Some economic history and a prediction. Renter's rule!

Having moved five times because of my husband's career, I can say that it isn't the current trend in being mobile that will keep people as homeowners - it is their children. If you have children, you want a stable life for them. Moving from city to city turns their lives upside down. Some children never recover from the instability of constantly changing schools, neighborhoods, and losing close friends. As long as we continue to have children, we will want to stay in one place, if we can. And, owning a home makes sense: in the long run, if you pay off your mortgage, you actually own real estate that can be passed on to your offspring. You can't do that with a rental.

I think that this really misses the point. Regardless of how bad the economy gets or changes, people still want to own their home for reasons that are emotional as well as financial - children are a big part of that but there other reasons like personal stability. How and what we own will probably change and homeownership in the next generation will probably change to accommodate that mobility, but I don't think that mobility alone will kill home ownership or make renters. And jobs will change as well.

And I wonder when we talk about government support for renting what does that mean exactly. Are we talking support for renters or support for landlords? What would that support be?

Nice post, Katie. As a Navy wife who moved six times in seven years, at one point, I never want to move again. It is very hard on children. The other issue is that people were more open to corporate moves in the fifties and sixties because few women had careers then. They could pick up and follow husbands. That's much more unlikely now.

I think we'll see growth in telecommuting but I can't see us easily turning into a society always on the move. Having your own house, your own bit of yard, in a community where you've put down roots is a powerful dream most people won't easily give up.

I think Mary makes a very critical point about women and their careers being in the mix. Working at a university, one of the biggest variables in getting faculty members is the ability to find a place for the spouse. When dual career couples find a place where they can both be happy in their work, they don't move. And while having several jobs/careers in one's lifetime is probably more and more true, urban centers (especially mega-metropolis like Boston-New York-Philadelphia-Baltimore-DC) often mean that one can stay fairly close to home and still change careers. I just don't see the nomadic life gaining much of a foothold. In fact, rather than successful people being the ones who will move for work, I think it will be that successful companies will be those that can accommodate things like telecommuting and such.

Some of these commenters don't seem to have read the article. They picture a wealthy America able to pick and choose among whims and lifestyle preferences, like an affluent woman sitting back in a fashion boutique while hopeful, obsequious shopgirls parade a selection of outfits for her approval. Unfortunately for our shopper, all her credit cards were denied at the register, the resentful shopgirls have given her the boot, and she is now hanging outside by the loading dock door hoping to beg a biscuit. Because we now know, America is not anywhere near as wealthy as it thought it was.

If we do have an "L-shaped" recession, or a Japan-style lost decade, or worse, Americans will not be able to choose so freely where they live. They will have to go where the jobs are. And, as the article points out, homeownership is no asset in that scenario:

Homeownership, Oswald found, is a more important predictor of unemployment than rates of unionization or the generosity of welfare benefits. Too often, it ties people to declining or blighted locations, and forces them into work—if they can find it—that is a poor match for their interests and abilities.

I truly doubt that the ability/willingness to move will move the next economy. Previous posters have brought up the issue of children and working spouses - both of which make families less able or willing to move.

I see it the opposite way: with the rapid proliferation of flex-time, and various work-from-home accomodations that employers are rapidly making, the ability to hire workers means that the worker's location may be much less important, depending on the job. Broadband, and a dedicated workspace mean that a worker can work from home and work for pretty much any employer. the only travel that may be required is the travel to & from periodic meetings at the employer's place of business.

Many local employers offer work-from-home for at least one, and some for all five, days per week; employers who offer work-from-home on an as-needed basis are also proliferating. In addition, the use of technology, including video conferencing, desktop conferencing, web-meetings, etc. mean that people can meet face-to-face without being together.

No....I really don't see people willing to pack it up & go when the employer calls.

I disagree because I believe that most people have an inherint desire not to be continually traveling and that this lifestyle will disappear with technology. It will no longer be necessary for travel (as we learned in the immediate aftermath of 911 when companies realized that it was possible to do business without sending employees all over the globe). Also, companies will start to return to the USA as the Obama administration invokes incentives for companies to remain in the US instead of relocating overseas.

The units occupied by renters are still OWNED by someone. I'd rather be the owner collecting your rent, then be a renter.

Stripping away the child-rearing and career-oriented priorities of a family, it seems as if Mr. Florida's conclusions are logical ones. He is not saying that it will be incumbent on individuals to move multiple times over the course of a lifetime, but rather that pursuing the best available opportunities will REQUIRE moving multiple times over one's life. In my view, this has already started happening - folks grow up one place, go to college in another, graduate school in another, and pursue jobs in another - this may not be because they are pursuing the highest salaries or best opportunities each time, but even because their lives are moving through different stages... the idea of staying in the same place and doing the same thing over the course of an entire life does not make sense in a 21st century world. Innovation truly is a global concept, and the idea that it is "captured" in one place for a lifetime is correlated with American post WWII economic dominance which we know for a FACT is on the decline.

Refusal to admit that moving multiple times is going to be part of the 21st century worker's life is about ego trumping practicality. Parents refuse to believe that their children should be raised any other way except a very specific one, and immediately get defensive when alternatives are suggested ("that's not the way I was raised" is usually the only fact supporting their argument). The argument can be made that having a child move around every 5 years (uh, that's only 3 times before they turn 18... unless you want them living with you forever) develops social skills, self-awareness, and an understanding of different parts of the United States or even the world (same goes for adults!). How could this possibly be a bad thing in a global economy?

Workers believe that, just at the very beginning of careers (anyone under 35 is at the beginning of their career), they will "put down roots" and buy a home without fully understanding the range of economic possibilities they are signing up for (again, ego). Is there any idea that has been more DISPROVEN in the last 6 months than that?

Reality, as we are finding out with this global economic crisis, can be a harsh wake up call. American workers are now competing with those all around the world and are finding that much of the world, over the last 30 or so years, has caught up with us, and in fact, some (Western Europe and developed Asia) have even passed us in terms of their skills, versatility, global awareness, and (dare I say it) drive to be frugal and successful. America, it is true that when we put our egos behind us, we can accomplish anything. Until we do so, however, a lack of understanding about how the rest of the world works, and an idea that because it is American custom, it is the way it should "always be done" (I'm looking at you Katie T. February 25, 09 05:52 PM), will be the source of much of our undoing.

I, for one, will take Mr. Florida's piece into consideration, because when I read it, I said to myself, "at last, someone thinking logically about the 21st century!". Time will tell if he is right or not, but it's hard to say he isn't making a strong argument. Will someone step up to rebut him?

www.vagabondguru.com

Florida's key points about solving the financial crisis:

1. "The solution begins with the removal of homeownership from its long-privileged place at the center of the U.S. economy. Substantial incentives for homeownership (from tax breaks to artificially low mortgage-interest rates) distort demand, encouraging people to buy bigger houses than they otherwise would."

2. "Instead of resisting foreclosures, the government should seek to facilitate them in ways that can minimize pain and disruption. Banks that take back homes, for instance, could be required to offer to rent each home to the previous homeowner, at market rates—which are typically lower than mortgage payments—for some number of years." [my emphasis]

It's crazy for anyone underwater on their homes with a nonrecourse mortgage not to mail in the keys and walk away. That they could rent their own homes much more cheaply points to both the problem, and the solution.

This "renters" solution to the mortgage crisis is also proposed by bubblehead Dean Baker, who also points out that the MSM appears terrified to discuss.

Mr. Florida may be an esteemed academic with mutliepl degrees, but apparently he has yet to hear of a modest little innovation called the Internet. For his edification, in braodband-enabled world, people can live anywhere and simultaneously work anywhere in the world. Without disrespecting his eminent credentials, my money (and the way I have been working for the last twelve years) is on LESS career-driven mobility and MORE virtual workplaces.

Wake up and smell the broadband, Mr. Florida! Tomorrow, we'll teach you all about sometheing we call "telephones." They are very useful and kind of cute, too!

I'm not sure it's that renters are "nomadic," but that they are more flexible. Anyone in a house they cannot sell probably doesn't feel so much like he/she has roots as trapped. (I often joke about people living in very economically depressed areas - do they stop them at the borders and not let them leave?) Renting, rather than owning, has the potential to allow people to make big changes when they need to without taking a real financial hit.

That said, I love my house. But I also own rental property, so I have an interest in both worlds.

Yes! Yes! Everyone rent! Please!
(I am a landlord.)

That said, my goal is single-home ownership, even if I have to rent it out while I move around for a few years. Some day I'll need a place to retire to, and I can pass on the asset to my children, ensuring an estate.

To rocketman February 26, 09 03:13 PM - you couldn't be more right that that's how the technology works and that it can change the working lives of millions if not billions of people. I can work at my home in Manhattan for a company in London, Rio de Janeiro, or Seoul. Florida's argument has nothing to do with that - he's following the evidence he's gathered to a reasonably logical conclusion, and it is that in spite of the technology available to us, people have been moving more and more (and self-segregating in urban areas more and more based on certain demographic information, but that is another story), thus diminishing the need to own a house, and suggesting that legislation should reflect the fact that people are moving more often (thus renting) in their lives. He's coming to a plausibly practical solution the government can implement that reflects our reality. Isn't that what is supposed to happen?

www.vagabondguru.com

Many people here seem to be assuming that everyone can just use the internet and work from home and not worry about commuting or moving! It seems rather short sighted as well as narrow minded. Telecommuting is fine for some people, but I work in a lab - I can't work on my research in my basement. And what about people in the service industries? Can bartenders, waitstaff, people in supermarkets, nurses, doctors, museum staff, mechanics, ( I could go on and on) work from home? I don't think so. If we want to make the argument that it's only in the finance or technology sector, then fine. But even then, research and development can't be done only on the internet! Flexibility in where you work and live, and being able to move to where the jobs are will be key in this new economy, as more and more people I know get laid off and can't afford the mortgage that they never should have taken on in the first place.

Many people here seem to be assuming that everyone can just use the internet and work from home and not worry about commuting or moving! It seems rather short sighted as well as narrow minded. Telecommuting is fine for some people, but I work in a lab - I can't work on my research in my basement. And what about people in the service industries? Can bartenders, waitstaff, people in supermarkets, nurses, doctors, museum staff, mechanics, ( I could go on and on) work from home? I don't think so. If we want to make the argument that it's only in the finance or technology sector, then fine. But even then, research and development can't be done only on the internet! Flexibility in where you work and live, and being able to move to where the jobs are will be key in this new economy, as more and more people I know get laid off and can't afford the mortgage that they never should have taken on in the first place.

Mr. Florida may be an esteemed academic with mutliepl degrees, but apparently he has yet to hear of a modest little innovation called the Internet

I bet he has. I bet he's also heard of the up to 4 million jobs expected to be outsourced overseas by 2015. Including by 3/4 of all financial services firms, as companies discover that whole new categories of jobs that could be done "only by an American" really don't have to be.

For his edification, in braodband-enabled world, people can live anywhere and simultaneously work anywhere in the world.

You might want to read your own sentence a little more carefully, for your own edification.

Let's not forget that a home is also an investment. A renter has nothing to show for all of those monthly payments. No equity, no tax credits... While renters may have more flexibility while in the workforce, what happens when they retire? And while a mortgage payment will generally be more than rent, let's not pretend that people are disciplined enough to invest the difference. Human nature is to spend what you make. I would rather live where I want, generate equity in a home, and have more money in my pocket from tax credits on the interest paid. When I retire, there will be little or no balance on my mortgage and renters will still be renting at market price.

With the alarming number of of homeowners that are currently underwater, it's going to take a while before this "shift" occurs. And as many have already noted, technology will limit the need for travel or relocation. Many companies have their workers connect from home 2-3 days per week so they can then "share" a single office as they will not be in the office on the same day. Additionally, many companies (like mine) are switching to a "virtual" office. Once the "Blackberry" was created, it changed eveything. Just wait until the video version (such as Tandberg) becomes prevelant...

This thesis is completely flawed. Why would the Federal Government remove the ability to write off mortgage interest in the wake of a national housing crisis? That would defeat the purpose of the record setting stimulus package and it's attempt to stablize the housing market. Removing the tax advantages would depress home prices even further and prolong the recession. Desn't make any sense what so ever.

JB, yes, a home is an investment.

That doesn't mean its a good investment.

I'm a renter. I used to own. A lot of property. I sold it all in 2005 because it was no longer a good investment. That's what one does with investments - analyze them to see if they make sense. Not make blind assumptions.

Citibank stock was an investment as well.

The points being made about the needs of children, and women/partners with careers, are very important in a discussion about an imagined nomadic future.

Child development researchers and sociologists have raised awareness that many children do better in more stable living situations than uprooting ones. They often grow up more academically accomplished, confident, happy, and comfortably out-going. Staying in one place can influence the development of essential relationship building skills. Plus, we are starting to see studies showing that living in cities is not good for everyone.

And it's biased and disrespectful to treat a wife's (or partner's) very real needs-- career/work, family, educational, medical, etc-- in a trivial, out-dated, or subordinate kind of way. The increasing importance of everyone's life-needs can make it difficult for a partner, or parent, to just up and relocate. Few will benefit by destroying partnerships and families. Depression, anger management, and substance abuse could become bigger issues than they are already. Long distance marriages are not likely the answer, either.

IMO, people will create real 21st century solutions to employment dilemmas. Telecommuting has been a start, and is really picking up speed for some types of jobs. It is a way to avoid some company consolidation forced moves or lay-offs, too. Satellite work places in areas determined to be where groups of workers live has been another. Audio and video teleconferencing helps keep people in their burb homes/offices, as well. So do the many online services, for that matter.

The “Silicon Valley” (a region mostly comprised of diverse suburban sprawl, and rural suburbs) is already taking the next step by developing new industries and jobs, so that folks don't have to move from where they are comfortable and happy. Green technology is evolving quickly, and is becoming more of a future employment hope in the Northwest, as well. Some industry leaders are joking that the Silicon Valley will be called the Green Valley in a very few years. Because some of the country's elite universities, and creative “brainiacs” are in the burbs, or in the open space loving areas, this may be where other good paying jobs and industries start, as well.

Who knows what the future may bring? With the flexibility and lifestyle adaptation qualities of technology driven industries and jobs, renting over owning a home may not be that much of an issue, but more of a personal choice.

Also, just because one works in an industry which could technically allow people to work from home does not mean that one's company WILL allow its people to not be in the building. There are (apparently) reasons that are compelling to do so - companies have people/buildings/organizational structures/presences in different places for different reasons.

Simple Facts:
1. Most people don't like to move. You lose all your friends and it's a stressful.
2. People like to stay close to their family for both emotional and practical reasons.
3. People like to give their kids a stable home.
4. People buy homes with a sensible mortgage so that they have a roof over their head when they are too old to work.

Mobility is something that most people will try to minimize. Companies have to compete for talent. This Florida guy missed half the picture.

1. Most people don't like
2. People like
3. People like

LOL. The sense of entitlement ought to be bottled as a perfume.

People like to eat, and therefore they will be living wherever they are told to.

As I have said many times here, people should use the banks as a leading indicator for where housing is headed.

About one-third of state-chartered banks in Massachusetts lost money in 2008, recent federal data show, compared with just 7 percent in 2007, a drop analysts and executives attributed to the worsening economy and losses on investments.

"It's a sign of the recession moving into the Northeast," said KBW banking analyst Damon DelMonte. He attributed the widespread losses to problems common to banks around the Northeast, including reduced securities investments and losses related to mortgage lenders Fannie Mae and Freddie Mac.

Before their exposure to subprime mortgages became a problem last year, regulators had encouraged local institutions to buy shares in Fannie and Freddie as a conservative investments.

Among 145 Massachusetts banks providing figures to the Federal Deposit Insurance Corp., 32 percent were listed as "unprofitable," compared with a national average of 23 percent for 2008. In some states a much higher percentage of banks lost money, such as 50 percent of California banks.

HUb

Wrote before by my post was lost...

Cambridge landlord, I agree 100%. People do not like to move and will do whatever it takes to avoid moving. Companies which prosper will come around to this logic if they want to keep their good employees. This added to the fact that most families have two wage earners means that to move for one job means to have a spouse quit another job. If anything, the era of two wage earners means that families will stay put more and more...unless both earners are laid off.

As an example, our whole group of ~ 20 was transferred to San Diego a few years back. The alternative was to be laid off. Not one single person accepted the transfer, mush to the shock of the company. It was a big company and they did fine, of course. However, after leaving we were told that there was much surprise among upper management who assumed we would all happily uproot our families and their jobs and move. Sorry, we may be employees, but we are not slaves.

Yes BV, people don't like to move. But sometimes they don't have a choice. If that happened today, how many people would take the transfer?

Florida's point is not that people will like the new world, but that they may be forced into a certain approach. Like matters, but forced matters more.

Charles...good point. I would bet some number greater than zero. Mostly the single people, however. Many who were laid off had a spouse who had a job still. In the new world order, it is equally likely that giving up a perfectly good job and moving for the benefit of your unemployed spouse might not be such a good idea either. Who knows. But still, a good point...people do what they must to survive.