“While Mona Lisa’s and Mad Hatters
Sons of bankers, sons of lawyers
Turn around and say good morning to the night
For unless they see the sky
But they can’t and that is why
They know not if it’s dark outside or light”
Bernie Taupin’s 40-year-old lyric resonates today as an allegory for those in Washington, D.C. and Aspen deigning to run our economy and our governments as we drift rudderless towards the dreaded “double dip” recession.
The ideal of a world where housing values never go down and everyone is employed serves as the myth from which we have yet to capitulate four years after the fall began, a metaphorical Mona Lisa of our economic yearnings. We remain transfixed by her seductive purity, her elusive bounty a palpable influence over our rationality.
Who is the Mad Hatter? Elected leaders whose actions in response to economic crisis disregard reason. They act as if time has stopped, and the future price of yesterday’s indulgence will never come due. While desperation looms, more tea and unanswerable riddles remain the order of the day.
But let’s start at the beginning.
Between 1998 and 2006, our nation’s leaders persuaded us that it was safe, even beneficial, to purchase homes we could not afford with loans we could never repay. We believed them, and enjoyed the immoderations of access to apparently free money.
Towards the end of this period the handwriting was on the wall. Nationally and locally anyone could clearly see that free market housing prices were unsupportable if they were willing to look at the facts. We didn’t.
The now famous “Case-Shiller” index of American home prices demonstrates this unsupportable trend. During the 108 years between 1890 and early 1998, after adjusting for inflation U.S. home prices increased a mere 10 percent. That’s right, 10 percent in just over a century.
Then, between 1998 and 2006, spurred by a government facilitated relaxation of credit standards, the Case-Shiller index rocketed upward 88 percent, or almost 11 percent per year.
The magnitude of these findings is astounding. The American housing market absorbed more than a century’s worth of price growth every year for eight consecutive years between 1998 and 2006. Then it all came crashing down. (The Case-Shiller housing index data is available for download at: http://www.econ.yale.edu/~shiller/data.htm .)
For the past four years our federal government “Mad Hatter” has toiled vainly to reignite our indolent economy. Like riddles without an answer, the Hatter’s “TARP” program, stimulus spending, “operation twist” and of course the “quantitative easing” triplets, QE1, QE2 and now QE3 — the Federal Reserve’s Keynesian monetary strategy for job creation that fundamentally amounts to government insured check kiting — have and will prove fruitless.
Nationally, homes today average about 61 percent of the value our metaphorical Mona Lisa betrayed us into believing at the market’s 2006 apex. By 2010 according to the U.S. Census Bureau, the median single family home cost $173,000, down from its 2006 high of $222,000.
With this new millennium housing crash as backdrop, Aspen embarks this week upon its second ever “housing summit,” to tinker with its own economic Mona Lisa, its heavily subsidized workforce “affordable” housing program.
Now, when I first moved to Aspen 11 years ago more than a few haughty real estate swashbucklers proclaimed to me that in Aspen, free market housing prices never fall, ever. With that myth firmly debunked, only one housing “market” that I know of continues to carry pre-crash prices — the one where, in Mona Lisa style not only are prices still high, but employment is compulsory: Aspen’s government-subsidized affordable housing program.
In Aspen, depending on your income, “affordable” can mean upwards of $500,000 for a three bedroom half-duplex — almost three times the national free market median price — which you may be able to barely afford if you make the salary of a professional wage earner. Just don’t plan to retire, ever. The housing inventory is replete with such units.
The national median price of $173,000 for a single family home solidly resides in the bottom half of APCHA’s price grid — in Category 2 — between the three-bedroom and single-family detached unit types, meaning that a two-adult household with one or two children can make no more than $68,000 to qualify for such a unit, assuming it even exists. The vast majority of larger units cost more.
All of this means that the majority of Aspen’s service workers, frozen out by price and unit types, continue to ride the bus two to four hours a day — the equivalent of 60 to 120 additional work days a year away from their families, just commuting to and from their Aspen jobs. For-sale affordable housing for service workers is not the answer, but more rentals would be appropriate. The point is that the program needs to work better at both ends of the income spectrum.
Who but a Mad Hatter would perpetuate such a system? And who represents the service workers at the aforementioned housing summit? Nobody.
Clearly it’s time to stop admiring our metaphorical Mona Lisa’s both nationally and locally, and make the difficult decisions needed to sustain our communities, our economies, and our workers.
Unfortunately our government Mad Hatter holds all the cards. I’m not sure what we do about him. I fear his self-importance, his penchant for distraction, and his interest in riddles for which he has no answer.