The Bay Ridge couple I recently saw in the Whitehall Street subway station☆ may provide a clue about the fate of the US economy.
But I should first describe Bay Ridge, so that you can see what I mean.
A predominantly Irish and Italian neighborhood for much of the 20th century, and popularized by the film Saturday Night Fever, Bay Ridge could be considered the opposite universe when compared to Manhattan’s occasionally sickening habit of trend chasing. In many respects, the community can appear culturally isolated.
For instance, like a few other communities outside of Manhattan, I know of some Bay Ridge residents who’ve never left their neighborhoods for any reason, save for attending a family member’s NYC Police Department ceremony, or the highly infrequent “special night” out in Little Italy. Sometimes, the two sample reasons are conveniently wrapped into the same visit to The City. Those residents who work in The City could very well say they commute to another state five days a week, as far as the other residents are concerned.
And speaking of “The City,” I find it strange how Bay Ridge residents — even though they live in a section of a borough in New York City, — insist on calling Manhattan, another NYC borough, The City.
It’s as if The City is truly another world, far removed from mainstream life in Bay Ridge, even though The City is less than a 30-minute car ride away; an hour by subway.
Telling some Bay Ridge residents to visit “The City” is almost akin to asking an Alsatian native to hang out in Paris for a night. The trip is either treated as a journey, or an irrational request.
Bay Ridge didn’t see many Asian or Arab residents until the last decade or two — and even those new inhabitants don’t have a visit to The City as a top-of-mind activity.
My Mother recalled a day many years ago — back when Bay Ridge had a stronger Italian vibe — she and my Father visited an Italian restaurant where they were the only diners of color at that moment. Before their meal began, someone — presumably a Bay Ridge local — visited the table close to my Parents to have a lively and extended conversation with other diners. The problem Local Guy presented was that his buttocks were inches away from Dad’s face, who advised the offender accordingly. Local Guy ignored Dad and continued the disrespectful table discussion — until Dad attempted to set Local Guy’s azz on fire with a cigarette lighter.
Longer story.
My Bay Ridge sketch hopefully gives you a sense of why my attention was focused on this couple in the Whitehall Street station.
A combination of data points told me the couple, who appeared to be in their late-twenties, calls Bay Ridge home.
First — they had the thickest of traditional Brooklyn accents, denoting their borough of origin and highly indicative of Bay Ridge’s linguistic style.
Second — they were waiting for the “R” Train, heading to the 95th Street station, which is in Bay Ridge.
Third — they made a reference to going home.
Fourth — they were very lost, or at least not certain if they were traveling in the right direction.
“If we go the wrong way I’m gonna kill ya Mikey,” said the Bay Ridge woman. She was wearing a cast on her right foot — not the sort of physical condition you want to be in when you’re lost.
The Bay Ridge guy was holding a folder and wearing a conference name tag which he forgot to discard when leaving his appointment. In addition to displaying his name, the tag read “Home Flipping Workshop,” referencing the practice of buying real estate properties at low cost and selling them quickly at higher prices.
So I now know the compelling reason — rivaling in importance to attending a sibling’s Police Academy graduation or celebrating a life milestone in Little Italy — for why this Bay Ridge duo made a day journey to The City: to make their fortune in America by becoming players in the real estate investment market.
Their summary statements to each other about what they learned that day also helped to form my assessment.
No one could blame the couple for their ambition. A guy I know who owns a few rental properties once told me: “People need to live somewhere. So why not help them for a price?”
Except there are emerging danger signs ahead which make investments in housing — an activity where the excess of it shares responsibility for the 2007 financial crisis and the resulting Great Recession — a risky proposition. Some analysts even say the signs point to a risk for another crash in the financial markets and economy.
Signs like, the decrease in home ownership during the past two decades, thus creating a “surge of renters.”
Except rentals are becoming increasingly unaffordable.
Wage growth is still not increasing fast enough to make housing more affordable for many. In general, consumers are financially weaker today than they were more than 10 years ago.
But oddly, home prices keep increasing and have surpassed the pre-bubble burst prices of 2006.
In what can only be viewed as bad news for real estate investors, the time it currently takes to flip a home has reached an eight-year high.
The Bank for International Settlements not only sees the conditions for 2007’s crash to repeat itself, but the organization also says that today’s weak economic recovery — even with low interest rates implemented to stimulate growth and investment — leaves economies across the world defenseless against another collapse.
And like almost every manifestation of the investment bubble in recent economic history, the biggest gamblers — known to you as the banks and the super rich — made plenty of money early in the game (and helped by cheap funds from the Federal Reserve or policy assistance by the US government in the current case), and their economic gains invited a large number of latecomers who are interested in duplicating the financial success stories seen on television.
Latecomers like the Bay Ridge couple.
This reminds me of the lore where banking tycoon JP Morgan (or Joe Kennedy) saved his fortune by dumping his stocks just before the 1929 stock market crash after learning that his shoeshine guy just bought stocks.
People misread this story by simply calling JP Morgan an elitist. Who knows, labeling Morgan this way could be accurate, but the broader point is that mainstream America is typically not invited to the same investment game with the high-rollers — until assets are overpriced and the investment bubble is about to burst.
While larger investors left the home-buying game a long time ago, banks will lure new market participants with cheap loans to chase mogul dreams, without the neophytes realizing that their aspirations only serve as the lifeblood for this game of musical chairs to continue.
Except much of this game’s upside earnings have already been made, there’s a growing glut of overpriced housing inventory to flip, and the consumer base too weak to suppurt robust buying activity.
And then at some point, the music stops.
I wish safe journeys for this couple, as well as the rest of us …
song currently stuck in my head: “easy evil” – marlena shaw
☆Small changes made to story details to protect identities.
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