Tuesday, January 11, 2011

For lots of young adults a couple years out of school the big question to somebody they like a lot: " How much school debt are you carrying?"

The housing crisis is not going to resolve itself.  Not next year, not under the next President, not even when housing prices sink to the level where they are in rough sync with incomes...for those who have incomes.

Why not?

Because a couple of generations of college grads-with-debt-up-the-wazoo and years--nay, decades--of underemployment under their belts will have saved nothing, zero, zilch to use as a down-payment on a nice little monstrosity of a tract mansion at the far reaches of suburbia.

More than twenty five percent of  college graduates in Califormia are deemed to be underemployed, working at jobs that do not validate the fast-disappearing notion that higher education is the ticket to middle class income and prospects.  The trend in most other states is likely headed toward Calfornia's numbers.

In this chart--from the amazing and prescient Dr. Housing Bubble--we see that aggregate U.S. credit card debt, which used to be just shy of a trillion, is shrinking, shrunk to less than the aggregate total of school debt.  Lots of bankruptcies have resulted in banks writing off huge amounts of the card debt.  But the school loans go on forever; there's no escape; the interest keeps mounting, no forgiveness even in bankruptcy.  Legions of alumni will take huge balances on their owings, along with those memories of school days, to the grave.

Not everybody will will be in this pickle.  But, if only 20 percent of those who would have in the past started shortly after graduation on buying starter houses, then moving up the domicile ladder are mired in education loans, they'll drag down, demolish, drown the whole market.

Just at the moment when huge numbers of baby boomers are unloading their big suburban--and even their modest-but-still-very-nice*--abodes, there will be a whole lot of people with high hopes and no-chance.  Tough lending standards and 20% downpayments are going to be beyond the reach of a significant number.  And this will kill the real estate market by driving prices down, down, down.

Suburban dreams are fading fast already.  Many of the young and young-ish who are presently minimally set to buy real estate are leery of diving into the suburban lifestyle.  Four hours every weekend of riding a mower, long commutes on deteriorating (asphalt is, after all, just another word for petroleum) roads.  While their fathers were practicing lawn-adoration, they were inside tuning in and turning on to the prospect of living where Friends and Seinfeld lived--urban apartments.

* Even Casa Waterblogged will be for sale when the crocuses reappear, as the residents plan a move back to Milwaukee

1 comment:

busana muslim said...

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Of the biblical allotment of three score and ten I have lived only three of them more than a bicycle ride from one of the Great Lakes. I grew up ten blocks from Lake Erie in the (once Irish/Italian ghetto, now newly-hip) "Near West Side" of Cleveland. I can still cycle to the Milwaukee lakefront in an hour and a half; but, a round-trip has always been more than I would (noror ever did) attempt. -0- I'm a "...somewhat combative pacifist and fairly cooperative anarchist," after the example of Grace Paley (1922-2007). -0- I'm always cheerful when I pay my taxes (having refused--when necessary--to pay that portion of them dedicated to war). -0- And I always, always vote.