Where is the US economy headed?

Yawn.

Thanks for asking. This is a big question amongst the people I know right now, especially out here on the West coast, where houses go from 500k-1 million dollars apiece - if you want to live in any sort of urban area.

In order to buy a house around here, you'd need to have a combined salary of about 120-140k. That's not unachievable or even crazy; my wife recently graduated with her degree in psychology and if her salary did nothing more than match mine (it has the potential to be much higher), we would fall into that zone. But it's hard to decide whether or not it would be a good deal, and it's hard to see us locking into a plan which forces us to stay in one place and could potentially screw us badly if one of us loses their job or is injured.

We want to live in an urban place, because we walk. It's as simple as that. Everything we need to do, we walk to go do. Walk to the grocery store, walk to the vet, walk to the hardware store, walk to the doctor. Walk to work, walk home for lunch. Walk downtown to go shopping or get dinner, see a play on the weekends. It's nice. You actually have time to see things and look at them, and you buy less stuff, because you don't want to carry as much stuff. This leads us to buy a lot more fresh fruit and vegetables, in small lots, than we did when we lived back in TX.

I feel as if I live in another time; surrounded by cars. Nobody inside a car ever looks happy to me. They always look impatient. And I always feel impatient inside a car, driving or as a passenger. I just can't wait to get out of the damn thing and get where I'm going. You don't enjoy the trip the way you do when walking, or on a bicycle. So the idea of living in the suburbs, a place where you have to drive to do ANYTHING, go to ANY store, is totally unattractive to me. It doesn't seem cost-effective anymore, either; gas is only going to be more expensive, and in the suburbs, you need a car for every member of the family as they grow older. At my parents' house in Houston, we had 6 cars for a 5-person family. I shudder to think of the CO2 emissions we pumped out.

We've been using this rental calculator provided by the times to try and decide whether or not we should be buying -

http://www.nytimes.com/interactive/business/buy-rent-calculator.html

It's just difficult for us to see the housing market continuing to rise in the future. I think that the US is massively over-built on houses right now, and the banks are slow-walking foreclosures and sales in order to keep the entire market from bottoming out. I just don't see a house as an investment, the way my parents did; at most, it's a place to park money, that grows slightly. We have additional worries out here: high property taxes, high insurance rates, and you just can't get earthquake insurance, so your house better be damn well built or the next big one is going to wreck everything.

We're also rent-controlled in our current place. Don't know how that works where you live, but the most my rent can go up per year is a half a percentage point or so. That's damn stable. We've been in the current place for 5 years now and the rent hasn't actually gone up at all. While a 2-bedroom apartment isn't always going to be big enough, it sure is now, and buying a house would double or more our monthly spend on housing. Higher utilities in a house as well, upkeep... all that crap.

I see for us a decade or more of continuing to rent, all while saving as much money as possible for a house later. I'd like to be in a situation where we have saved up between 3 and 4ook, so when we buy a house, we can put a massive down payment on it - when we need a house. Right now we don't need one, so why incur all that extra liability and risk? I think it really is different for my generation, thanks to the insane run-up of the last 15 years and the crash that followed. Sort of shattered our trust that the traditional model is the way to go.

Living in the city means we don't need to own a car, and when/if we get one, we'll have one car. All the money we save on gas and car upkeep and the note goes straight into the bank. Occasionally we can rent a car by the hour if we need one; it's a good model overall, not only for our pocketbooks, but also for our lives.

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As an owner of the property, I think the important considerations for you would be:

1, as Roger said, how choosy can you be? I would highly suggest only taking graduate students and professionals if that's a possibility for you. There are always people who are looking for housing in college towns who don't want to be surrounded by a bunch of partying kids. Those folks (like my building) tend to be stable and stay a long, long time. IIRC, this has the potential for making you a good deal of money, as rents tend to be rather higher than a mortgage would be on the same condo.

2, taxes. Not sure what the tax situation is there for you, in renting the units vs. selling them.

3, Liability. You'd want good insurance, because the plain fact of the matter is that renters don't take as good care of the place as owners do.

4, on-site management. The key to a good rental unit (in my experience) is having at least one person on-site who is 'in charge.' A lot of problems at 3 AM can be solved immediately by having a guy there who only pays 2/3rds rent, but his job is to solve such problems. My best experiences in apartments have all had this.

All in all, I think that apartments are just going to offer you more flexibility in the long run. You could also do a mixed-unit; I've seen that before, with condos on the top floor and apartments on the bottom. If you take some time and make the condos really nice inside, you could be quite successful in moving your renters up into condos over time as well - that's a popular model out here.

Re: the expansion of UVA, I totally agree with and support your decision to try and halt it. I come from Austin and the University of Texas is doing the same damn thing there. These days, colleges are ran like a business, and if they aren't constantly expanding, the provosts don't feel like they are doing their job right, or some **** like that. I personally don't like the way that the University has gutted out a lot of places I used to like in Austin. But that's life, I guess.

Don't give in - build your condos, and to hell with them. Or get them to offer you a mint for it. This is a tough time for the housing market and I applaud your audacity in moving forward with new construction.

Cycloptichorn

Thanks, Cyclo, for your thoughtful response. It, to a large extent, mirrors what I am hearing re urban vs rural and walking vs driving. Obviously the scale of CA vs VA is mammoth but the fact remains that Cville is an expensive place for a grad student, med student or a young professional to live. UVA requires that med students live within a certain distance of the school. There are not a lot of places that are attractive (ie not dumps owned by absentee landlords and/or surrounded by frat boys.)
You might be interested to hear that UVA has a new President, replacing John Casteen who retired after a long run of fund raising and new building construction. The new Pres is Dr Teresa Sullivan (60), who comes from a position of Provost and Exec VP of Academic Affairs at the Univ Mich in Ann Arbor (2006-2010). From 2002-2006 she was Exec Vice Chancellor for Academic Affairs for the U of Texas system. Prior to that (1975-2002) she taught sociology and also in the law school at the Univ of Texas - Austin.
She has a 5-year contract at UVA and the word is that she will likely then retire. She has signaled that the bricks and mortar things will slow down in favor of strengthening academic affairs. UVA has seen a brain drain. notably in the med school.
Again, thanks for responding. As I recall, H2O lives in Athens, Georgia which is home to the U of GA. I am surprised he couldn't find anything constructive to say.

Just a note on Athens, GA: I've known many who have lived there. They all complained about the humidity.

When does he ever have anything constructive to say?

Yep, Athens is full of liberals that complain about everything.

Please beware of this video because it contains reality!

If you are emotionally driven on either side of the isle this video may make you mad!

part1

http://www.youtube.com/watch?v=pusG5oQ9tuQ&feature=relmfu

Slightly different approach subject, but relevant to your question, RJB -
architecture critic Witold Rybczynski's take on the housing market, in Slate:
http://www.slate.com/id/2293106/



Adds, I'm mixed on whether you should have a mix, RJ. I can see a top story of condos.. but maybe that would make for two different worlds in the same building that already will have at least three (retail, offices, housing space).
Back in what might be called my generation's heyday, a lot of rental places were turned into condos (circa 1970), so I suppose that's still an option at a later date.
I also wonder about having different sizes on different floors, as a good or poor idea, though if I remember, you are thinking of them all as relatively compact, so that wouldn't matter sociologically.

Cycloptichorn

That is what we should be doing! Why aren't we?

Because as citizens we are brain washed into thinking that the conservative way of thinking is the american way. The rich who control the media and government have been chanting the mantra that liberal is unamerican so long they have convinced a large number of people that it is in their best interest to go conservative even though just a little bit of study would prove the fallicy of this idea. Most people would rather be told what to do than spend time to research it for themselves. So it looks to me as though things are going to get worse before they get better. I just hope that when the revolution finally comes it wont be a french revolution type.

I do think that you are on to something! It is amazing what a world we have when there are educated Psychopaths that are able to be social with each other but teach that social is a bad idea to the mass!

Can you believe it, the president's latest economic plan is simply to tell businesses to hire more people. What a simple solution! Why hadn't he thought of that before? Why not just tell them to make more money and pay more taxes too? And tell consumers to buy more stuff! Just order it all be done and the economy will then heal itself.

http://www.cnbc.com/id/43003679
"President Obama urged businesses to "step up" and hire workers, pressing banks and other corporations to do more to help an economy that he said would take "several years" to recover fully."

Bush urged people to go shopping..
Here are his words..

Do the math before ye complain about the graph

Cycloptichorn

My prediction?

USA - Reasonable GROWTH for 2011.
USA - Comparable SLUMP for 2012.

A Corporate spending splurge will happen over the next 12 months as big business takes advantage of the 100% tax break on offer this year.
However, as they are pulling 2012 investment forward by a year because of the tax incentive, Corporate spending will be almost non existent in 2012.

Worldwide slump in 2012.

USA - as above.
CHINA - will face massive inflation problems as their economy drastically overheats.
EUROPE - Insufficient domestic market coupled with underlying debt problems, and problematical export opportunities to USA and China, becuase of aforemetioned troubles with their own economies.

The collective belts will remain tightened for a good while longer, I fear.

Exports to the US will also be undermined by a weak and probably declining rate of exchange.

Maybe you're right, but I hope the Paul Ryan debacle showed that Democrats can play this feet-to-the-fire game as well. And it's a good thing, too: America will have to balance its budget eventually. But the more urgent concern right now is unemployment, so "those folks in Congress" are right to procrastinate about the budget-balancing.

That's an interesting view considering the dismal "boost" to employment we got from the trillion dollar stimulus of the past two years - all of which was paid for with borrowed money which merely adds to our continuing interest payments and debt.

Indeed the main "boost" to employment was to enable states (which got huge grants for highway construction, community development and environmental programs - all told comprising about 40% of the total) was to enable them to delay laying off surplus bureaucrats for a year or so. The fact is spending for highway construction,community redevelopment and environmental cleanups didn't increase at all - the states merely used the money as a replacemen for declining sales & income tax collections and thereby deferred already needed restructuring for a year. The crises in state finances are now unfolding.

I don't see anything involving lasting stimulus to productive economic activity in that. However, it certainly was a boost to government employee unions and other constituents of the Democrat Party.

More government spending like that will merely make the unfolding crises far worse without doing much at all to stimulate real tax paying economic activity. When you are in a hole it is usually wise to stop digging.