“That’s what we’re doing to restore middle-class security and rebuild this economy the American way—based on balance and fairness and the same set of rules for everybody from Wall Street to Main Street. An economy where hard work pays off and gaming the system doesn’t pay off, and everybody has got a shot at the American Dream. That’s what we’re fighting for.”
President Obama, Labor Day speech, Detroit, Michigan
“You’re absolutely right that housing has been at the key—at the core of a lot of the hardships we’ve been going through over the last two and a half years. . . .”
President Obama, town hall meeting, Atkinson, Illinois, two weeks earlier
In keeping with my current scheme of alternating pieces on politics and the personal, today I’m sharing with you thoughts on my husband’s and my failure this spring of 2011 to sell the house we lived in for thirty-seven years. Our experience speaks to a few of the myriad ways in which the burst of the housing bubble is changing the way Americans live.
Lately I’ve been thinking a lot about Cecelia Holland’s The Sea Beggars, a historical novel set in sixteenth-century Amsterdam that nobody reads anymore. The effacement of Ms. Holland’s literary career is as good an example as any of the ubiquity of change. Not so long ago, in the 1970s and 1980s, she was acclaimed the premier historical novelist of the time. Why? Because she had a gift for creating past epochs scrubbed of contemporary thought. But literary fashion changes, and now readers want historical fiction (and film) anchored somewhere within our modern comfort zone on matters of race, feminism, marriage, religion, war and the meaning of violence.
For all that, the opening scene of Sea Beggars is a masterpiece, and it’s that scene to which in my mind’s eye I return again and again. It’s Sunday in Protestant Amsterdam, and a fiery preacher has just delivered a sermon on the evanescence of human existence to the enormous Calvinist crowd before him. The characters whose lives briefly we are about to follow leave the Sunday service re-affirmed in their attention to, their love of, Scripture.
But it never occurs to our characters that the biblical verses that they have savored, whose knowledge defines them as Protestants as opposed to Catholics, might actually quite literally be fulfilled in them. Of course that is exactly what happens. Catholic Spain regains control of the Netherlands and the comfortable lives of our Dutch Protestant burghers are gone in an instant.
Here is human nature, right? We take from other people’s experience—whether in Scripture, or books, or film, or observation of real life—what we find comfortable, what fits in with the worldview we already possess.
And so this happened to me in the fall of 2007 when I was covering the Obama grassroots movement in one of its smaller incarnations, in Memphis, Tennessee. On an especially dispiriting evening—a deluge of autumn rain, the venue the common room in a shabby public home for the mentally impaired—I listened to a university professor try to convince his audience, ten to twelve skeptical older African-Americans, that Barack Obama could become the next president of the United States.
Afterwards, over donuts and punch, we talked. The people who had come out that evening were neighbors, homeowners on the street nearest the group home. Their street, a semi-circle of small brick homes built nearly seventy years ago but beautifully maintained, was part of the black middle class neighborhood that had settled around the University of Memphis.
I had thought, at first, that Obama’s prospects accounted for the glumness of mood. I was wrong. A neighbor, owner on the corner, had died, and just the week before the U.S. government had bought his home for Section 8 housing. This development did not bode well for the street, much less its property values.
“The renter will be a woman with kids—woman supposedly single—but I guarantee you there’ll be a parade of men coming and going—all hours—ton of people living there—drug deals—you name it.”
This was the gloomy prediction I heard twelve times over.
No prospective private buyer had been interested in the neighbor’s house. Why? Because for the same amount of money a Memphian could purchase a new house, with an up-to-the-minute kitchen and a great room, far out in the suburbs.
Having poured their lives into the American dream of home ownership—and done so long ago, not in any housing bubble—these potential Obama supporters had discovered that home ownership was not the bulwark they supposed. In the advent of one Section 8 housing rental to their street, they saw the future for their own homes, for what they had once thought they had to bequeath their children.
I did a little research and discovered that, indeed, the older middle class neighborhoods—black, white, mixed—around the University of Memphis had begun to decline due to the arrival of Section 8 rentals.
My sympathy for the predicament of these middle class Memphians was the greater because such a thing could never happen to me. I was white and upper middle class. My own street was lined with much grander and more expensive homes. The government does not put Section 8 housing into such a neighborhood. Even to think of comparing hip and happening Rockridge, Oakland, San Francisco East Bay, California to benighted and struggling Memphis, Tennessee was apples and oranges.
Or so I thought. But this spring I got Sea-Beggared.
When my husband and I bought our Oakland house, it was the best we could afford but not what we wanted. It was 1975, and housing prices were going up, up and up every month. The universal fear of young family professionals like us was that we would never be able to “get into the housing market,” as we said then. Not only the prices were daunting. At that time, a 20% down payment was de rigueur. A monthly house note could not exceed 30% of monthly income. 26% was the norm.
Like others of our generation, we borrowed a down payment from my father and lived as poor as church mice (if I remember correctly, our monthly note was actually more like 33% of our monthly income) for the next five years. But the scrimping was the means to an end. Eventually, we would be able to “trade up,” if we wanted, as our slightly older friends had done.
Meanwhile we lived in Oakland’s Rockridge, where property values had recently been devastated by the arrival of BART, the Bay Area’s new mass transit system. The trains ran right through Rockridge, and the building of the tracks and station—not to mention the widening of the throughway to Contra Costa County—had taken out a large swath of old Oakland housing.
In 1975, the commercial district along College Avenue near our new house was comotose. The transformation of the neighborhood—essentially the raping of an old and aging community for the benefit of newer and whiter suburbs to the east—was raw and ugly. And it wasn’t just the vista of concrete and steel. Rockridge was, and is, noisy. The drone of automobile traffic, the rumbling of trains.
That’s why we could afford to buy there.
We would have liked to have bought in the Berkeley Hills, above the University of California campus. A house in the Berkeley Hills—that was the dream of every couple we knew. High up, and as far from anything commercial as possible.
Thank goodness we were able to buy in Upper Rockridge, on the better side of Broadway, blocks away from College Avenue and its storefronts.
Perhaps you already know where I am going with this little history. Change came to Rockridge. The kind of change that astute city planners might have foreseen. Residents grew accustomed to the new shape of the neighborhood. In California’s rising prosperity, local residential property values recovered. The Oakland stretch of College Avenue, like its Berkeley counterpart just north, revived. It is now lined with world-class restaurants and cutting-edge shops. More importantly, San Francisco commuters decided they liked BART and wanted to live in easy driving distance of its parking lots.
The whiz-bang to the boom for Rockridge was its Who’s Who. Successful writers and artists, musicians and tech entrepreneurs—famous and not so—moved there. Rockridge developed a cachet and therefore property values beyond what its mere housing stock merited. This was the kind of change no one, not even an astute architect, could have planned for. Cachet, delightful as it is, nevertheless is also a warning bell, but we Rockridgeans were too busy counting our virtual house dollars to hear the chiming descant on the theme of change’s inherent unpredictability.
Change has come to Rockridge again. The burst of the housing bubble accounts for part. This is the change that could have been predicted—and indeed people did. A few years ago, I watched a local TV segment on the housing boom at the far reaches of the San Francisco Bay Area commute. A couple who made $80,000 a year gave the TV anchor a tour of the new house on which they had a $800,000 mortgage. I remember being taken aback. My husband and I had an income several times theirs, and yet we would not be comfortable with an $800,000 mortgage. But I knew what the couple was feeling. They were pleased; they were able to rest easy, because they knew they could always sell the house, for more than what they had paid for it, if they ran into financial trouble.
That was a strain of middle class thinking back then, wasn’t it? Certainly, it wasn’t the only strain. Although the country did not like to dwell on the fact, and certainly our media did not, pieces of the American middle class, particularly in rural communities and old-tech factory towns, had never recovered from the previous recessions and the larger economic shifts behind them, in the last decades of the twentieth century. As someone who loves the heartland, I was well acquainted with such places. I knew what could happen. And maybe that’s why the TV segment on the couple with the $800,000 mortgage rang ever so small a chime in my head. I wondered if getting in on the housing boom was what getting in on oil & gas tax shelters in the 1970s had been: a losing prospect for those who bought last.
The fall of house values is but one part, however, of the change that is taking place in how and where Americans live. Another part of what I call the Great Inchoateness is that young families today do not want the neighborhoods my friends and I wanted when we were young. This is unpredictable change.
Who could have guessed that today’s young couples, the lion’s share of Bay Area buyers, would want to live close to commerce? With their generation’s complicated relationship with cars, they want to live in walking distance of stores and restaurants. Therefore, the housing market in the East Bay has turned upside down. The Berkeley and Oakland hills are no longer as desirable as the Elmwood (Berkeley flats) and Rockridge residential blocks to either side of College Avenue.
One reason my husband and I could not sell our house this spring is that it is too far from College Avenue.
Like the arrival of Section 8 to the lovely, curved street south of the University of Memphis, our failure to sell our house, perhaps the best on our block—we had no offers, even after drastically dropping the price—does not bode well for the neighborhood.
Many factors contribute to the particular Great Inchoateness that is now Rockridge residential property. The burst of the bubble. (25% of Rockridge mortgages are “under water.”) The change in buyers’ tastes. The Berkeley-Oakland Hills Fire of 1991. (Now families can get an Upper Rockridge house of post-fire vintage, with up-to-the-minute kitchen and great room. Hello, Memphis.) A paucity of buyers. The national trend of widening income gap, which in practical terms (among many other consequences) has skewered house pricing according to “comparables,” because paying a few hundred thousand more or less for a house means nothing to a twenty-nine year-old working at Pixar or Zynga, with a seven-eight-figure portfolio.
Add to all that uncertainty. Our real estate broker in March: “It’s been a hard two years but the market is looking up.” Our broker in August: “the market is still falling.”
After this summer’s roiling stock market, debt-ceiling spectacle, downgrading of U.S. debt and August unemployment figures, who can not but suspect that the Rockridge homes bought last spring would sell for slightly less now?
No wonder it’s the rental market that’s thriving. I’m exaggerating a bit when I say that people were standing in line to rent our house. But that’s what it felt like, with much interest and several offers. So now my husband and I are landlords, however reluctantly. And I have girded myself to be one for the foreseeable future.
Our real estate broker of last spring explains it this way: people who have been through foreclosures and short sales (those who “bought last”) still have to have somewhere to live. To her observation I add the growing national realization that buying a house is not the great financial investment it once seemed.
I raise a question that even only two years ago would have been unthinkable: perhaps the twenty-first century American dream will not be home ownership?
For the sake of historical accuracy, moreover, I point out (to President Obama’s young speechwriters, among others) that the American dream originally was not home but land ownership. Here again is the work of change. For how many people today lust for a couple of acres on which to hoe and to graze livestock?
Our forebears, except for a few of the wealthiest, did not care all that much about houses. Outdoors most of the day, they spent very little time in them. In a world unaccustomed to bodily privacy, adults, children and servants slept close together and didn’t think much about it. It was the dream of land ownership (the possibility for which was closed to the common man in the Old World) that brought us to these shores.
What was land ownership about? Doing a hard day’s work for oneself rather than for somebody else. Feeding a family. In England and in Europe, a common man could not hunt or fish, for even the game and the trout belonged to the gentry and nobility. Reveling in the freedom to do as one damn well pleased on one’s own property.
At heart, the desire for land that built our nation was a yearning for human dignity, to be a man in full just as much as any of the rich and powerful.
Eventually, as American pastoral gave way to urbanization, the specifics of the American dream have changed but the core meaning of human dignity remains the same. For over a hundred years, to be middle class in America has meant house not land ownership. For the last fifty years, in an age of enormous prosperity, our American middle class, and its suburbs of single-family detached houses, grew exponentially.
But now we are in the process of shifting the loci of the dream, that possession of dignity that anchors and centers our nation. Where will the new iteration of the American dream take root and flourish? Perhaps in the shaping of one’s persona in social media, for our younger generations, just like our seventeenth and eighteenth-century forebears, do not put the value on personal privacy that fed the desire for home ownership from the Victorian Age through my own.
I have always thought that the Obama Administration, through the best of intentions, with a desire to help hurting citizens, made a mistake in trying to bring the housing fall to a soft landing. The burst of the bubble should have been allowed to spend itself. Instead we have an approach rather like the slow, excruciatingly drawn-out pain of peeling back a bandaid rather than ripping it free. Facing the prospect of government’s reconstitution of Fannie Mae and Freddie Mac, with sporadic pressures on banks to write down mortgage balances, the housing market cannot find the ground it needs to re-seed itself.
Philosophically I am not an opponent of government regulation. It secures our lives in ways that we take for granted. Just one small example: dairy inspection. Therefore, although I know and respect many members of the Tea Party, here is what I say to them about regulation. You want a society with less of it? Go to Russia, take your children and live in a place where every time you drink milk you could be exposed to tuberculosis.
Regulation is the warp and woof of a complex society based on the rule of law. (As opposed to China, a complex society based on corruption and a hieratical structure of authority that is opaque to outsiders, partly because it can shift in an instant. (My husband says he never knows if a deal is going to go through until suddenly everybody gets out their seals to chop the documents.)
Nevertheless, I have no confidence that trying to regulate the housing market will work. Here are the two reasons uppermost in my mind. First of all, so many of the homeowners with troubled mortgages are like the couple making $80,000 a year but holding a mortgage ten times their income. It’s magical thinking on the part of the Obama Administration to imagine that writing down such a mortgage less than half—maybe even two-thirds—would keep people from defaulting. And my pessimism here is rooted in the second reason.
For thirty years, we middle class Americans have maintained our lifestyles and pumped up our buying power either by using second mortgages and secured lines of credit or by refinancing our homes as they appreciated in order to take out cash. This avenue is now closed. For the first time in almost half a century, we Americans are going to have to live within our incomes, which will have to cover—a new discipline! will take getting used to—all our expenses and purchases, including those we used to dip into house equity to pay.
Furthermore—and if I don’t point this out, one of you readers will—the situation is unfair. People like the young men working at Pixar and Zynga, like my husband and me, beneficiaries of the rising value of tech stock, are unfazed. My husband and I did not have to sell our old home in Rockridge in order to buy a new one in Silicon Valley.
But then life is never fair. Is it? One way or another—and again the unpredictability of change can be a factor—we all experience unfairness. This is why President Obama’s constant refrain of “fairness” in his stump speeches troubles me. Having followed him for so long on the campaign trail, I find little about Barack Obama, President, surprising. His personality, his priorities, his politics—all are playing themselves out pretty much as I thought they would. One thing that does surprise me, however, is that he still does not know his fellow Americans well.
He’s intelligent; he’s well-educated (although now that I think about it, he may be, like so many Americans younger than my generation, American history-deficient); he zips in and out of the heartland regularly. Obama’s favorite trope about the middle class, however—I can’t imagine where he got it. The ideas that “fairness” and “playing by the rules”—so many Obama speeches hinge on these—are keys to the American Dream are nonsense. Obama has created a fairy tale for himself that, when you stop to think about it, none of us believe in. And it certainly is not supported by American history, by the ways in which we settled this land and built a nation.
Who are we Americans? We are a nation of immigrants. For the last fifteen years, I’ve spent a lot of time in Queens and in Houston, the two most multi-ethnic cities (Queens along with New York’s other four boroughs) in the United States. I have come to love both for precisely this reason. I had never felt particularly patriotic until I watched the way in which immigrants who would be slaughtering each other back in Central Europe and the Middle East live cheek-by-jowl in Queens. Why the civility?—because of both the opportunities America offers and the adherence to rule of law that She asserts.
If I am hopeful about us as a nation—and I am, and I wish I could live to see the day when the ambitions and attitudes of our recent immigrant generations bear a new fruit that I can but dimly picture—it is because of Houston. Here, even more so than in Queens, an observer cannot miss the spirit of family togetherness, of dedication to hard work and of entrepreneurship that characterizes all the Harris County immigrant populations, otherwise so different.
Let me step back from this praise of immigrants now. Who are the people who come to America, as opposed to the people who stay behind? They are the bold ones. They are the risk takers. They are willing to do what it takes. They are the scrappy street fighters. They may not be endowed with great intelligence, but they know they had better be fast learners if they want to succeed. They have seen what happens to people who are not. Back home, they have known the dark side of human nature that we native-born Americans, outside the military, see only in films. They are survivors. They are, quixotically, not only survivors but also dreamers.
Only the weak hope, or expect, or delude themselves, that life might be fair. Only the timid cannot bring themselves to do other than play by the rules. Fairness and playing by the rules—these have never been part of the way in which our American character—through a process of immigrant self-selection that has been going on since 1620—has taken shape.
Think for a minute about the realization of the American Dream of land ownership that made this nation. How much of it took place through “playing by the rules?” The settling of what used to be called the Old Southwest (now the Southern states east of the Mississippi River) was one big land grab, in which sometimes the U.S. government colluded with the rich and powerful in taking Indian land, in which sometimes men defied U.S. government orders and did it anyway. In my home state of Tennessee, along every stage of its history from the end of the Revolution through today, men and women built homesteads, created communities and acquired enough wealth to need last wills and testaments by pushing back against rules.
The Great American Land Grab did not descend into chaos because at the end of the day every man, no matter where he had immigrated from, was willing to play by one rule: English property law. Without property law, a man could not be assured of title to the land he had just acquired. It is not surprising, moreover, that in an inchoate environment there was one law that was sacrosanct. After all, there was enough land out there, for the taking, for everybody.
This tension, or balance, between two opposing forces—pushing against the rules and respect for law—fueled the entrepreneurship that built this nation and eventually created the American urban middle class. It is the dynamic through which our latest round of immigrants prospers. It is the way small businessmen succeed—by having a talent for walking this tightrope. If President Obama believes that entrepreneurs—heck, if he believes that the GM employees to whom he gave his Labor Day address—follow every rule and pay every tax, well, I have a bridge in China I’d like to sell him. Assiduousness about rules and taxes and fair play shapes the lives of lawyers and civil servants—but then these groups of Americans, whose lives are shored up by some version of a protective combination of salary, job security and pension, have that luxury. Most of America’s middle class does not.
President Obama’s harping on “fairness” is particularly worrisome because, however the mortgage crisis ends, fairness is not going to be a factor. Fairness is not even part of his own administration’s plan to alleviate the problem. Undoubtedly, different versions of mortgage write-downs will continue, and these will favor the spendthrifts in mortgage trouble over the prudent in the same neighborhoods who never borrowed too much or whose mortgages are not under water.
In this respect, Obama’s fairness focus is eerily—or perhaps I should say ironically—similar to an idée fixe in the Tea Party, exercised because it is not “fair” for illegal immigrants, who have broken the law, to get the same treatment as legal immigrants. Indeed parts of Obama’s presidential speeches are interchangeable with Tea Party credos, not only about fairness but also about the tilted playing field, where the little middle class guy as opposed to the rich and powerful guy does not have the same number of chances to score.
Somehow everything I write ends up being about Obama, but then, when you think about it, what I believe and observe matters little, whereas what he does matters a great deal. Just as I could not foresee the change in housing tastes, so he could not foresee his presidency. He did not get the presidency he assumed he would get. After all, his qualities and experiences make him especially—some, including me, might say uniquely—qualified to be a president called upon to reshape America’s role in the world. But that is not the work he has been asked most exigently to do. As my conservative friends are fond of saying, “This is a man who has never had to meet a payroll.” Their larger point has been proved true. Barack Obama does not really understand successful businessmen and seems to be of two minds about them. Are they greedy fat cats? Or are they the architects of American prosperity?
So President Obama, too, has been Sea-Beggared. When he called upon CHANGE in 2007 and in 2008, he was speaking rhetorically. He was not calling upon change to materialize and to take up residence in his own White House. But that is the change he got.
In the next part of “The Essential Obama,” I will be writing about his ability to grasp complexity. Here is the strength upon which he is calling in order to deal with the worlds for which he has little previous experience and no special affinity: those of business & finance and of the middle class.
A final few words on houses and the American Dream. The little, curved street of small brick houses south of the University of Memphis and my own street of grander houses in Rockridge have now merged in my thoughts. Both prompt sadness. But here’s the thing—at once brutal and hopeful. There may be no remedy for the Memphis street. The homes will slowly decay; eventually they will be torn down. If Memphis goes the way of Detroit, the area will return to grass and emptiness. If Memphis goes the way of Atlanta, something else will be built in its place. A civic future may be very much in doubt here, but outcome at a personal level always seems to resolve unfairly. People with more come out better than those with less.
Therefore, I predict that the homes on my Rockridge street will survive, if in a different incarnation. Someone with the entrepreneurial spirit will see opportunity there. An Indian, or Pakistani, or Vietnamese, or Maltese immigrant wanna-be real estate mogul will buy the 1930s and 1940s houses because he or she has an idea about how it might be possible to make a fortune in what surely is going to be the next iteration of the American lifestyle: renting homes and finding that choice attractive because it most easily accommodates mobility, thrift and changes in composition of households.
The American Dream holds out the possibility of living as a man, and now a woman, in full. Our saving grace as Americans, despite our many flaws, is that our social compact, which fuels the dream, is based on respect for human, individual dignity. Right now, in 2011, the compact has frayed and too many of us, particularly us native-born Americans, no longer know how or where to reach deep within ourselves to bring forth that respect, particularly for fellow Americans who think and believe differently. But we will find that wellspring again. An inexorable consequence of change is that things are never quite the same once the movement has stopped. And so our revitalized social compact will have a new geography. And I would not be surprised if the realization that social status and security are not necessarily tied to single family home ownership will be one of the many threads of the future’s warp and woof that helps us find the way.
September 7, 2011