Starter Home

You can still here this phrase on the varying HGTV flip shows. How they are still in business in this housing market is beyond me as now with rates over 6% and costs to rehab doubling down I suspect that there will be fewer and fewer of them doing this as a full time business. But then again they were always a bizarre mash of people doing the same home repeatedly and acting as if it was the greatest project ever done. Yes we need more shiplap.

With that there were two articles this weekend about what defines Starter Home. The LA Times says this about the California marketplace:

For decades, the single-family home has been Southern California’s ultimate lure — a chance to live a life of sun and sand from the comfort of your very own property.

Most buyers’ ticket into that life is the starter home. Something modest but not minuscule. Two bedrooms, maybe three. A picket fence in front and a yard out back for the kids and dog to play.

But the starter home has changed. As home prices have soared and higher mortgage interest rates have made everything less affordable, wish lists have become more and more wishful, and buyers have been forced to find something smaller and less practical.

Want two bedrooms? How about one, plus an office that might fit a twin-size bed. Want a backyard? How about a space shared with the rest of the condo complex. Want to paint the exterior of your townhouse? The homeowner association won’t allow it, but feel free to spruce up the inside.

Making compromises has always been a part of house hunting, but in a market where some two-bedroom homes are selling for $1 million or more — often for hundreds of thousands over the asking price — middle-class buyers are forced to take whatever they can get.

So we have over bidding and homes now in the six figures that defines a median or at least an average price in some markets – Seattle, LA, Portland are good examples of how out of control it has been as they are the “it” cities. San Francisco and NYC have always been out of range of many but now that includes the burbs and boroughs that were for years ignored are now equally competitive in the marketplace. Is it really jobs? I doubt it as New York City is facing a massive tax downfall from the pandemic and the offices that have not reopened fully to workers. So with that comes that many of the higher tax bracket did leave and have not returned. As the article states:

The sheer number of people who left in such a short period raises uncertainty about New York City’s competitiveness and economic stability. The top 1 percent of earners, who make more than $804,000 a year, contributed 41 percent of the city’s personal income taxes in 2019.

About one-third of the people who left moved from Manhattan, and had an average income of $214,300. No other large American county had a similar exodus of wealth.

On that note the reality is that many of them never left and with that they are pushing the housing market into untenable reaches as they bid up for rentals the same way one does in purchasing housing. And many who did kept their apartments for pied a tier’s for when they do return and/or visit keeping them vacant and off the market. So who is moving here? I suspect many who dreamed of living here and with that sold homes, cashed out savings and are living off 401Ks and investments the same way I am. The difference is that the market is shit now and with that we are all at risk. Things will not end well I am afraid.

The article goes on to state:

In the years before 2019, the people who left and the people who stayed in New York City had similar average incomes, the IRS data showed. But during the pandemic, the residents who moved had average incomes that were 28 percent higher than the residents who stayed.

Still, New York City collected more tax revenue in both 2020 and 2021 than in 2019, thanks in part to at least $16 billion in federal pandemic aid.

The outlook for this year has become much less certain as the stock market has plummeted in recent months and certain forms of federal aid, like stimulus checks and expanded unemployment benefits, have (long) ended.

Again the current financial state of Manhattan and its environs are at risk in ways not seen since the 80s. And with that I suspect many a newcomer will find themselves wanting to leave, but the costs of leaving are considerably higher and for many it will be akin to a hostage situation. I saw that quite a bit in Nashville during its “it” heydays. People come for jobs, to seek adventure, to find a new life and a tribe. It never works out that way. Sorry folks I know this better than most.

Inside the incredibly shrinking Southern California starter home

By Jack Flemming Staff Writer LA TIMES Sept. 23, 2022

For decades, the single-family home has been Southern California’s ultimate lure — a chance to live a life of sun and sand from the comfort of your very own property.

Most buyers’ ticket into that life is the starter home. Something modest but not minuscule. Two bedrooms, maybe three. A picket fence in front and a yard out back for the kids and dog to play.

But the starter home has changed. As home prices have soared and higher mortgage interest rates have made everything less affordable, wish lists have become more and more wishful, and buyers have been forced to find something smaller and less practical.

Want two bedrooms? How about one, plus an office that might fit a twin-size bed. Want a backyard? How about a space shared with the rest of the condo complex. Want to paint the exterior of your townhouse? The homeowner association won’t allow it, but feel free to spruce up the inside.

Making compromises has always been a part of house hunting, but in a market where some two-bedroom homes are selling for $1 million or more — often for hundreds of thousands over the asking price — middle-class buyers are forced to take whatever they can get

“Beggars can’t be choosers,” said Zach Zyskowski, a TV producer who bought his first home last summer.

His search started with two-bedroom homes in West Hollywood and Mid-City, but he quickly realized that everything was out of his price range.

“Anything under $1 million was hard to find,” he said. “There was nothing that was both nice and unique, and I wanted something that wasn’t cookie-cutter.”

Zyskowski decided to switch strategies. He stopped searching for homes on the market and got creative, asking friends if anyone was planning to sell in their respective condo complexes. He ended up buying a one-bedroom condo directly from a seller in an off-market deal.

In the end, he sacrificed space for character. His new home is in El Cabrillo, a Spanish-style courtyard complex built by movie mogul Cecil B. DeMille in the 1920s.

It’s a bit small at 800 square feet, and he uses a pull-out sofa in the living room to host guests. But the stylish building, which has been featured in shows such as “Hollywood” and “Chuck” and enjoys a spot on the National Register of Historic Places, more than makes up for it.

“Would I have loved something bigger? Yes, there’s always more you can want,” he said. “But I’d rather have something smaller and nicer than bigger and boring. I was just amazed I could buy a place at all.”

For Elena Amador-French, smaller wasn’t an option. A planetary scientist for NASA’s Jet Propulsion Laboratory, she grew tired of working on the Mars Rover from her dining room table during the pandemic. The newborn baby didn’t help.

She and her husband started house hunting last year and set their sights on Altadena, a community tucked into the San Gabriel Mountains filled with charming Craftsman, English Tudor and Colonial Revival-style homes.

With a budget of $800,000, they wanted a house with character — as long as it had two bedrooms. But their search played out like many others: putting in an offer, watching dozens of other buyers drive up the asking price, and seeing the house sell for hundreds of thousands more than they could afford.

“You just have to laugh at a certain point. We couldn’t get upset because we couldn’t even compete,” she said.

They switched strategies and aimed for a duplex, which didn’t have the appeal of the single-family lifestyle but also didn’t have dozens of buyers swarming every open house.

In the end, they paid $970,000 for an 1,800-square-foot duplex with three bedrooms and three bathrooms in an east Pasadena complex.

“There’s still a piece of me that wants a single-family home that I can truly make my own.”

— Elena Amador-French

It didn’t have the charm of a single-family home, and it didn’t quite check off all the boxes; they couldn’t fit a swing set for their daughter into the outdoor space, and they weren’t able to add any personal touches to the exterior because of HOA regulations that require all houses to be painted the same color.

But it was an easier process that ended with more space for less money.

“There’s still a piece of me that wants a single-family home that I can truly make my own,” she said. “But this was so much less of a battle.”

In today’s market, it makes sense to settle. Homes that check all the boxes — hip neighborhood, plenty of space, interesting architecture — are still attracting plenty of offers and often selling for over the asking price. But for buyers willing to let go of the dream of single-family housing and redefine what a starter home can be, there are plenty of options.

Condos are regularly on the market in L.A. in the $300,000 range, a fraction of what some single-family homes are commanding. Other buyers are opting for tenancy-in-common units, arrangements in which residents share ownership of a building.

As more buyers choose alternatives, condo price increases are outpacing single-family home price increases. In August, the median sale price for L.A. condos was $675,000, a 7.1% jump year over year, according to Redfin. During that same stretch, single-family homes increased 0.4%.

The same is true for townhouse prices, which have increased 6.7% year over year for a median of $700,000.

For many Southern Californians, single-family homes are simply out of reach. The Times has published a “What Money Buys” series for the last five years that highlights homes on the market at certain price points in different neighborhoods. Now, those stories read like a time capsule.

For example, a 2019 piece featured homes on the market for $800,000 in a handful of L.A. neighborhoods including Jefferson Park and Cypress Park. Both areas had a five-bedroom home listed for around $800,000.

The Jefferson Park home ended up selling for $850,000 in 2019. Now, Redfin estimates that the home is worth $1.28 million. The Cypress Park home grew even more valuable, selling for $800,000 in 2019 and now worth an estimated $1.45 million.

Those prices have become standard. In Jefferson Park, there are no five-bedroom single-family homes on the market for less than $1.2 million. The $800,000 price point now buys a two-bedroom home — or a three-bedroom fixer-upper.

The change becomes even more pronounced at lower price points. A 2017 entry in the series explored what $500,000 buys in the L.A. neighborhoods of Van Nuys, Leimert Park and Boyle Heights. Every single home on the list had at least 1,000 square feet, and most had three bedrooms. One had four.

Five years later, Redfin values all the properties on that list at $750,000 or more, with a few valued north of $850,000.

A look at the options currently on the market in those three communities finds no three-bedroom homes for $500,000 or less. The closest thing is a three-bedroom townhouse in Van Nuys asking $550,000 — cash offers only.

For comparison, a 2022 story exploring homes at $500,000 highlighted much smaller options including a 648-square-foot bungalow in East L.A. listed at $485,000 and a one-bedroom condo in downtown L.A. asking $509,000 (plus $813 in monthly HOA dues.)

Spoiler alert: Both homes sold shortly after the article ran, and the East L.A. bungalow sold for $10,000 more than the asking price.

More buyers are settling for two-bedroom homes as a starter, and it’s driving up prices.

In L.A., the median two-bedroom home — the typical size for starter homes — sold for $765,700 in August, a 10.1% increase year over year, according to Rocket Homes. That outpaces one-bedroom homes, which increased 8.8% year over year, and three-bedroom homes, which increased 9.1% year over year.

Earlier this year, Compass agent Allie Altschuler sold a two-bedroom home in the hills of Eagle Rock for $1.442 million — or $293,000 more than the asking price. What it lacked in bedroom count, it made up for with unique features such as a breakfast nook with a built-in booth and a separate structure in the backyard that can be used as an office or studio.

“Younger buyers are OK with buying smaller homes because they know they won’t be in it forever,” she said. “Buying a house and living in it for 30 or 40 years isn’t the case anymore.”

The Week’s Sorta Kinda Review

I did want to wrap up the week with a personal story but before I launch into that I do want to note that after my last post regarding the economy stories are still be written that America is growing economically, but not as much but as much given what it can thanks to “supply chain issues.” That is a phrase that I will keep in the lexicon for years as it can pretty much be vague enough and generalized enough to use in a multitude of situations regardless of reference/intent.

The great “resignation” stories still abound but with more factual stories behind them. It seems people quit better paying but hideous jobs for lower paying ones and moving to cheaper communities in which to afford said decision. That has been the reverse in mentality for years as it was believed one had to move to bigger cities to find work that compensated you for the over priced degree you earned, offset the costs of living in an expensive metro and just cause who doesn’t want to live in the cool important places? The cost of living in NYC which is awash in a hot mess of crime and urban decay is of course back to charging astronomical rents and the cost of housing to purchase is equally as unaffordable for the average buyer. But the reality is that a big chunk of Americans are house rich, cash poor, the idea that savings was built into the house, the one that is expensive to maintain, that is taxed frequently based on needs of the community through either special assessments in Condos to offset maintenance and in turn personal property through increases needed to fund schools and other infrastructure that is needed thanks to the expensive costly multi family residencies and commercial buildings and corporate tax incentives given to those who build, work and/or even live in. Do they live in them? No they often rent them/own them and use them for corporate tax write offs, as again ask Nashville about that 181 day residency requirement in which one needs to avoid state income tax. And with the rising costs overall, from commuting costs to food costs, the reality is that salaries will lag in bigger markets. And in New York City the reality is that dream living in this city was a dream as many are now finding out.

I found this story is one from a few weeks ago but is relevant as it is about the cost of rental properties and the overall affect housing has on the return to work concept. The WSJ had an insert today in their real estate section of the paper regarding the “Gold Coast.” This is the portion of where I live in Jersey City that extends south to Bayonne and all the way north to Edgewater, NJ. It runs the Hudson and was largely responsible for the beginning of the gentrification in the area, Hoboken, the mile square city once known as the origin of Frank Sinatra. A former rat trap of a city is now the party central, called Broboken for the amount of traders and other financial workers who moved there the last decade. The city is awash with older brownstones and buildings aligned with new builds of million dollar condos and apartments run by large publicly traded companies and some privately held ones. One company Equity Residential and the other LeFrak have huge tax breaks and build massive buildings the other have bought up existing stock and do some minor works and then raise rents to disproportionate levels that long term residents cannot meet and they leave. Equity was cited on the local NY news as that while rents are outpacing the city and in turn could ultimately affect growth and return to normal as vacancies can contribute to increase in crime and property damage; they are certain there are many more tenants who can afford to move in and pay such rates. Well that is interesting as the debate about return to work and compensate salaries is an issue and right now some of these companies have said that while they work from home their current salary might not be maintained dependent upon where one’s home is. AirBnb is so far the only that has come forward and said their employees can live anywhere and pay will be the same as always when it comes to the position held, regardless of where one lives. But if you read most articles that is not the case and again why pay six figures for an employee who lives in say, Arkansas, really? Then again who the fuck is living in Arkansas? No one they are all moving to equally expensive hip places, Seattle, Austin, Miami, not fucking Arkansas.

And with this they are paying 5K or more rent to live in the building from hell. I love this story as I can see it here in many of the new buildings around me. The claim of 99% occupancy, yet vacant units sit dark. My personal favorite is the lumbering building behind my unit and sits firmly in a flood zone. There was some dumb planning and permitting there as adding 700 units in a city already decaying and have federal issues with regards to waste management of water seems odd, but then again how much was donated to varying campaigns to those who approved said plans. I watched the build over the pandemic, with a rotating crew of day labors, chaos and delays over issues that I suspect again were do to “supply chain”, rising costs and lack of actual qualified workers in which to do the job. One start up construction company building two equally massive buildings, Katerra, folded into bankruptcy only now like the Phoenix to reemerge and start anew here in the area with new plans to big builds like erect penises in the sky! Note that in the article here are some of the tenants expressing frustration of getting home now imagine in a real crisis trying to get out.

One of the buildings was a touted one from the famous Ryan Serhant of Million Dollar Listing and with that some of the complaints are most interesting that include raining from the light fixtures. The reality is that construction during the pandemic was an illustration of how bad things can get and I cannot stress enough inspections and oversight equally lacking. The article states the reasoning as such:

New development is rarely perfect, but a crop of pandemic-era apartment buildings that have hit the market show that two years of stop-and-start construction, global supply chain issues, pressure from lenders and yo-yoing housing prices have taken a larger toll. Complaints and legal claims are already emerging, signaling that a confluence of all factors amid the Covid crisis could continue to be a problem for new construction — from entry-level studios to top-tier penthouses — for years to come, according to lawyers and development consultants.

And with that I tenant protections have ended and this is why I remained in my Kusher building despite wanting to move, the reality is that Real Estate Agents are useless who do little to offset the costs of real estate, be it renting or purchasing. Serhan is just who he plays on TV only worse. But I don’t work from home I work in the schools and with that again that is another issue that the Pandora Box opened for many when the closed, they actually saw how bad they are. And in that budgets to improve public education are approaching Billions as they are here in Jersey City. And where does that money come from? Property Taxes, special levies and they are considering another option – an income tax addendum. Oh good I can pay more for the shitty job I have and yet no union org, state or local, has ever gotten back to me about unionizing said job. Go figure.

But I am lucky, and that brings me to the last story of the week. Thursday I went to a fund raising event in White Plains, NY for Restoration through the Arts (RTA). My involvement was until then a check sent last year for two reasons: I had cash and I needed to rid myself of it to avoid paying taxes. Clearly I did not do enough to do so as my fed and state taxes were significant, very significant. I do not have a foundation or other way of burying money and I am not Jeff Bezos, ex wife, Mackenzie Scott, by any stretch but I do like her way of simply donating and moving onto the next. So following that lead I chose a multitude of orgs that simply were either linked to my childhood, Woodland Park Zoo, my love of the arts, Seattle Symphony and Pacific Northwest Ballet; my being a woman and with that the League of Woman Voters, Planned Parenthood Organization (not the foundation as that is a political arm and not tax deductible, again you need to do research); to some other lesser known places that assist with women and families in need that still have a long history and presence in their community. These mean having Boards, a tax id number and again a long history of at least a decade or more. There were Animal foundations, the State of Kentucky and other ones that while I was not keen on donating, such as the Red Cross as their overhead often consumes much of their funding, I did not have the luxury of finding similar disaster relief groups that were as widespread but with that you can in fact designate the donation to go exclusively to disaster relief. But with that I chose RTA as I had with Pat Graney’s Dance Company as she I knew from Seattle and her work in the prisons and with that I found Yoga in the Prisons and RTA which does so through the arts. The “gala” enabled me to actually see theory into practice to attend a dinner and meet the recipients, their families, other donors and the founder in which to see how they have affected the lives of those imprisoned in Sing-Sing for the last 25 years. It was amazing and with that I left early as I saw that I had made a right decision but that it was in fact a one off, they do not know that but as much of the places I donated last year will not be on a recurring loop and RTA is not that special in which to remain. I did laugh as when I checked in they had put my email address last name as my name on the guest list. Meaning that they had not read my RSVP nor even verified it from the Check I wrote. My standard line, “Did the check not clear?” got a reboot and with that I knew then my business was done. Once that was fixed and I stayed for the evening I met interesting nice people, saw the production and tributes and slipped out. Apparently not fast enough as I was alone I was a mark. I have also said repeatedly that I am valued for two things: My vagina and my checkbook. One thing is that my vagina is no longer of interest so that means I have only one thing – my checkbook. And with that I found the attention of an Attorney attending with his client, a woman, whom he had exonerated herself from a false charge of abuse and she was for the record, young a white and been imprisoned for murder. We hear these stories all the time and with that few are directed about women. Thanks to John Oliver the one woman on death row who was to be executed, Melisso Luchio, has had a stay. You see it takes not a village but famous or money to get the attention to these cases and with that I get it, I really do after what happened to me in 2012 and I have never been able to ever get over it and with that my story ends. I had only myself and me alone who figured out how to rebuild my life but again I had the resources and knowledge how to. Not everyone is so fortunate. But that said I also have full control over said resources and with that after my last run in with the two frauds, Kevin Trombold and Ted Vosk, it will be a cold day in hell before I trust any Attorney. And while I am sure this man is legit and is doing good work, I know when I am being tagged a “mark.” With that , the exchange between he and his client I knew the hot hit would begin before I left White Plains the next day. So the next morning I did not check emails, I instead enjoyed my morning at the Opus Hotel there which is first class times none. A marvelous room and room service attendant who was a delight, the check in and lastly the pool man made me glad I chose to do this one off. That was worth it all. So when I finally got home in the afternoon the email was there waiting to take me to a drink, coffee, a meal to discuss his foundation. I could not say roll eyes fast enough to immediately craft a bullshit response, some true some not. The short end was that I am booked the next few months with many engagements, and that is true sorta kinda, but hey I have theater tickets and concerts to go to, so that is busy. And with that I said that upon the end of summer I was planning to possible return and relocate back to Seattle to be with family as the pandemic had changed much about life and meaning. And with that the nice ex con girl wished me the best and sent me her phone number to call her and keep in touch. (Okay and no on that regardless) and nothing from the Attorney. Call me shocked but no. So this year as I cull my donation list and say that attending these events are to say the least interesting but incredibly boring is one; the other is to say it is good to know that there are people willing to do the heavy lifting. I am not one. I say my work in public schools is the equivalent with a per diem. And dressing up, eating poor food and sitting with largely a group of strangers who don’t know each other either and have only that in common is another bore. See the other half, not that great and not the other half really, not even the one percent. Just one of 99%.

And that is the week as it ends. Now off to the Brooklyn Academy of Music and their theater arm to see Cyrano. It got rave review and with the last three plays/musicals I have seen – Plaza Suite, By the Skin of Our Teeth and The Life – a trifecta of bad, I am ready to see James MacAvoy tackle this work. We all need to find pleasure and with that my keyboard and checkbook are closed until another day.

The Gouging of America

Inflation is running rampant and with this prices from gas, food and of course rent is denting may pocketbooks of those who work in the real world. These are the folks like me who actually go into a place of business, mine a school, and must commute, stay on the property, go home and function as the primary caregiver/provider. This means cooking, buying food for said cooking, doing laundry (and for many that means a laundromat) and of course if they drive or use public transport that both have risks from the rising cost of gas,parking to of course increased violence be it road rage or transit rage that lends to added stress going to and from the workplace. The coddled class have felt NONE OF THIS.

I am amazed at the price of food as I live alone and I have yet to leave a store without the price of two bags hitting just under $100 bucks. I do buy almost exclusively organic and am fussy about food. I rarely order take out and never eat out so I am responsible for my menu and even I look at the endless leftovers and find myself tossing some waste knowing that it was not necessary. I do often give those to my doorman but again that is not always feasible as I have to buy disposable products in which to do so and provide them with the food, so this too adds costs and still more waste frankly. But the joke is even that bag of chips or other non-essential food may not be costing more but the size proportion is less. In some ways that I appreciate. And I have begun on average to make my own juice but I stop at bread as that is not something I can do at all. So much for those sourdough starters that everyone was talking about. And yes I drink and I take turns on costs for wine and some weeks I do go up a shelf and other times not so much. But again, I live alone, solely care only for myself and that does make it easier.

Expect the basic food group – eggs to go up even higher. The bird flu has led to some rather unorthodox attempts at quelling the disease and with that added to the unemployment roster. Remember this is supposedly a employees market, yeah right you bet. I can trade one shitty job for a less shitty one, still shitty but less so. This great resignation myth is up there next to the one of meritocracy. But even the supposed wage gains at said jobs are being blamed for inflation costs. With that too one can go really? Paul Krugman discusses the issues surrounding this subject in his column in the Times, Inflation, Interest and the Housing Paradox

In that he points out the role of the Fed and how banks respond which in turn lead to what we have now with regards to housing costs: Since about 2014, the cost of shelter, as estimated by the Bureau of Labor Statistics, has been rising considerably faster than the overall cost of living. I’m not talking about house prices; I’m talking about rental rates for apartments and “owner’s equivalent rent,” the bureau’s estimate of what houses would rent for. (Notes a graph) What’s going on here? The answer is that after the housing bubble and bust of the 2000s, housing construction plunged and never fully recovered.

And with another column he discusses the long term prediction or fear with regards to inflation and notes this:

But inflation, which used to be mainly confined to a few sectors strongly affected by the pandemic, has broadened. So I find myself in reluctant agreement with economists asserting that the U.S. economy is overheated — that overall demand exceeds productive capacity and that the two need to be brought in line.

The good news is that there’s essentially no evidence that inflation has become entrenched — that we’re in the situation we were in circa 1980, when inflation persisted simply because everyone expected it to persist. Every measure I can find shows that people expect high inflation for the next year but much lower inflation over the medium term, indicating that Americans still view low inflation as the norm.

So we go into the next year as elections begin and a tide will turn the Congress I have to ask what is the messaging here. We have never had a consistent nor actual reliable messenger for the last six years and that is not changing. Let’s just look at Covid and the new Covid team of the White House and the former Team. Well Dr. Fauci who has been here for six years, declaring the pandemic over or not, whatever he says that rolls and roils the left and right into a tizzy. I have again said this before and again the man is a fucking bureaucrat not an actual Doctor, he just plays one for the TV. He has never used his medical license or training for anything but research but he knows how to play one effectively. Shame Dr. Birx did not follow his lead.

That said the growth of the economy pushed by record stimulus packages, the rise of wages in the coddled class (the working class did as well but they reduced debt more than purchased cars, houses and stuff) enabled a rather steep growth in our overall GDP, especially in comparison to similar economies. And this again is going up one hill and down another. So one is expecting the concept if not the perfect storm aka plan if the GOP return to the House and Senate as they will do their best to avoid anything but thinking massive tax cuts is the way to avoid said recession. And with that we have seen some downturns as Covid is still here, the protections of costs and other measures, such as eviction relief and Health care costs rising thanks to less stimulus to the ACA, will undoubtedly affect growth. And with that already the GDP has declined. What this means in the long term is hard to know. But let us see what pans out in the next 10 months.

This is not about Covid although the pandemic, now the rising war in the Ukraine are two reasons for why we have major economic issues still being played out, as despite it all, the reality is that Corporate America is doing just fine. The coddled class is still playing at home and the reality is that many are bending to the will of that group, while the working class are doing their best to learn how to organize and collectively bargain in the same ways that their elders did 50 years ago. And with that brought more equality and economic gains than any expensive overpriced degree ever did as the campus class is now seeing a safe space means a better working place. They are doing more than any Politician ever did as laws are always made, broken and replaced. Remember how Gay Rights seemed sacrosanct? Yeah me neither.

So who is doing well? The Corporations are and they are people my friend. The same men and some women who are demanding then retracting or tracking their workers, and in turn firing the cleaning staff while cleaning up their accounts. Money, money and more money.

Revealed: top US corporations raising prices on Americans even as profits surge

A Guardian analysis uncovers how companies enriched themselves and their investors while boasting about jacking up prices

by Tom Perkins The Guardian

As inflation shot to a new peak in March, cost increases exacted a deep toll on the economy, eating into most Americans’ wages and further imperiling the financially vulnerable. But for many of the US’s largest companies and their shareholders it has been a very different story.

One widely accepted narrative holds that companies and consumers are sharing in inflationary pain, but a Guardian analysis of top corporations’ financials and earnings calls reveals most are enjoying profit increases even as they pass on costs to customers, many of whom are struggling to afford gas, food, clothing, housing and other basics.

The analysis of Securities and Exchange Commission filings for 100 US corporations found net profits up by a median of 49%, and in one case by as much as 111,000%. Those increases came as companies saddled customers with higher prices and all but ten executed massive stock buyback programs or bumped dividends to enrich investors.

In earnings calls, executives detailed how even as demand and profits rose post-vaccine, they passed on most or all inflationary costs to customers via price increases, and some took the opportunity to add more on top. Margins – the share of sales converted into profits – also improved for the majority of the companies analyzed by the Guardian.

Economists who reviewed the data say it’s more evidence of a clear reality: Consumers are taking a financial hit as companies and shareholders profit or are largely shielded.

“It’s obvious that corporations are trying to pass on any form of short-term pain they might be feeling … and that’s serving the top, wealthiest class instead of those in need of fair wages or products that are affordable,” said Krista Brown, a policy analyst with the American Economic Liberties Project

Media framing likely influences public perception. News reports of Hershey’s multiple price hikes over the last year read like so many dire reports on inflation’s pervasive toll. The company, which owns popular brands like Reese’s, KitKat and Skinny Pop, has been cast as the “latest victim of ever-increasing inflation”.

But a closer look at the company’s financials suggests a vastly different reality. Hershey’s net profits spiked 62% between the fourth quarters in 2019 and 2021, its operating margin widened, and it recently rewarded shareholders with $200m in stock buybacks

Still, customers will pay even more for candy bars in 2022 as Hershey aims for even higher profits: “Pricing will be an important lever for us this year and is expected to drive most of our growth,” CEO Michele Buck told investors.

Similarly, a Kroger executive told investors in June, “a little bit of inflation is always good for our business”, while Hostess’s CEO in March said rising prices across the economy “helps” it profit.

The pandemic, war, supply chain bottlenecks and pricing decisions made in corporate suites have created a “smokescreen”, said Lindsay Owens, executive director of the Groundwork Collaborative, which tracks companies’ profits. That obscures questionable price increases, she added, and allows businesses to be portrayed as “victims”.

“That gray, nebulous area is fertile ground for companies right now, and you hear about it in their earnings calls,” Owens said. “Inflation itself is the opportunity.”

Profits or profiteering?

The Guardian’s findings are in line with recent US commerce department data that shows corporate profit margins rose 35% during the last year and are at their highest level since 1950. Inflation, meanwhile, rose to 8.5% year over year in March.

The Guardian’s analysis is the first to take a granular look at a cross-section of companies across a range of industries. It compared the most recent quarter’s profits to the same quarter two years prior, pre-pandemic. Price increases were obtained by checking earnings reports, though those often lacked specifics.

The data is not intended to be definitive, but does show how a wide sample of companies have raised prices even as profits jumped. In earnings call after earnings call, executives made no secret of their strategies.

• As gas prices soared, Chevron’s 240% profit spike was part of “the best two quarters the company has ever seen”, prompting a dividend increase and assurances it would keep production low to maintain high prices.
• Steel Dynamics profits increased 809%. The company was “not materially affected by inflation” as higher prices “exceeded” increased supply chain costs.
• Fertilizer giant Nutrien’s profits shot up by about $1.2bn on “higher selling prices [that] more than offset higher raw material costs and lower sales volume”.
• Nike’s 53% profit increase driven by higher prices was only “partially offset” by supply chain and inflationary cost increases.
• Keurig-Dr Pepper’s “significant pricing actions” and productivity outpaced inflationary costs, leading to an 83% profit jump.

The analysis found commodity companies trading in oil, timber, rubber, meat, wheat, steel and mining recorded the highest profit increases, while restaurants and retailers saw comparatively lower improvements, or losses. Commodity price spikes reverberate down the supply chain, eventually hitting consumers, noted Martin Schmalz, an Oxford University economist.

The Guardian’s data, he added, objectively shows a massive “transfer of wealth” from consumers, who pay higher prices, to shareholders and investment firms that reap the benefits.

The potential consequences are enormous and global. Inflation may already have sealed Democrats’ midterm fate, and in France, Marie Le Pen, a far-right candidate from a Holocaust-denying party, gained on her liberal opponent as she positioned herself as the “pricing power” candidate taking on the “oligarchy” and “elitism”.

But even as profits skyrocket, many have dismissed the idea they play a meaningful role in inflation, including Larry Summers, a former Obama adviser with clout in the Biden White House. He previously called profiteering claims “business bashing” that are “terrible economics”.

A Hershey spokesperson stressed that its growth was driven in part by volume, and it would be re-investing much of its profits to meet growing demand: “These investments are where we are making the biggest use of cash,” he said.

Financial observers have varying takes on whether companies are “profiteering” or “price gouging”, or simply profiting. George Pearkes, an analyst at Bespoke Investment, pointed to Caterpillar, which recorded a 958% profit increase driven by volume growth and price realization between 2019 and 2021’s fourth quarters. Eliminating price increases may have dropped the company’s 2021 quarter four operating profits slightly below the $1.3bn it made in 2020.

“This isn’t price gouging … and it shows pretty concretely that there’s a lot of nuance here,” Pearkes said, adding profiteering is “not the primary driver of inflation, nor the primary driver of corporate profits”. However, he added that it’s reasonable to question whether Caterpillar should have passed on its cost increases.

The company also spent $5bn on buybacks last year, and $1.3bn for a quarter of profits is still high, Brown noted, especially in the context of inflation eating into workers’ wage gains.

“Companies have access to massive capital,” she said. “They could have one or two years that are more painful – not even more painful, just less profitable for their investors, and they’re choosing not to.”

‘It’s a fix’

One industry that neatly illustrates how corporations have used the current imbalance of supply and demand to increase their profits is housing.

In recent months, the white-hot market for newly built houses shut out many Americans as average sale prices shot above $500,000. The popular explanation: inflation, supply chain squeezes and building material costs.

But another less publicized factor contributed. Two of the nation’s largest builders, PulteGroup and Lennar, intentionally kept home starts low and took other steps seemingly designed to maintain high prices by restricting supply.

“​​We could sell another 1,000 homes in the quarter if we wanted to without too much effort. It just doesn’t make sense to do that,” Lennar co-CEO Jon Jaffe told investors in an earnings call. Lennar’s profits are up 78%, while PulteGroup’s jumped 97%. Lennar didn’t respond to a request for comment.

A step up the supply chain, wood producer Boise Cascade saw profits spike more than 1,100%, which it largely attributed to “unprecedented” pricing in 2021. Executives boasted that improved margins were only “offset partially” by inflationary and supply chain costs.

And at Home Depot and Lowe’s, where profits are up 38% and by about $2bn, respectively, volume and pricing drove sales as customers paid four times more for lumber.

Observers note a common thread along the supply chain: consolidation. By some estimates, Home Depot and Lowe’s control about one-third of the home improvement market, and hold even more of consumer lumber. Lennar and PulteGroup control about 11% of the home building market, though that figure is probably much higher in many metro regions, and Boise Cascade controls about one-third of the plywood market, according to a Forest Economic Advisors analysis.

“Those who have market power can raise prices above what’s considered fair market value,” Brown said. “We’re at a point in our market concentrations that we haven’t seen ever before.”

The influence of consolidation is pervasive. A Procter & Gamble executive noted to investors it and Kimberly Clark benefit from controlling 70% of the diaper market. It’s what Owens called a “concentration of necessities”. Reports say customers have “shrugged off” diaper cost increases, but antitrust advocates note very limited alternatives exist for many consumers. After multiple price increases, Procter & Gamble’s profits are up and Kimberly Clark’s are down, though the latter expects to “cover the majority of inflation with pricing” in 2022.

Similarly, Hershey’s 30 companies control at least 46% of the candy market. Prices on some of its products are probably up by double digits while the CPI index shows candy is up 7.6%.

Concentration is particularly pronounced among commodity companies, a problem highlighted in the grain market. CPI data shows bread and cereal prices increased by 30% and 7% between 2019 and 2021’s fourth quarters, while wheat skyrocketed to an all-time high in March as war largely eliminated Ukrainian and Russian crops.

Meanwhile, four large grain producers control about 90% of the market. Among them are Archer Daniels Midland, whose profits jumped 55%, and Bunge, whose profits swung by about $280m. Three companies control 73% of the cereal market.

That level of concentration breeds higher prices, said Alex Turnbull, a commodities analyst.

“When you go from 15 to 10 companies, not much changes,” he said. “When you go from 10 to six, a lot changes. But when you go from six to four – it’s a fix.”

Depending on the material or good, some commodity prices are set by exchanges, which Pearkes noted largely eliminates some companies’ pricing power. But commodity consolidation can open the door to another form of pricing power: boosting prices by keeping supply low.

“Price is set by supply and demand at some metals exchange, but what is the supply? That is what the companies determine, no?” Schmalz asked.

Just as PulteGroup kept housing starts down, oil companies have kept production low while gas topped $7 a gallon in some regions. In earnings calls across the industry, oil executives like Diamondback Energy CEO Travis Stice have promised to keep production flat in the years ahead, “putting returns and, therefore, shareholders first”.

“No one wants to see that shareholder return program put at risk with volume growth,” Stice said.

Some companies are enacting price increases in a less direct manner: by eliminating lower-cost products. The CEO of Kohl’s said in a previous interview the store was shifting its merchandise toward higher-end brands like PVH-owned Tommy Hilfiger, where profits are up 183%, because they’re more profitable for Kohl’s.

Similarly, General Motors profits jumped 49% between the full years in 2019 and 2021 despite selling about a million fewer vehicles. The company said it focused on moving more expensive trucks and SUVs than in previous years, but it also raised prices – a Silverado can now cost over $5,000 more than it did in 2019. That includes two rounds of March price increases just weeks after GM announced record profits and margins.

Such strategies further squeeze lower income consumers, said University of Massachusetts Amherst economist Isabella Weber.

“That’s a general trend that can enhance price increases quite dramatically, especially with cars and groceries,” she said.

‘Sick and tired of being ripped off’

Not everyone is raising prices. Arizona Iced Tea owner Don Vultaggio became a populist hero in April when he declared he’d rather take a hit than push prices above 99 cents: “I don’t want to do what the bread guys and the gas guys and everybody else is doing,” Vultaggio told the Los Angeles Times.

But Arizona is a privately owned company that doesn’t face shareholders’ wrath. When Target and Walmart declined to pass all inflationary costs on to customers ahead of the holiday season, an investor revolt ensued, and their shares temporarily plummeted.

“Shareholders are not interested in seeing anyone be cautious with price increases, and in some cases they’re saying ‘let’s throttle supply, let’s see how far we can take this’,” Owens said.

The surge in pandemic profits has not gone unnoticed. A spate of Senate and House bills aim to rein in excessive profits, while Biden proposals and executive actions target stock buybacks and consolidation. Meanwhile, many consumer advocates and economists argue that enforcing antitrust laws already on the book, or strengthening them, could help reduce companies’ pricing power. Others have argued for the implementation of very targeted price controls on essential items, like bread.

In March, Senator Bernie Sanders began a push to bring back a windfall profit tax last used after the second world war, while Senator Elizabeth Warren introduced similar legislation that focused on oil companies’ profits.

“The American people are sick and tired of the unprecedented corporate greed that exists all over this country. They are sick and tired of being ripped off by corporations making record-breaking profits while working families are forced to pay outrageously high prices for gas, rent, food, and prescription drugs,” said Sanders.

Sanders may well be right, but if “sick and tired” Americans vote against the Biden administration in November, his chances of pushing for change will fall.

Living Large

 Today Amazon announced that it was raising the wages for their employees to $15/hr.  This does not include contractors and those hired through third party agencies, a large cohort that does employee Amazon workers for their distribution centers and offices throughout the country.   But it is a start.

The reality is wages have never been on par with the cost of living and where one lives in America means the median wage is often on what is considered poverty level in which to live but is entirely exempt from the social services available to those who are at said poverty level established by the federal government.  And it is why you see the struggle over health care and housing as the breaking point for many families.

Here in gentrification town I watch build after build and what we are finding is that one after another “luxury” building, be it tall skinny’s, multi family apartments and some lofts/condos to fill in what for years was a very neglected housing market.  The MDHA which runs permits and the federally subsidizing housing units that align the city in the now most desirable areas are putting further strain on a city that is sleight on resources as they are on transparency.

Right now what I see is a chess game of businesses closing shop in one area and moving to another. Core Civic a large private prison business located here in Nashville is now selling and moving. Where to Brentwood a suburb about 10 minutes from where they are located but its likely cheaper and less accessible to protests and attention that this shit for bag company has been attracting of late.

We have some gigantic office building with only two tenants identified, Shake Shack and H&M. Another a few blocks away with no actual tenants mentioned but Asperion is a prospective tenant consolidating their offices located in Nashville, Murfreesboro and Smyrna when the build is complete.  But grandiose mentions of bowling alley’s, movie theaters and green space for performances are all included. Which is also happening in another construction site planned for literally across  the street.  Okay then.

Then yesterday a lunatic included his plans for the neglected and flooded area north of Nashville across the Cumberland that he labels the Gucci of the area.  What the flying fuck?  We don’t even have a legitimate downtown core so sure we are going to go across the river on not one but three planned majestic bridges that he wants to see constructed to link the communities.   Who will pay for said bridges is unclear but hey they have to be high enough if the Cumberland floods – again.

Other than the announcement that a financial services firm was moving their office support staff to Nashville, the three partners are already “relocated” here in which to ensure residency to avoid income tax and high New York State property taxes, the rest of their staff is not coming to the area until next year.  How many jobs they will have available once that transfer is complete of course is never clear and in reality where they are locating, the tax breaks receiving will all offset that earnings from the new business faster than you can say sweet tea.

But the growth continues and the push outwards is to attract other business to relocate into the area and bring jobs, any jobs to the region. They can pay less, not fear union organizing and in turn avoid income tax which in Seattle had been an attractive lure. And they came and now the city can no longer afford to have so many educated employed people as costs have exceeded wages.  And do companies raise wages well they do but they would rather not so its cheaper to move. And in turn find the communities willing to pay for said move.   And that is the Catch 22 who moves first? The employer or the employee?  And then what?

The story below is showing that no one can afford to live in the cities of “it” anymore unless you are a six figure executive.  The reality is that while the article states Nashville I want to point out the jobs are largely hospitality based or hospital based with some well paid jobs but the largest employer still is in then industry of service.  The civic employees which include Teachers, Police and others have very stagnant wages and due to the budget shortfall the cost of living increase planned for this year was canceled.   

Drive around your community and take a tour of open houses. Can you afford them? If you cannot but still feel compelled to buy and a bank is willing to loan you money then welcome 2008 is back. And I suspect that right now we are close to this in regards to commercial build. And the reality is we have many hidden LLC’s and other Businesses owning property across the country and without clear ownership and in turn funding we have a pattern that I think is very akin to Trump and his property business.  He went from being heavily in debt and bankruptcy to suddenly awash with cash and that was hardly due to his negotiation skills.  Seen them up close and personal of late?  They suck.

We are now heading into another crisis due to tariffs.  Yes we are facing huge economic challenges if these continue and the low job numbers may not last and wage increases will go with them.

Housing Market Slows, as Rising Prices Outpace Wages

By Ben Casselman
The New York Times
Sept. 29, 2018

DENVER — By nearly any measure, this city is booming. The unemployment rate is below 3 percent. There is so much construction that a local newspaper started a “crane watch” feature. Seemingly every week brings headlines about companies bringing high-paying jobs to the area.

Yet, Denver’s once-soaring housing market has run into turbulence. Sales and construction activity have slowed in recent months. Houses that would once have drawn a frenzy of offers are sitting on the market for days or weeks. Selling prices are rising more slowly, and asking prices are being slashed to attract buyers.

Similar slowdowns have hit New York, Seattle and even San Francisco, cities that until recently ranked among the nation’s hottest housing markets. The specifics vary, but economists, real estate agents and home builders say the core issue is the same: Home buyers are reaching a breaking point after years of breakneck price increases that far exceeded income gains.

“The local economy is still fantastic, all the fundamentals are there, but obviously wages are not keeping pace,” said Steve Danyliw, a Denver realtor. “As the market continues to move up, buyers are being pushed out.”

Rachel Sandoval is one of them. An elementary schoolteacher in the Denver Public Schools, Ms. Sandoval earns about $50,000 a year, enough to afford a condominium or a modest house in most markets. But not in Denver, where the median sales price for all homes was $410,000 in August, and where even condos routinely top $300,000 — a price Ms. Sandoval calls “not even close to feasible.” She said she was scoping out jobs in Texas, where houses are cheaper and pay is higher, and considering leaving teaching in search of a higher salary.

For now, Ms. Sandoval, 41, is sharing a one-bathroom rental house with two roommates, a nurse and an adjunct professor. The three stick to a strict schedule to make sure they can all get to work on time.

“We are professionals, we have degrees,” Ms. Sandoval said. “This was not the plan.”

Nationwide, sales of previously owned homes fell 1.5 percent in August from a year earlier, according to the National Association of Realtors. Residential building permits were down 5.5 percent over the past year, according to the Department of Commerce. Many economists say the housing market may have turned into a drag on the gross domestic product.

The recent slowdown, however, is unlikely to give would-be buyers like Ms. Sandoval much relief. Prices in Denver are still up 8 percent over the past year, according to the S&P Case-Shiller index. That’s cool compared to the double-digit gains of a couple years ago, but well ahead of the 6 percent increase in average hourly earnings over the same period. Rising interest rates have also made buying homes more expensive.

Few analysts expect an outright decline in home prices anytime soon. That’s because, unlike the speculative bubble of the mid-2000s, the recent run-up in prices has been driven primarily by economic fundamentals: People are moving to Denver faster than developers can build places to live. The Denver region has added more than 300,000 residents since 2010, making it one of the country’s fastest-growing areas.

Introductory economics textbooks suggest that high prices should attract more supply or suppress demand — or both. Inventories of unsold homes have risen in Denver and other markets in recent months, and the real estate site Zillow found that price cuts have become more common.

Over all, however, the housing market is not behaving as the textbooks say it should. Inventories remain low despite the recent increases, and new construction is slowing, not picking up.

Part of the problem, local real estate agents say, is that the furious pace of price growth has essentially gummed up the market, making homeowners reluctant to sell for fear of being unable to find a new home.

Rising interest rates are compounding the problem because would-be sellers do not want to give up their low interest rates, a phenomenon economists call the lock-in effect.

Brant and Annie Wiedel spent more than a year trying to get a foothold in Denver’s housing market — and they are reluctant to give it up. The couple estimate that they looked at 160 houses before finally closing on a three-bedroom ranch house in Lakewood, a suburb, three years ago.

With two children and a third due in January, the Wiedels would like to trade up. With the rise in home prices some renovations, the house they bought for $350,000 could be worth more than $500,000.

But the family borrowed at about 3.5 percent three years ago. Today, they would pay closer to 5 percent. “Even if we just saw houses at the same price, we’d have to pay more” every month, he said.

Ultimately, the key to breaking the logjam is to build more homes. Downtown Denver is crawling with cranes, many of them erecting amenity-filled apartment complexes aimed at young professionals. A drive in almost any direction from downtown reveals freshly built subdivisions with names like Tallgrass, The Enclave and Green Gables Reserve.

Most of those new homes, however, will list for more than $400,000. And hardly any builders are selling properties for under $300,000 without government subsidies. Even many home builders worry they are pricing themselves out of the market.

“I see the biggest threat to our business as the affordability challenge, that we are building houses that people can’t afford,” said Gene Myers, chief executive of Thrive Home Builders.

The problem, Mr. Myers and other local builders say, is cost. The price of land, building permits and other fees can run close to $150,000 for a single-family lot — before construction.

Some of the challenges are specific to Colorado. Quirks in state law, for example, make it easy for condominium buyers to collectively sue builders over construction defects, making developers reluctant to build condos.

But other issues are common to many cities. Building materials have become more expensive, in part because of tariffs on lumber and other products that President Trump imposed this year. Labor costs are rising, too, especially for skilled trade workers. Restrictive zoning makes it hard to build denser developments that make cheaper homes profitable for builders.

“They’re producing what they can produce,” said Sam Khater, chief economist for Freddie Mac, the government housing-finance company. “The problem is, it’s uneconomic for them to produce affordable.”

This big-city conundrum is spreading. People priced out of San Francisco moved to Seattle and Portland, driving up prices and displacing people who moved to Denver and Austin. Next on the list: Boise, Nashville and other cities offering some of the same attractions at lower prices.

Sure enough, the online real estate site Redfin this spring found that Denver had joined Seattle and San Francisco as cities with a “net outflow” of users — that is, there were more people on the site looking to leave Denver than to move there.

“City after city is going to face this,” said Glenn Kelman, Redfin’s chief executive. “At some point, the buyers step back and say, ‘Enough is enough.’”

More people are moving to Denver than leaving it, but migration has tapered off in recent years. J. J. Ament, chief executive of Metro Denver Economic Development Corporation, said he had seen no sign that rising home prices were making the region less attractive. Last month, VF Corporation, an apparel maker that owns brands like The North Face and Vans, announced it would move its headquarters to Denver from North Carolina, partly because of the area’s reputation for outdoor activities. The state also offered $27 million in incentives.

“I wouldn’t use the word ‘crisis,’” Mr. Ament said. “The work force is still willing to move here.”

Plenty of people in Denver do use the word “crisis,” however. A January report from Shift Research Lab, a local research group, concluded that years of under-building have left the region with a shortfall of tens of thousands of housing units.

That shortfall could threaten Denver’s growth, said Phyllis Resnick, a Colorado State University economist and one of the report’s authors. The skilled workers moving to the area, who have been so important to attracting companies and jobs, want to be able to eat out at restaurants, drop off their dry cleaning and send their children to school, all of which require lower and middle income workers. If they cannot afford to live in the area, Ms. Resnick said, Denver will not retain its allure — and the economy will not keep growing.

“My concern is, at some point it sort of breaks because we can’t house the folks that we need to fill out all the economic activity in the region,” she said. “I’m not convinced that in the near term it will correct itself just through market forces, unless that’s through people moving out.”

Local governments and charities are trying to address the problem. The Denver City Council last month voted to double, to $30 million per year, the city’s affordable housing fund, which is used to build and preserve homes for low-income residents. Late last year, nonprofit groups announced they had raised $24 million to start the Elevation Community Land Trust, which will buy land to create permanently affordable housing. Another new program aims to help public schoolteachers come up with down payments.

To have a big impact, economists say Denver and other cities have to build more homes affordable to middle-class families. That will require persuading communities accustomed to single-family homes to accept condos and townhomes.

“The only way to solve the riddle is through density,” said Dave Lemnah, co-owner of Lokal Homes, a Denver builder.

That’s why he is building projects like the Villas at Wheatlands, a 94-unit development in Aurora, east of Denver. Each lot has three attached units arranged like a jigsaw puzzle. Lokal sells the homes for less than $400,000; some go for close to $300,000.

One buyer, Angela Kirkland-Vandecar, an aesthetician and a single mother, has spent two years searching for a home she could afford on her roughly $50,000 income.

When Ms. Kirkland-Vandecar began her search, she did not want to move to Aurora or to a condo.

“I’ve now done everything that in the beginning I said I was not going to do,” she said.

But Ms. Kirkland-Vandecar feels good about her decision. Her monthly mortgage payment will be less than her $1,900 monthly rent, and she is happy not to have a lawn to mow. Her daughters, 11 and 13, will have their own rooms, and she will no longer have to store food in the laundry room, as she did in the cramped apartment she had been renting.