On Generational Shift
The world we live in goes through changes as those who benefit from the old ways lose control over wealth and power as they retire and pass away, opening up space for innovation and growth.
Dear Friends,
The laws of the United States are designed to encourage people not only to own their own home, but to place the bulk of their savings into their home. Tax deductions for mortgage interest and lower monthly costs for owners than for renters encourage people to put most of their nest egg into housing.
What happens when the generation made wealthy by the G.I. Bill and a massive expansion in homeownership, who have upgraded and expanded their homes as an investment for the future, decide that they want to cash out and use those funds on vacations or assisted living costs?
Houses start coming on the market at valuations inflated by government spending in the wake of the pandemic.
And while the owners have been happy with the steadily rising home prices, that increase across the board has made it much more difficult for the likely buyers, young families starting out, to afford such an expensive house.
Especially with interest rates pushing on 10%, making HELOC payments and new mortgages way more expensive than people have grown used to.
Too many sellers and not enough buyers leads to a contraction in prices. People don’t want to be the last one to sell in a falling market, which accelerates the listings and increases the negative pressure on prices.
But after that price drop and with the increased wages, eventually the next generation will end up in houses of their own. But they may not be the same houses.
Younger families want to live closer to their daily lives, more of them see driving as a chore than a joy, and they don’t see the sprawling houses their parents owned as aligned with how they want to live their lives.
When I was growing up around our family’s car dealership, mortgage rates were over 15% and most cars still ran on leaded gasoline. Cars were central to people’s lives, and the culture and design of cities around the country were built to reinforce and strengthen that centrality of a car, of driving yourself anywhere you want to go.
Now if a person has a parking garage with electric vehicle charging, they may never end up pumping gas, and many people are happy to let other people own cars that they hail with an app on their phone.1 Finding places to park, spending the money on insurance and a car payment, these seem less like freedom and more like hassles.
In a generation where people are remote from each other, but still able to be present, the idea of a one hour commute to have a big house in the suburbs that costs thousands of dollars in heating and cooling expense doesn’t appeal as much as a ten minute walk to work from a downtown apartment that’s close to good schools and restaurants.
We see these shifts in politics as well as the economy. The values of my father’s generation, formed during the Cold War, defined themselves in opposition to the USSR and everything they stood for. “Communist” or “socialist” were the worst things you could call a fellow American.
Now that authoritarian dictators like Putin and Kim and Assad are the biggest threat to the American way of life, fear of higher taxes or government healthcare are not as pressing as fear of banning medical procedures or violent repression of civil liberties.
The world feels a little unsettled right now, with high interest rates and corporate scandals competing with wars in Ukraine and Gaza and the criminal prosecution of the former President for the attention of the American public.
But under all the froth and foam of the news cycle, what this next election is really coming down to is whether the values that govern the United States will be those of my father’s generation or those of my daughter’s.
We’re at the top of the roller coaster, the place where for a split second you experience a queasy weightlessness before the ride continues. It’s unsettling, but this too shall pass.
Thank you for all you are doing to reach out to those you know who are going through these challenges, having to deal with job changes, health problems, and family loss during such an unsettled time. Sometimes it’s less scary at the top if you have someone to hold your hand.
Enjoy the ride, we’ll be at the end soon enough.
Yours truly,
Nick
Not everyone likes shared rides, for those who don’t, that’s why the Sarwark family is still in the used car business. :)
