundation. The collection spans over 500 years of art history while the value of the works is more than $1 billion. The auction is titled: ‘Visionary: The Paul G. Allen Collection.’ The proceeds will be divided up among various charities.

Among the artists’ whose work is featured in Allen’s collection include Paul Cezanne, Jasper Johns, David Hockney, Edward Hopper, Pierre-Auguste Renoir, Georgia O’Keefe, Paul Gauguin, Roy Lichtenstein and Claude Monet. Following Allen’s death, it was revealed that he was the anonymous buyer of Monet’s haystacks painting titled Meule in 2016. The painting sold for $81.4 million.

Because I am teaching a class titled Culture, Media, and Society this semester, a sociology of culture course, this news caught my attention for several reasons:

  • The amount of wealth concentrated in a set of created objects is fascinating to consider. This is considered a good investment for those with the means:

In the aftermath of the Covid-19 pandemic, the art world continues to see major gains. According to a UBS study, the art market generated over $65 billion in 2021 alone. The US art market made up 43 percent of the value share. 

  • This is a reminder of the amount of wealth – and presumably networking – involved in the major art markets. People with fewer resources can see major works in museums or galleries but the owners of such works are in different social categories and circles.
  • Living with such work that is considered important and/or expensive must be interesting:

In 2015, he told Bloomberg: ‘To live with these pieces of art is truly amazing. I feel that you should share some of the works to give the public a chance to see them.’ Allen said in the same interview that his art collection was a ‘very, very good investment for me.’

  • How does someone become invested – economically, socially, personally – in art? According to Allen:

It was a visit to London’s Tate Gallery that exposed him to classical works by J.M.W Turner as well as the pop art of Roy Lichtenstein. That visit left Allen ‘profoundly moved.’ The bio continues by saying: ‘That experience ignited within him a passion for art — and for making art accessible to more people.’

As we consider culture as “processes of meaning-making” (definition from sociologist Lyn Spillman), there is a lot of meaning-making in Allen’s milieu, actions, and legacy.