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EXPLANATORY JOURNALISM: The TerryReport
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News, commentary, opinion on politics, government, books, social trends, American life, travel, cycling, books, other stuff
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REAL ESTATE GOES GLOBAL
The most expensive housing market in North America is not where you’d think. It’s not New York City or Orange County, California, but Vancouver, British Columbia. Now, Vancouver is a beautiful city, a thriving deep-water port, a popular site for TV and movie shoots. By all accounts, it is a wonderful place to live. But nothing about its economy explains why, in a city where the median income is only around seventy grand, single-family houses now sell for close to a million dollars apiece and ordinary condos go for five or six hundred thousand dollars. “If you look at per-capita incomes, we look like Reno or Nashville,” €ť Andy Yan, an urban planner at the Vancouver-based firm Bing Thom Architects, told me. “But our housing prices easily compete with San Francisco’s.
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LINK TO THE NEW YORKER
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The New Yorker article, while interesting and worthwhile, is way behind the curve on this trend. If one lives in New York, which has been a destination city for the wealthy for generations, it is possible to not see the forest for the trees.
Years ago, there was a book about business where the author went to interview the person who was then head of American Express. The author had grown up in Charleston, South Carolina, where stately old houses surround a park area known as the Battery. These old houses had been in the same families for generations. In the 1980s and ‘90s, the wealthy discovered Charleston and the Battery and bought up almost every house. The prices went so high that people felt they could not pass up the money, so the old families dispersed to other parts of Charleston, many went “across the river” to new houses in wealthy suburbs.
The author of that book, having grown up in Charleston, took note that the head of American Express had purchased a house on the Battery. Knowing the neighborhood extremely well from having grown up there and knowing most of the families, too, he wondered which house the executive owned. So, at the end of his interview, he asked the company CEO how he liked the house. He replied: “I don’t know. I’ve never been there.”
This story reflects the raw power of money to reshape a place and make it into the kind of ghost town referred to in the New Yorker article. Once, the Battery had been a home to those who knew it and loved it, people who raised their children there and left the property to those same kids when they died. Now, it is a super chic enclave where many of the houses sit empty 11 or more months out of the year. Where once children played, went off to school together and families knew each other for life, houses now sit empty with only servants coming and going to clean and maintain them.
As in the price of art works, the rich prop up the prices of houses by the money they are willing to pay. If the ability or willingness to pay ever went away, the high value of houses in these surging city zones would deflate like a child’s balloon. The rich are counting on that not to happen. They are counting on being able to sell the house for more than they paid for it, or at least close to the same amount. The houses are as much places to park unused money as they are part time residences. Meanwhile, as great concentration of wealth grows, the rest of us must swim in their wake.
Doug Terry, 5.20.14
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The very rich run quickly out of things to buy. The first thing someone looks for, generally, when they get big rich or when their company makes it big is a corporate jet. Then, a second or third house. Then, a fourth, fifth or sixth house. Oh, yeah, a big powered yacht, of course.
There are a number of reasons the rich buy houses. First, they have to do something with all that money and just leaving it in a bank, or putting it in stock is kind of boring and unrewarding. Second, wives of rich husbands like multiple houses. It gives them the feeling that the long hours of work and the days and weeks away from home are worth something to them, too. Houses allow the wives to decorate and to invite friends in for parties or weekend stays. Impressing friends is very important and among the rich-rich, it gets harder and harder, you know.
A house is a good place to store money. It is not as good as a bank, but it is generally better than the stock market for avoiding losses. The mega rich are buying houses in countries thought to be immune to coup attempts, natural disasters and other unpleasant events. If worse comes to worst, they can leave their own country and live in one of their many houses in more stable societies.
This world wide trend is driving up housing prices all over and, rather surprisingly, in the once rather dull southern town known as Washington, DC. For some unknown reason, perhaps movies and television shows, DC is now “on the map” with mega rich buyers. It is creating a strange situation where the new, rich city is being built over the top of the old town once mixed with middle income earners and the poor.
At the left is a clip from a New Yorker article about this trend as it has hit in Vancouver, Canada. There is a link to the article as well.
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Another unfortunate aspect of money flowing into real estate around the world is that it tends to drive out of great cities the bedrock of reasons people wanted to be in them in the first place. A city loses its soul, its character, its grit, when ordinary wage earners are driven away. Artists of all sorts, painters, writers, poets, playwrights, and dreamers have been chased out of great cities like Paris and Manhattan because it is just too expensive for them to live where very rich buy every apartment in sight. The wealthy drive the price of real estate upward, whether they live in the places they buy or not.
There are some of the rich who will shout “good riddance” as the grittier aspects of a city depart. Over time, however, a place with great texture, a great vibe, can become just a collection of tall buildings and busy streets, like downtown Dallas has always been, more or less. The Village in New York, birth place of poets, singers and half mad writers of various sorts, a place that nurtured Bob Dylan and many others to fame, is a shadow of its former self. A new version of Dylan arriving in the Village now would find very little to channel into fantastic, rambling poetry. Manhattan, 2014, has the highest concentrations of McDonald’s of any place in the world.
One factor that drove generations of American writers to stay in Paris, after they arrived to look around, was the exchange rate between dollars and the French franc. Trading at about five for each dollar, a Metro subway ride even into the late 1990s was barely more than 20 to 40 cents. Someone in Hemingway’s time (the 1930s) could live in Paris on a couple of hundred dollars a month, even less. The franc is gone now, replaced by the Euro which trades above $1.20 for one unit. No more cheap meals. No more cheap, out of the way hotels, either.
Paris has become so expensive that many French people have fled for the suburbs, coming into Paris on Saturdays and Sundays like visiting tourists, drinking in the atmosphere and culture that was once right there, theirs, and ours, for the asking. The vibrant, poetic, elusive beauty of the city is still there, but it is harder to be part of it, to feel at one with it. Paris at evening rush hour each weekday resembles a scene from a movie about WW III: it looks like every car that ever existed in France is in the process of trying maneuver in, around or out of the city, as if a giant voice cried out: evacuate!
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to go to recent posts, nearly 300 pages of news and comments filed during the first nine months of 2013 and during the critical election year of 2012.
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to go back to prior years (500+ pages) of The TerryReport
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