fortune--2020-07-17--TIAA CEO Roger Ferguson on racism: “I’ve been mistaken for a waiter”

This is what every generation thinks of real estate—and what each has spent on it

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Good morning.
Roger Ferguson, CEO of TIAA and former vice chairman of the Federal Reserve, is one of only four black CEOs on the Fortune 500 list. He sat down with Fortune’s Susie Gharib this week for a frank conversation about race relations in America. You can watch the interview here, but this is what he had to say on why he was speaking out now on the topic:
“I think it is really important that everyone understand that even African Americans who have lived and benefited from the American dream, who are, as I am, beneficiaries of the civil rights movement, we have had our moments as well. Racism is not a class-only issue although there are class overtones, it has everything to do with what you look like.
“I’ve been mistaken for a waiter, I’ve been asked to pick up someone’s spoon at a social event, I’ve been watched when I go into retail outlets the way any African American might be, I’ve seen people step aside when I come by. Racism is not something that only happens to poor, uneducated black people, it happens to everybody.”
Ferguson is hopeful the current global movement may mark a turning point.
“America has been having ebbs and flows around racism from the beginning. I don’t expect us to have a sudden epiphany this year that’s going to make 2021 better. But I am looking forward to continuing to have real and honest dialogue and carry it through the full year.”
And since it’s Friday, some feedback. Genworth CEO Tom McInerney wrote in after my post mentioning growing fears of a second wave of economic effects from COVID-19, saying his company “has determined we will extend our U.S. work remotely status to January 1, 2021 from September 8, 2020” for its 3,000 employees, and that even after that the company will “allow employees to work primarily from home if that is their choice.”
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Barr burn
Attorney General William Barr has lashed out at Disney and a host of U.S. tech giants for compromising their principles in their dealings with the Chinese authorities. From Barr's speech: "American companies must understand the stakes. The Chinese Communist Party thinks in terms of decades and centuries, while we tend to focus on the next quarterly earnings report. But if Disney and other American corporations continue to bow to Beijing, they risk undermining both their own future competitiveness and prosperity, as well as the classical liberal order that has allowed them to thrive." Bloomberg
Netflix Co-CEO
Netflix's stock price was decimated following the announcement of chief content officer Ted Sarandos as co-CEO, alongside Red Hastings. Sarandos will hang onto his content role, but Hastings says they have really been partners for decades, and the change just formalizes that situation. Netflix's results were pretty solid, though it warned of less growth in the second half of the year. Fortune
Russian hack
Government officials in the U.S., U.K. and Canada have blamed a Russian hacking group for spying on organizations involved in coronavirus vaccine development, allegedly in order to steal intellectual property. The group, known as "Cozy Bear" or APT-29, has a long history of hacking governments and political parties—you may remember them from the attacks on the Democratic National Committee back in 2016. Wall Street Journal
Twitter hack
Twitter says the extraordinary attack on its systems—via social engineering, the attackers managed to hijack high-profile users' accounts for the purposes of a cryptocurrency scam—did not result in the theft of users' passwords. "Currently, we don’t believe resetting your password is necessary," the company said. Fortune
AROUND THE WATER COOLER
747 retirement
British Airways is the world's largest operator of the 747-400 jumbo jet—or, it was. Now, due to the massive pandemic-related downturn in travel, it's immediately retiring every one of the 747s in its fleet. That's 31 planes, or around a tenth of the total fleet. Spokesman: "It is unlikely our magnificent 'queen of the skies' will ever operate commercial services for British Airways again due to the downturn in travel caused by the Covid-19 global pandemic." Fortune
Privacy Shield
After yesterday's bombshell striking-down of the U.S.-EU Privacy Shield data-sharing agreement, what does the court's decision mean for U.S. companies operating in the EU? Here's a rundown of the impacts, which depend on what sort of legal basis those companies are using for their EU-to-U.S. personal-data transfers. Fortune
Calculating unemployment
Fordham University finance professor John Finnerty reckons the headline unemployment rate in the U.S. undershoots the true scale of the problem. He explains in a piece for Fortune that the error is down to misclassifications by the U.S. Bureau of Labor Statistics. Finnerty: "Correcting the misclassification error would have increased the headline unemployment rate by almost one full percentage point in March, almost five percentage points in April, about three percentage points in May, and about one percentage point in June." Fortune
Saving news
Jennifer Hoewe and Brett Sherrick, assistant professors at Purdue University's Brian Lamb School of Communication, write for Fortune that paying for news is the only way to save journalism at "a time when access to accurate information could not be more important." They write: "Good journalism is expensive. In order for the press to operate in a capitalist-driven democracy, people must pay for the content that fulfills their goals of being well informed." (P.S.: If you're not a Fortune subscriber yet, here's the link.) Fortune
This edition of CEO Daily was edited by David Meyer.


fortune--2020-07-17--To buy or to rent? Residential real estate calculus in the time of COVID-19

The iconic Boeing 747 is almost finished as a passenger plane as BA retires its fleet

This article is part of Fortune‘s quarterly investment guide for Q3 2020.
It’s part of the bedrock of the American Dream: owning your own home. Not only is a home the biggest purchase most Americans will ever make, but it’s also likely to be their main investment and best chance to create long-term, sustainable wealth.
While U.S. home prices continued to climb this spring—rising 4.3% year on year in May—there are indications that the pace of that growth is beginning to stall. Zillow is forecasting that housing prices nationwide could fall nearly 2% by October, with prices gradually rebounding to stay flat over the next 12 months.
Still, the U.S. housing market has shown surprising resilience during a pandemic that has devastated the American economy at large. While the number of homes sold has slipped precipitously over the course of the pandemic, prices have proved relatively stable. That’s likely owing to a sharp decrease in overall inventory, as the economic lockdown has led to fewer homes being put on the market for sale.
George Ratiu, senior economist at Realtor.com, notes that the inventory of homes for sale in the U.S. declined 27%, 29%, and 30%, year on year, over each of the last three weeks of June. In that final week, that 30% decline was met with a corresponding 6% jump in median listing prices.
“Sellers are worried about pricing, and the inventory for their next home,” he says. “If they’re going to put their home on the market and sell it, what are they going to buy in return?”
But for would-be first-time homebuyers—those younger, mostly millennial Americans who’ve found themselves renting a home for most, if not all, of their lives—the current situation could present an interesting opportunity. There’s evidence that COVID-19 is prompting demographic changes that could make both buying and renting—especially in more expensive urban areas—a cheaper proposition.
Whether it’s rising unemployment that’s made it harder for many to pay rent, an aversion to living in crowded cities during a pandemic, or the fact that our new work-from-home culture means young professionals no longer have to live so close to where they work, COVID-19 seems to be taking a toll on residential real estate prices in major cities. In über-expensive markets like San Francisco, vacancies are up and rents are down—a phenomenon real estate agents are calling “pandemic pricing.”
John Fagan, CEO of New York–based digital rental startup Doorkee, says his company has seen renters “shifting away from heavily populated areas.” One moving company that partners with Doorkee has seen “a huge uptick in [clients] moving outside of New York City,” according to Fagan. “I don’t think people will want to buy an expensive condo in a neighborhood where the value proposition is location,” he adds.
Meanwhile, a millennial population that was already trending toward a cheaper, more suburban lifestyle as it grows older and starts to raise families appears to be moving even more quickly in that direction.
“We were already starting to see a migration away from urban cores for younger buyers in the last two years, and I think the pandemic is pushing that [further],” Ratiu says. “Many of these younger buyers built their careers in the city. When the kids come, that one-bedroom isn’t going to work as well, and schools become a bigger component of a family’s life.”
That means more interest in the suburbs surrounding major cities, such as areas of upstate New York and New Jersey near New York City and, on the West Coast, cheaper and more spacious alternatives to San Francisco like Sacramento, Modesto, and Fresno.
“I’m in New Jersey, and everyone from New York is coming here, because it’s a cheaper price point,” according to Ralph DiBugnara, senior vice president at mortgage lender Cardinal Financial and president of homebuying website Home Qualified. “In the last few years, everyone was moving to cities and wanted that lifestyle, but that has changed. People are thinking that they can work from anywhere, so why pay these high rents?”
Here are the three primary factors experts say to consider in the buy vs. rent debate: Interest rates It is, quite simply, what DiBugnara describes as “the lowest interest-rate environment I’ve ever seen.” He notes that “money is so cheap that it’s hard not to think about buying right now.” The interest rate on a 30-year mortgage is now at all-time low of around 3%—down from over 4.5% a decade ago. That means that a 30-year mortgage on a $500,000 home, for which the borrower paid a 20% down payment, is around $350 per month cheaper than it would have been 10 years ago, according to Bankrate’s online mortgage calculator. Historically low interest rates are also a boon for those seeking to pay less than the customary 20% down payment on a home, since the monthly payment on a larger outstanding principal would be lower than usual. DiBugnara says he’s noticed a trend of prospective buyers having taken time during the coronavirus lockdown to evaluate the economics of a potential home purchase, given the low-interest-rate environment. “Because they had time, a lot more people started to look into it, and some got themselves preapproved [for a mortgage],” he says. “This isn’t a real estate crisis. Lending guidelines haven’t changed; interest rates are low; and it’s easier to get qualified [for a home loan] than it was five or 10 years ago.” Macroeconomic conditions aside, the decision over whether to buy or rent is, as always, a calculus unique to the persons in question—and the variables around their decision. Location and time frame “Whenever anyone asks me if now is a good time to buy, I ask, ‘How long are you going to stay?’” says Skylar Olsen, Zillow’s senior principal economist. “When is the point in time where the equity buildup [in the value of the home] overcomes the upfront costs?” Indeed, the variable costs associated with buying a home can add up to be much more than some buyers may expect. In addition to the price of the home and the amount of the down payment, they can include closing costs like mortgage fees and commissions, which can be up to 5% of the home sale price; property taxes, which depend on the location of the home; and future maintenance costs, which vary depending on the age and condition of the property. Additionally, provisions in the 2017 Tax Cut and Jobs Act have limited some of the tax benefits of owning a home, particularly for buyers in more expensive markets. The bill reduced the home mortgage interest deduction that homeowners could claim on their income taxes—limiting the deduction to a principal of $750,000, compared to $1 million previously—and imposed a $10,000 cap on the amount of state and local taxes, including property taxes, that one can deduct from their federal income taxes. Zillow’s “Rent vs. Buy” Calculator depicts how such costs factor into the economics of buying a home—depending on where one is looking to live, the value of the property, and other financial considerations. Factoring those variables, the calculator determines what Olsen calls the “break-even horizon”—the point in time in the future when the cost of buying a home becomes less expensive than renting one for that duration. As is often the case in real estate, the biggest variable is location. While home prices and rents do correlate, the fact is that in more expensive metropolitan areas, what Olsen calls the “price-to-rent ratio” often skews dramatically higher. “There’s a higher variance, across the U.S., in home prices than there is in rents, in a really big way,” she says. That means that in more expensive markets, one’s “break-even horizon” is often further off in the future than it would be in cheaper locales. In that case, it could make sense to take advantage of the presumably lower rents on offer in the time of COVID-19, while saving up for a bigger down payment. But the operative term, of course, is “for now.” Because, as Realtor.com’s Ratiu notes, owning a home still holds a special place in America’s collective imagination. “In most surveys of consumers where we ask them whether their feeling toward buying a home has changed, the answer overwhelmingly still favors home ownership,” he says. “There’s still a cultural component where people favor it.” More from Fortune’s Q3 investment guide: A comprehensive guide for first time homebuyers
The best and worst places in the U.S. to invest in real estate during the pandemic
Where are housing prices heading? Gain, then pain
Are people really fleeing cities because of COVID? Here’s what the data shows
What the post-pandemic housing market might look like, according to the CEO of Century 21
This is what every generation thinks of real estate—and what each has spent on it
How to hedge your home


fortune--2020-07-17--A comprehensive guide for first-time homebuyers

This article is part of Fortune‘s quarterly investment guide for Q3 2020.
Richard Stapleton got the keys to his first house a week before the country went into lockdown as the coronavirus spread across the U.S.
Having decided in December to leave his 650-square-foot apartment in Buford, Ga., Stapleton and his girlfriend were ready to move into a home of their own in Gainesville. After browsing over 20 properties, the couple closed on a house on March 16—and not a moment too soon.
“I hate to say it, but it kind of happened at a good time. I got to be able to move in and really get to know the house very quickly, because I really haven’t spent much time out of it, honestly,” Stapleton tells Fortune.
Even in the best of times, buying a home for the first time can be confusing and stressful. Stapleton recalls he was “very blind and kind of naive about the whole process,” and he credits his real estate agent with holding his hand “every step of the way.” Layer on the paralyzing stress of a complete economic shutdown and a global pandemic, and it’s no wonder first-time buyers are struggling to stay calm. Fortune consulted top real estate experts to put together a guide for what every first-time homebuyer needs to know in this market.
Understand the 2020 market
The consensus is clear: This is “absolutely a seller’s market, no matter what,” Mike Miedler, the president and CEO of realty behemoth Century 21, tells Fortune.
“There’s very little on the market at any price range, especially [for] first-time homebuyers,” says Paige Grove, a real estate agent based in the Atlanta area. That means what is available will likely have a lot of offers and competition, and sellers are often getting full-ask prices for their homes, say agents.
But while you should keep in mind you’ll likely have to fend off other buyers, you’ll also also be getting more bang for your buck: 30-year fixed mortgage rates are at historic lows. That puts “more purchase power in people’s pocket so that they can afford more home right now,” notes Miedler.
Know your stats
If you’re one for checklists, this should be at the very top. Taking stock of your overall spending—and making sure you actually know your credit score—is a key first step in getting approved for a mortgage.
“My advice is keep track of the month or two before you’re going to delve into this. Track all of your spending,” says Jeff Thomas, a senior loan officer at Atlantic Coast Mortgage in Virginia.
But according to agents like Grove, “People are very educated today on what they think their credit score is. They’ll tell us, ‘Oh, Credit Karma or CreditWise says this,’ but those are not [always] correct,” she says. “They’re usually off, sometimes by 25 or 30 points.”
A mortgage lender will pull your credit report when you go to get preapproved for a mortgage, and you can assess your options from there. In general, you’ll need a debt-to-income ratio below 43% to qualify for a mortgage. However, you should be aware some lenders like JPMorgan Chase have recently tightened standards amid the pandemic. You now need a 700 credit score to qualify for most loans through the bank. (Wells Fargo, meanwhile, requires a 680 score for government loans.)
If your credit score is not so hot, you shouldn’t throw in the towel necessarily. “Time can heal a wound,” says Eric Tyson, a personal finance expert who has penned books including Home Buying for Dummies and Mortgages for Dummies. “If you’re [checking your credit] many months in advance of wanting to make an actual purchase, there may be some things you can do.” But don’t wait until the last minute. In that case, there might not be enough time to fix outstanding debts or blemishes before you need to get approved for a mortgage.
If you’re looking for some blunt advice: “Don’t buy anything,” says Thomas. “Once you start the homebuying process, you need to put your credit on lockdown. You want your bills to stay the same or go down.”
Plus, something simple to avoid, say experts: all those rewards credit cards. The benefit is “reducing the credit card charging temptation, which is made worse by people getting rewards,” notes Tyson. He recommends having two cards, but he cautions that canceling a bunch of cards “could lower your credit score in the short term.”
Choose a broker or a bank
Should you opt for a mortgage broker or go to Citibank?
Experts say both options have pros and cons, but most of those who spoke with Fortune agreed mortgage brokers typically give first-time homebuyers a more personalized experience and can work more flexibly with different circumstances (for example, if your credit isn’t perfect).
“The difference between a bank and a mortgage banker is, [with] the bank, if you don’t fit that square, they’re not going to give you that mortgage,” says Atlantic Coast Mortgage’s Thomas.
Others, like Grove, note that brokers are “willing to think outside the box.” And for prospective buyers with less-than-spotless applications, brokers are “willing to sit down and look, as opposed to just sending it through the computer system and saying, ‘You’re out of here,’” she says.
Whatever you choose, experts suggest you shop around, since you’re not tied to using a particular lender, even the one that writes up your preapproval letter.
Get preapproved
Having a preapproval letter in hand to show sellers is crucial when vying for a home, “regardless of if it’s a seller’s market, buyer’s market, any market,” notes Lauren Bennett, a real estate broker based in the Long Island City area of New York.
Preapproval for a mortgage (a more intensive step than just prequalification) is when a lender pulls all your credit reports, financial statements, debt, asset accounts, and W-2s and looks at your overall financial situation to determine how big of a mortgage you can afford. This will help you not only look more appealing (and serious) to a seller, but it will also help you set realistic expectations for what kind of home you’ll be able to get.
Preapproval letters are good for a limited time, but loan officers like Thomas say a typical preapproval is good for 90 days as long as the buyer’s credit stays the same.
Do the math
One important thing homebuyers should be aware of: There was a tax law change in 2017 that impacts mortgage interest deductions and state and local property taxes if you itemize your tax return. Now, you can only deduct $10,000 per year (even for married couples, if filing together) for both state and local taxes. Additionally, you can now deduct mortgage interest on a loan only up to $750,000 (it used to be $1 million).
The upshot is that “for a given home purchase, if you can’t take all the property tax off, what you’ve effectively done is you’ve raised the cost of that home to the homebuyer,” says Tyson. But the good news for most first-time homebuyers is they are likely not in the price range (i.e. $750,000) where the mortgage interest deduction change would impact them too much.
You could save money by itemizing your tax return using Form 1098 (which you get from your lender) if the interest you paid on your mortgage is more than just using a standard tax deduction, according to TurboTax.
With 30-year fixed mortgage rates at historic lows, those like Atlantic Coast Mortgage’s Thomas don’t see “any benefit” right now in opting for an adjustable-rate mortgage (which goes up or down over time based on the terms). “Most first-time homebuyers want that feeling that they know every single month their payment is going to be X,” he adds.
Calculate a down payment
Is the age-old rule of thumb still 20% down? Well, not necessarily.
There are those like Miedler and Tyson who believe putting 20% of the home price down on a house is still “the golden rule,” as Miedler puts it, but it’s important to know there are plenty of other options, including those that let you put as little as 0% down.
“Right now with a first-time homebuyer, I personally would encourage them to keep as much money in their pocket as possible,” suggests Grove. There are other financing options like the Federal Housing Administration (FHA) loan, which typically requires a minimum 3.5% down payment.
First-time homebuyers can find mortgages with down payments around 3%, including Freddie Mac’s Home Possible and Fanny Mae’s HomeReady. If you served in the military, you can also qualify for a Department of Veterans Affairs (VA) loan, which can be 0% down.
If you put down less than 20%, you’ll typically have to pay private mortgage insurance, which is an extra monthly fee to further protect your lender. But the good news is, “I don’t think mortgage insurance is this devil that you read about online,” says Thomas. The extra fees for mortgage insurance can be paid monthly until you build up 20% equity in your home, but Thomas suggests the “cheapest way most of the time is to do a lump sum. You either finance it or add it to your closing costs,” he says. Being able to pay a lump sum will depend on how much your down payment is, he notes.
But especially for first-time homebuyers, even coming up with the cash for a down payment could be a challenge in and of itself. For one, Thomas sees clients tapping their retirement accounts for a down payment. First-time homebuyers can withdraw up to $10,000 from their IRA penalty-free (you’re considered a first-time homebuyer if you haven’t owned a home in the past two years), but your withdrawal is subject to taxes. For a Roth IRA you’ve had for five years, you won’t pay taxes. (One note: You have to use your IRA funds within 120 days after you take them out for a purchase.)
While those including Tyson suggest you should “try to avoid” tapping your retirement savings for a down payment, others like Thomas encourage clients to ask themselves: “Where is the best place for the money—in the new house or growing in the market? I have found most buyers will withdraw the money and take the tax hit so they can buy today,” he says.
Make an offer
Your real estate agent or broker will look at comparable homes (a.k.a. comps) in the neighborhood, how long they’ve been on the market, and at what prices they sold to help determine how aggressive you should be for your offer, Bennett notes. That process will also include looking at things like the amenities and location of your property.
Given that we’re in a seller’s market right now, experts say, you’re more likely to run into bidding wars and pay top dollar for a house.
“When it goes on the market, there’s a feeding frenzy,” says Grove, of the Atlanta area. “There’s multiple offers on everything.” Anecdotally, Century 21’s Miedler says he hears reports from his agents of properties selling at 120% of the asking price, but experts emphasize the importance knowing the limits of what you’re able to spend so you don’t overpay for a home. (That’s also important when it comes time to get an appraisal.)
“You don’t want to overbuy. You don’t want to put yourself in a situation where you’re potentially one check away from going into foreclosure or missing a payment; that’s not why you’re buying,” notes Thomas.
You can (and perhaps should) make your offer contingent on the appraisal and inspection findings.
Get a home inspection
Ensuring you didn’t just offer to pay top dollar for a house with lots of problems is a key part of the process.
Getting a home inspector to come through and examine your would-be new house is crucial in making sure there aren’t any major defects, like a leaky roof, termite damage, structural issues, etc.
If problems are found, buyers can negotiate with the seller to fix what’s wrong (or even back out of the deal altogether if you put contingencies in your offer). But Grove, for one, says it’s important to choose your battles. She always tells her clients to think about what they can do themselves. “I’m like, ‘Didn’t you say your husband was handy? Let’s not ask for that. Let’s ask for the electrical and plumbing thing because that’s going to cost you more to hire,'” she says.
Go through a home appraisal
After you put an offer on a home, your lender will get an appraisal to make sure the home is a good investment. This step includes looking at what other similar properties are worth, along with any renovations or upgrades your home has, and helps your lender ensure the price you want to pay for the home matches up with the value of the property.
The home appraisal generally costs a few hundred dollars (according to HomeAdvisor, the national average cost is about $337), and along with the inspection is typically paid upfront by the buyer (although they can be added in at closing).
Close on your home
Closing costs vary a lot depending on the property, state, and loan and can range anywhere from 2% to 5% of the price of the home. (For one, Thomas notes, the closing costs for a first-time homebuyer in the Virginia area are typically 3%.) But a few costs you may need to budget for can include anything from underwriting fees, discount or mortgage points (one point is generally equal to 1% of your total mortgage amount and can be used to reduce your interest rate at closing), title fees, and other costs like earnest money (basically a deposit to show you’re serious about buying the house).
Since closing costs can vary so much, those like Bennett suggest buyers speak with an attorney beforehand, who can outline the details and help them plan accordingly.
Wherever you end up, you might be spending more time at home in a post-pandemic world. And as more and more people count their house as their office (and likely much more), first-time homebuyers like Richard Stapleton are glad they’ve got a place of their own.
He adds, “It’s so nice knowing that I don’t have to go anywhere for a long time.”
At the end of the day, the steps the pros recommend can protect you financially, but what may be most important of all is that you take the leap on a property you love. Especially these days, your home may be doubling as your office, gym, and child’s school for some time.


fortune--2020-07-17--How to hedge your home

How to hedge your home

This article is part of Fortune‘s quarterly investment guide for Q3 2020.
In 2002, David Bowie saw the writing on the wall for the music industry when Napster, LimeWire, and the like began sharing songs online.
Said Bowie: “The absolute transformation of everything that we ever thought about music will take place within 10 years, and nothing is going to be able to stop it.”
He was right, of course, as streaming completely changed the game in how we consume and pay for music. But Bowie also put his money where his mouth was by selling his music catalog.
In exchange for the royalty payments on his music for 15 years, Prudential paid the singer an upfront sum of $55 million. Those royalty payments added up to a 7.9% interest payment on that $55 million of principal.
Bowie basically turned his music into a bond. But there was a tradeoff for this move: He got less upside for taking the lump sum payment. In other words, he hedged his risks.
In her book, An Economist Walks Into a Brothel, Allison Schrager used Bowie’s innovative royalty deal to explain the simple idea of hedging, which she defines as follows:
Hedging involves taking less risk by giving up big gains to avoid big losses. What takes skill is knowing exactly how to find the right balance between risk and reward, or knowing exactly how much risk to take.
Unison is a company that effectively does for homeowners what Bowie did with his music royalties. Unison helps people come up with a down payment for their home, but instead of borrowing the money, the person who buys the home gives up some of their upside to Unison when they sell the home.
For example, let’s say you only have enough saved for 5% down. Unison would fork over the other 15% to get you to a 20% down payment, but then take a cut of price appreciation if you sell at a gain on top of getting their money back. If you sell for a loss, Unison loses money too and doesn’t get paid back in full.
The Urban Institute shows the median homebuyer currently borrows 95% of the home’s value at purchase. This number was 80% as recently as 15 years ago:
This means people are putting less money down than they did in the past, effectively increasing the leverage on the roof over their head. But this matters for another reason beyond the risk involved in the use of leverage.
If your mortgage is more than 80% of the value of the home, you will pay private mortgage insurance until you get the loan-to-value (LTV) ratio down to 80%. Assuming a 5% down payment, it would take you almost eight years to go from 95% LTV to 80% LTV.
That cost could be in the range of $100 to $200 per month depending on the size of the loan and your down payment. Here’s an example from Unison on the monthly savings for someone who puts down 10% with a 10% match from Unison on the down payment:
At the different price points, you can see monthly savings of $540, $820, or $1,080 at the higher-end price points. That would equate to annual savings of $6,480, $9,840, and $12,960, respectively.
One of the biggest advantages of buying a home for most people is it acts as a form of forced savings. But let’s assume you’re a financial adult who has the discipline and ability to save this extra money for retirement or some other financial goal. Not only does a down payment program help hedge your risks, but this would also allow you to diversify your exposure away from your biggest illiquid asset.
This type of program isn’t for everyone, but there are people in certain types of financial situations who I think could consider this option.
People who can’t save for a down payment
The median home price in San Francisco is almost $1.4 million. To save up enough for a 20% down payment over five years would require more than $4,500 a month!
The median home price in New York City is almost $700,000. It would take savings of more than $2,500 a month over five years to get there.
Not everyone has wealthy parents who can afford to help them with a down payment. There’s nothing wrong with being patient when making the decision to buy, but many young people will never have the means to save up enough for a reasonable down payment.
People who know about the ancillary costs of home ownership
Owning a home is expensive. You pay taxes, maintenance, interest costs, and upkeep, and you have to furnish it. Many young people are forced to buy fixer-uppers which require more money than most realize.
I can see scenarios where even those who have enough for a down payment would hold some of it back to partner with someone like Unison to stay more liquid for these other costs that arise.
People who don’t want to trade up
I’m anti–starter home for most people because the frictional costs involved in going from one home to another can quickly eat up any price appreciation. It’s also difficult to build up equity in a home over a short period of time since the bulk of your payments in the early years of a mortgage go toward interest costs.
I would never recommend stretching for a better home if you don’t understand the financial implications, but settling for a home you’re just going to sell in three to four years is more expensive than people think.
The biggest financial benefits tend to go to those people who stay put in their home for many years at a time.
People who need to tap their home for spending purposes
Unison also allows people to cash out some of their current equity for a share of the price appreciation at the time of sale. The residential real estate market in the U.S. is worth an estimated $27 trillion. For many people, the bulk of their savings is tied up in their homes.
These people are going to have to get creative to fund their retirement, and for many, their home will be the only option.
People who understand opportunity costs
Yes, you would be giving up on future gains by going through a program like this. Unison has investors who only pony up this cash because they want to earn returns on their capital. If that’s going to eat you up inside, this type of deal is certainly not for you.
But there are plenty of other people who need to diversify, hedge their risks, spend or save elsewhere in their budget, or don’t have parents who can fork over the money for a down payment on their behalf.
Ben Carlson, CFA, is the director of institutional asset management at Ritholtz Wealth Management. He may own securities or assets discussed in this piece.
More from Fortune’s Q3 investment guide:


fortune--2020-07-17--The best and worst places in the U.S. to invest in real estate during the pandemic

This article is part of Fortune‘s quarterly investment guide for Q3 2020.
Over the past decade, U.S. homeowners saw their cumulative home equity climb by $6 trillion. That massive gain—larger than the GDP of every nation with the exception of the U.S. and China—confirms that real estate is still a winning strategy for wealth building.
But the coronavirus pandemic is reshaping where that money is going to be made in the years to come. Millions of Americans have physically uprooted themselves in recent months, fleeing cities to second homes or to stay with relatives (in my case, with my in-laws in Ohio). That is already disrupting the housing market. And if more employers make remote working the new norm, it could further transform real estate. Like the 2007–2009 recession, this downturn is hitting some regions and cities—in particular, tourist destinations—harder than others.
Before joining Fortune, I spent almost two years as a data journalist at realtor.com, where I closely tracked U.S. housing markets. Over the past two months, I’ve reconnected with many of my real estate sources across the nation and analyzed reams of data to pinpoint the best and worst places to invest in real estate during the pandemic.
One theme quickly became clear: The coronavirus disruption created a new normal for real estate virtually overnight.
“The expectations for the [2020] spring homebuyer season was it was going to be the best in 13 or 14 years. But the pandemic hits and everything falls off a cliff,” says Frank Nothaft, chief economist at CoreLogic. As states ease lockdowns and home showings return, housing is already starting to rebound in some markets. The key word: some.
To be poised for strong real estate growth, Ellie Mae COO Joe Tyrrell says, you’d want a market with a lot of twenty- and thirtysomething buyers—who are expected to drive the housing recovery—and a local economy that isn’t dragged down by mass joblessness. These factors were included in Fortune’s ranking of the best and worst places to buy real estate during the pandemic.
Our analysis focused on the 200 largest metropolitan areas in the country. In all, we weighted 10 metrics, including price appreciation, availability of second/vacation homes (highly sought-after during the pandemic), home affordability, millennial populations, population growth, and jobs impacted by the pandemic. (Scroll to the bottom of the article for a full breakdown of the methodology.*)
Keep in mind that we examined metropolitan areas, and not just city centers. So if a city’s urban neighborhood loses a resident to the local burbs, it equates to a net loss or gain of zero.
Best markets to invest
Earlier this month Tesla secured tax breaks and land usage approval it sought for the Gigafactory it plans to build in the Austin metro area. This is a sign that the pandemic isn’t going to stop tech companies or twenty- and thirtysomethings from moving to Austin—a.k.a., the factors that have driven the city’s growth for decades.
What draws them in? As compared to other tech hubs, Austin still has reasonably priced real estate when compared to incomes. The median home price in the San Francisco metro area is $998,050, or 10 times greater than local median household incomes. Compare that to Austin’s median price of $377,040, which is 6.4 times household income.
That potent combination of demographics and affordability makes Austin the No. 1 market in Fortune‘s rankings of best places to buy.
The strength of the market has been evident in recent weeks as buying activity has rebounded strongly. “Things started to take off again in June and July. I’ve seen it pick right up where it left off,” says Jason Bernknopf, a realtor at austinrealestate.com. Earlier this month he helped a client put in a bid in for a multifamily fourplex in Austin for $20,000 over its $650,000 listing price. His client lost out on the property, which got a total of seven bids—a surprising number when considering the Texas is still sitting at a double-digit unemployment rate.
Austin is one of the prime beneficiaries of a demographic explosion in the U.S. The millennials, born from 1981 to 1996, are known as a big generation. It wasn’t until 1989, however, when births really spiked. The five biggest birth years for millennials were 1989 to 1993. That means that a hefty percentage of millennials are just hitting age 30—the all-important milestone for first-time homebuying. Housing markets such as Austin that are packed with younger millennials and have reasonably priced real estate are poised to explode in the coming years.
Almost all of the top 10 markets to invest, including No. 2 ranked Fayetteville, N.C., and No. 3 ranked Fargo, N.D., have the same combination of lots of soon-to-be prime age first-time buyers and affordable real estate found in Austin. In No. 4 ranked Columbus, the median home price is just 6.4 times greater than the metro’s median household income. In Los Angeles that ratio is 14.3 times.
As city dwellers continue to flee urban centers that remain under strict stay-at-home orders, second homes and vacation homes are seeing greater interest. Anthony Hitt, CEO of Engel & Völkers Americas, tells Fortune that he expects this trend to continue past the pandemic as remote working helps the affluent be less tied to their primary residences in cities.
However, the markets with the greatest percentage of residences serving as second homes, such as Myrtle Beach, S.C., at 29%, also are being pulled down because the pandemic has crashed their tourism-heavy job markets.
Worst places to invest
The hustle and bustle of the Las Vegas Strip was replaced with an eerie emptiness after the governor of Nevada issued a statewide shutdown of nonessential businesses in March. And the tourism dependent economy in Las Vegas saw its jobless rate soar to 34% in April. That number came down only to 29% in May—still above the U.S. peak of 25.6% during the Great Depression.
“It’s going to take a long time for Las Vegas to recover,” Nothaft says. He expects home prices in Las Vegas to fall over the coming 12 months.
The three worst places to invest in real estate during the pandemic, according to Fortune’s analysis, are all in heavy tourism markets: No. 1 Atlantic City, N.J.; No. 2 Las Vegas; and No. 3 Honolulu. A meaningful recovery for the hospitality and leisure industry is unlikely until there is a vaccine for the virus. That makes investing in tourism markets risky in the short term. If prices fall significantly, however, it could create buying opportunities.
Employers like Twitter and Slack have already said more of their employees can permanently work from home. That could hamper price growth in expensive neighborhoods in big cities previously valued for their proximity to the office. And we’re already seeing signs, as rental prices get cut in some cities. Adriel Lubarsky, CEO and founder of Riveter, says he recently got a double-digit rent cut when he renewed his lease last month in San Francisco.
Among the potential losers of WFH is No. 5 ranked Los Angeles. The reason? Affluent buyers in L.A. are already ducking out for nearby second home markets.
“Buying and selling is on fire right now in Santa Barbara. People are leaving L.A. in droves. They’re getting the heck out and going toward Santa Barbara,” says Terence Alemann, owner and broker of Alemann & Associates. “No one wants to be in San Francisco or L.A. right now. Imagine paying $40 million for a penthouse and being stuck taking a crowded elevator up?”
Plus, the median list price of $915,050 in Los Angeles will continue to hold many of its twenty- and thirtysomethings out of the housing market. Not to mention it has a massive tourism industry that has been hammered by the pandemic.
*Notes on methodology: To find the best and worst places to invest in real estate, we looked at the following metrics for the 200 largest metropolitan areas in the U.S.:


fortune--2020-07-17--This is what every generation thinks of real estate—and what each has spent on it

How ‘ The Alienist : Angel of Darkness ’ returns viewers to the Gilded Age while setting up new stories

This article is part of Fortune’s quarterly investment guide for Q3 2020.
There has long been a generational divide when it comes to music, fashion, and politics…but there’s also a growing generational gap when it comes to real estate.
As the charts below show, starting in the 1990s, both the amounts each generation has invested in real estate, as well as the value of those investments, have differed dramatically. And generational experts say that while some of this has to do with luck and timing—those factors have also shaped each generation’s overall feelings about owning a home.
There are a few factors at work here, says Jason Dorsey, president and lead generational researcher at the Center for Generational Kinetics, a research and strategy firm based in Austin. And they affect not just how much each generation has to spend, but what each is spending it on. Gen Z: If you think Gen Z is all about gig jobs and the rental economy, you couldn’t be more mistaken. Says Dorsey: “Gen Z was old enough to remember the Great Recession, but young enough to have it change their views. They saw and heard their parents struggle, lose their jobs.” Broadly speaking, Dorsey says, members of Gen Z skew conservative financially and tend to have a more skeptical attitude toward credit and debt, seek jobs with stable benefits, and are much more likely to use apps that encourage saving or improving their credit scores. “We call Gen Z a throwback generation,” Dorsey says. “In many ways they are really like baby boomers.” A recent Freddie Mac survey backs that up, finding that 86% of Gen Z respondents want to own a home someday, and estimating on average that they will “attain this goal by the time they turn 30 years old, three years younger than the current median homebuying age (33).” Compared with previous surveys, Freddie Mac found that “fewer 18- to 23-year-old members of Gen Z see renting as more appealing than buying a home, versus millennials at the same age (19% to 30%); fewer believe renting makes you feel like part of a community (33% to 39%); and fewer perceive that it costs less to rent a home than to own a home (40% to 51%).” Millennials: It’s not that millennials don’t want to own homes, but given the economic wallop of the Great Recession, their passage through adulthood has been pushed back. Many emerged from college unable to find jobs, settled for jobs that weren’t ideal, or took lower-paying jobs because of the state of the economy. Not to mention this is a generation carrying very high loads of student loan debt, given the explosion in higher ed costs. According to analysis of Census data by the Pew Research Center, “Millennials trail previous generations at the same age across three typical measures of family life: living in a family unit, marriage rates, and birth rates.” They found that in 2019, 55% of millennials lived in a family unit. This compares with 66% of Gen Xers in 2003, 69% of boomers in 1987, and 85% of members of the Silent Generation in 1968. Though millennials had just started to power a buying boom before COVID-19, they were hit with another blow just as many would have been on the verge of buying their first home. Gen X: Meanwhile, when it comes to Gen Xers, their experience with real estate tends to center on whether they are in an area where prices have fully recovered from the Great Recession. If they have, they generally view it as a positive way to build wealth. But if not they hold more negative views. Says Dorsey, “They’ve seen the good and bad—the rapid appreciation and the crash.” Boomers: If you’re a boomer, you tend to have an unabashedly positive view of real estate as an investment, thinking of it as a wealth creation vehicle as well as a nest egg. Which leads to another interesting generational twist: Will millennials be able to play financial catch-up via a huge wealth transfer from their boomer parents? Though that has long been what’s predicted, Dorsey isn’t so sure anymore. “Boomers are living so long they may end up spending what they would have given to their kids,” he says. The Silent Generation: They have a very different experience than later generations, says Dorsey, “because they were there during the rapid growth of the suburbs post-World War II. As the parents of boomers, they witnessed farmland become master-planned communities. They also saw the fortunes of cities rise and fall and rise again.” He says that this group is increasingly trying to simplify their real estate and homeownership responsibilities—i.e. moving into a smaller place or one that is easier to maintain. They’re also navigating inheritance and estate planning, while figuring out how to “maintain their quality of life, access to healthcare, and proximity to other family members and friends,” says Dorsey. More from Fortune’s Q3 investment guide: A comprehensive guide for first time homebuyers
The best and worst places in the U.S. to invest in real estate during the pandemic
To buy or to rent? Residential real estate calculus in the time of COVID-19
Where are housing prices heading? Gain, then pain
Are people really fleeing cities because of COVID? Here’s what the data shows
What the post-pandemic housing market might look like, according to the CEO of Century 21
How to hedge your home


fortune--2020-07-17--Where are housing prices heading? Gain, then pain

This article is part of Fortune’s quarterly investment guide for Q3 2020.
In his 17 years as a Seattle real estate broker, Sam Mansour had never witnessed a marvel to match the shopping frenzy that took flight in the first days of reopening. “We were shut down by shelter-in-place orders in early March,” recalls Mansour. “When we returned to work, we saw a surge in buyers that continues, with no end in sight. Many customers have condos in the city, but now both husband and wife are working at home, so to get more space and enjoy a backyard, they’re buying second homes. On top of that, we have young renters who are rushing to buy because rates are so low.” He’s putting roughly 10 houses into contract a month, compared with seven this time last year, and his customers are paying record prices––around 8% more for the same ranch or colonial as in 2019. “We’d only seen big spikes when, say, Amazon suddenly hired 10,000 people, but not this big,” he observes. “The joke in the old normal used to be, ‘Where would you be happy living?’ Now it’s, ‘Where would you be happy quarantined?’”
This housing boom that Mansour sees building in Seattle exemplifies the trend that’s sweeping the country from Austin to Jacksonville, from Raleigh to Portland, Ore. In an America where the COVID-19 pandemic has tripled the jobless rate since February to 11.1% and caused the deepest sudden drop in GDP since the Great Depression, it’s the biggest, and most astounding, piece of positive economic news to emerge from the crisis. “The single-family housing market is going gangbusters, though some areas are hurting,” says Ed Pinto, the former chief credit officer at Fannie Mae who heads the American Enterprise Institute’s Housing Center. “It’s fully recovered from the pandemic shock and is back even stronger than last year, when it was showing its best performance in a decade.” On average, prices are rising 7% to 8% nationwide over this time last year, and they’re notching new records by the week. At the same time, data from April shows an alarming spike in mortgage delinquencies.
This scenario—where the economy is tanking while housing romps—makes this an unusually confusing moment to weigh whether it’s a good or bad time to buy or sell a home. Brokers like Mansour, as well as economists looking at the broad macro picture, such as Yale’s Robert Shiller, see several trends emerging. Mansour reckons that 30% of his buyers are families either selling their city condos or purchasing second homes, and most of that demand is new. And Shiller tells Fortune: “What strikes me out of the whole coronavirus experience is that the pleasure of living in a nice city is diminished by the fear of being close to other people. That appears to be causing an outflow to the suburbs and far-flung places even beyond the suburbs.”
Most experts say in the near term they’re expecting to see drops in big cities like L.A. and New York, and declines in Detroit, a metro with persistently high unemployment, and low incomes. According to Pinto, sections of south and southeast Cleveland and the South Side of Chicago, encompassing around 20% of their respective populations, will also get hit. These areas have a high proportion of low-paying service jobs, and will likely suffer from elevated unemployment rates that will last a lot longer than for the nation as a whole, driving down prices. Miami, Phoenix, and Las Vegas, heretofore flourishing metros thrown into recession by vanishing dollars from tourism and vacationers, will see prices fall. Because those declines will be counterbalanced by gains in the Sunbelt areas that will keep roaring, it’s hard to predict how much prices will fall nationwide, if they fall at all.
Research firm CoreLogic takes a pessimistic view, forecasting a decline of 6% on average nationwide in the next 12 months. “We were surprised at how quickly a V-shaped recovery happened, post the stay-at-home orders,” says Selma Hepp, an economist at CoreLogic. But Hepp believes that three factors will turn the rebound into a swift decline. First, she predicts that employment will stay stubbornly in the upper-teens, and cites that the jobless rate is a barometer for the health of housing. Second, the fall in disposable income erodes Americans’ ability to buy homes and make their mortgage payment. And third, the current spike in demand will unleash a bounce in housing starts that will fill building lots with new houses just as buyers are retreating.
In this writer’s view, a 6% fall nationwide over the next 12 months is unlikely, given the market’s current momentum, the super-low rates, and the prospects for continued growth in most of the South and Southwest. What’s easier to predict is the long game, and there, the future looks dark. One reason is that a lot of today’s buying is driven not by new, but by pent-up demand. “People who were planning on buying anyway and didn’t buy earlier in the year are buying now,” says Hepp. In addition, it’s unclear that what looks like the big new source of buying, the exodus from city apartments to suburban houses, will continue. “It’s hard to believe it’s a long-term trend,” says Hepp. “Once we get a vaccine, we may see people coming back to the cities.” Shiller is also skeptical: “People may get over this aversion to the cities faster than expected,” he says.
It’s likely that once the momentum from the decline in rates runs its course, prices will either fall in most markets, or fail to match inflation. The reason is basic: Home appreciation has been outpacing Americans’ incomes for around a decade. Right now, it’s the drop in rates that’s allowing the rise in prices to outstrip the extra dollars in workers’ paychecks. But that can’t go on forever.
Here’s everything we know about the current forces being brought to bear on markets across the country.
Pent-up demand
In late June, the National Association of Realtors announced that sales of existing homes had fallen 17.8% in May, the biggest single-month drop since 1982. That descent brought the total decline since the start of April to a staggering 26.6%, lowering the number from an annualized 5.33 million in May of 2019 to 3.91 million, the lowest reading since 2011. Pending sales of new homes, surveyed by the U.S. Department of Commerce, waned 12.8%, from 665,000 to 580,000, from March to April. Like most of the economy, housing locked down, as states banned agents from showing homes to the few buyers who braved venturing out to tour them.
In an early sign of things to come, new home sales “pending,” or in contract, soared to an annual rate of 667,000 in May, exceeding the previous year’s figure by nearly 13%. But the big driver is the existing home market that accounts for around nine in 10 sales. And probably the best predictor for that dominant sector is the survey of homes in contract that just “locked in” an interest rate with their lender, conducted by the AEI Housing Center headed by Pinto. Those rate lock transactions account for the vast bulk of all future sales. “The lock-in date generally comes 45 to 50 days before the closing or recorded sale,” says Pinto. Hence, the rate locks recorded in May will translate into July sales, and those in June progress to closings in August.
Pinto’s rate-lock data shows that housing entered 2020 in a sprint. For the first 11 weeks through mid-March the number of houses that secured rate commitments averaged 15% above 2019’s already strong levels. The volume of new contracts then entered a corridor of sorrows, trailing the 2019 trend by a wide margin. What followed is likely the most epic leap in the annals of housing. By the first week in April, buyers were getting rate locks on over 45,000 homes, well above the 35,000 from the same week last year. And the total kept jumping week after week, hitting 63,000 in early June before settling at around 50,000, then jumping back to 62,000 for the week ended July 10.
Over the past seven weeks, rate locks have exceeded the numbers from last year by over 40%, at roughly 35,000 to 55,000. In the week ended June 27, contracts jumped 62% ahead of last year’s pace. All told, total volumes for the year are 19% ahead of 2019, despite the falloff in March. “The strong sales pattern from 2019 suddenly got back on track, but with an extra boost,” says Pinto. “That extra boost came from the big decline in rates.” The towering contract numbers posted in June, says Pinto, should send sales on an annualized basis well above 6 million in August, the highest number since 2007.
The Pinto data also tracks the trend in prices. From early 2019 through the start of the lockdown, they’ve been tracing a steady upward trajectory, going from 3.5% annual appreciation to 7.3% at the pre-pandemic peak. The rate of appreciation showed remarkable resilience, falling only to 3.7% at the low point. From there, prices went on a moonshot, passing 7% in mid-June and exploding to 9.2% the week ended July 10, the most recent result.
Fewer affordable options
First-time buyers are typically millennials in their late twenties through late thirties who are moving from apartments, often because their first child is nearing school age. Those maiden purchasers are crucial to a strong market because they power the “daisy chain” that enables owners of existing homes to move up to bigger, pricier properties. The entry-level cohort mostly buys inexpensive used homes, providing a nice capital gain for sellers, who can use the extra cash as a down payment on a more costly, move-up abode.
It’s those first-time buyers that have been driving the bull market in recent years. In peak spring season, they’ve gone from purchasing 130,000 homes a month in 2013 to 190,000 in 2019––and their volumes are probably heading even higher this summer. “Keep in mind that millennials have been powering the market,” says Pinto. “Larger and larger numbers of them have been reaching prime buying age of 33. And their incomes have been increasing steadily in recent years.”
The rub is that the surge in prices that accelerated in 2019, then resumed with even greater fervor in May and June, is eroding affordability for all buyers, but especially for first-timers. Year after year, the outsize increase in what Americans pay for houses has been outrunning the modest ascent in their incomes. “Remember, incomes have been rising nicely at over 3% for the past couple of years,” says Pinto. “But from around 2012 to 2020, prices were increasing many points faster, just below 6%.”
But it’s a tale of two markets. The high end appreciated a lot more slowly, and hence faces less danger. Over those eight years, prices bounced around but averaged gains of about 4.5%. “I’m not worried about the high end,” says Pinto. “The leverage is low; owners have a lot more resources to fall back on; many own their homes free and clear; and those with loans are a lot less leveraged. So the chances of foreclosure or forced sale by the affluent are relatively low.
“Prices are rising fastest for entry-level buyers, and they’re exactly the ones most hurt by the trend,” says Pinto. The relatively low-price entry level that accounts for 27% of the total market has been appreciating far faster than both the 6% average nationwide and 4.5% at the high end, at 7.6%. This continuing escalation means that affordability will hit a wall for first-timers in many markets despite lower rates.
More debt
The affordability problem caused by prices rising faster than incomes is forcing purchasers to take on bigger and bigger amounts of debt relative to their paychecks. New homeowners—particularly low-earning Federal Housing Administration (FHA) borrowers accounting for 20% of the purchasers who get loans, a group forming the riskiest part of the market—are especially highly leveraged. That means their mortgage debt relative to their incomes is extremely elevated. So for prices to keep rising, they’d need to become even more stretched. Pinto says that the FHA could well keep allowing debt to income to spike ever higher and support the trend toward even more unsustainable prices. “That’s why prices still have room to move higher,” he says. But eventually the increase in supply brought on by high prices will push down values, causing the FHA and Fannie and Freddie to tighten credit standards, further chilling sales. That’s what killed the market from 2007 to 2011.
In many markets, from Los Angeles to Denver, homes are already unaffordable for first-time buyers, and for that reason alone, are likely to fall. Even in formerly inexpensive locales such as Charlotte and Dallas, they’re reaching levels that are pricing out new buyers, and hence leaving little or no room for appreciation.
Dearth of new construction
The reason that prices for first-time buyers are rising so much faster than for the affluent is the dearth of construction of inexpensive homes. “It’s new construction that holds down prices,” says Pinto. “But except in markets such as Raleigh and Jacksonville, where there’s a lot of available land and plenty of construction, land is much too expensive for builders to offer the $120,000 or $150,000 homes that young buyers can afford.” Hence, he says, few if any inexpensive houses are coming on the market to compete with the low end of the existing homes. So first-timers are stuck: That fixed supply of older homes, in the lowest-price tier, is practically their only choice. “Since the inventory of those $150K existing homes for sale tends to be lowest of any level, the first–timers bid up the prices a lot faster than for $400,000 or $500,000 homes where in, say, Dallas or Atlanta, you have plenty of construction,” says Pinto.
How have the first-timers kept going when you’d think that fast-rising prices would put homeownership out of reach? First, supercheap rates have empowered millennials to keep paying more and more for the same houses without substantially raising their monthly payments. The second reason is a big increase in leverage. The government-backed lenders such as Fannie, Freddie, the FHA, and the VA, that originate 80% of America’s home purchase loans are allowing low-income buyers to substantially increase the amount of debt they amass for every dollar in income. “That latitude has combined with falling rates to empower them to buy the same houses at much higher prices,” says Pinto.
Prices have risen fast in cities
Pinto and fellow AEI analyst Tobias Peter studied the change in affordability for first-time buyers in 50 metros from 2013 to 2018. The results are arguably the best evidence that prices in all categories, and especially the lower tiers, have been defying economic gravity. When the fundamentals take hold, as they always do, prices will need to fall or go flat in pricey markets, including a number where houses were bargains just a few years ago.
Pinto and Peter measure affordability as the ratio of the average price first-timers pay to their median family incomes. “I don’t consider interest rates, because they can change quickly and in big shifts,” Pinto says. “Keep in mind that the 30-year hit 5% in late 2018.” In 2013, the average price-to-income ratio in those metros was 3.0. In five years, it rose to 3.3, meaning entry-level purchasers nationwide were spending 10% more per dollar of income on their houses.
Most cities became less affordable, many by a wide margin, especially when you consider their big price increases since 2018. The bargain metros are mainly older industrial cities such as Pittsburgh, Cincinnati, and Memphis, and they still offered the best prices per dollar of income in 2018. Metros near the top of the price scale got even less affordable over those five years. For example, Denver incomes rose 31% to $85,000 in that half-decade, versus a 56% bump in median house prices to $367,000. Its ratio of prices to incomes zoomed from 3.5 to 4.2. The pattern was similar in Seattle, where prices rose 40% to $400,000, and incomes rose 28%. Las Vegas became spectacularly less affordable, as prices rose 42% to $265,000, and incomes waxed just 16%.
Even highly desirable cities in the South and Southwest that feature strong job growth and used to be highly affordable, have gotten much more expensive. In Jacksonville, home prices rose 22%, almost three times as fast as incomes, and they’ve jumped another 22% in just the past 18 months. Dallas was the eighth cheapest city in 2013. By 2018, prices had rocketed 40% to $264,000, compared with 9% for incomes, pushing its rank to 20th. Dallas appears to have run out of headroom to keep raising prices. Since the start of 2019, they’ve risen just 5.5%, way below the national average. That’s a sign of things to come.
Prices can’t continue to outpace incomes
For a while, it looked as if a normalization in rates would cool the huge run-up in prices where it matters most, on the low end. The 30-year hit 5% in November of 2018, and the Fed expected a rise to 6%. At that point, according to Pinto, it looked like the house-price boom on the low end especially would have a soft landing. Housing was headed on a sustainable course where prices would more or less track incomes. Then, the trade war and a slowdown in Europe and what looked like a looming bust on the high end prompted the Fed to slash rates once again.
That sent prices skyward at the low end. Then came the current run-up that made the affordability problem, and the correction needed to solve it, even worse. The dynamic of prices rising faster than pay that’s reigned for years simply cannot last, although low rates can keep it going for a while.
In many markets where the gap’s been growing fastest, such as Las Vegas, Phoenix, and Miami, prices will have to fall relatively soon before they can resume rising again. Then they’re likely to increase modestly in tandem with incomes. In those cities, the pandemic will provide the catalyst for the inevitable drop. But the reckoning, meaning flat or declining prices, will probably happen in all but the still-bargain Midwestern metros. We just don’t know how long it will take. The trigger could be that the coronavirus crisis lasts a lot longer than expected, or another unforeseen shock. What’s clear is that perhaps this new and surprising spike makes the already inevitable descent back to normal even steeper.
More from Fortune’s Q3 investment guide:


fortune--2020-07-17--What the post-pandemic housing market might look like, according to the CEO of Century 21

This article is part of Fortune’s quarterly investment guide for Q3 2020.
From working to working-out-from-home, the coronavirus is changing the way we live—and it might change where we live, too.
That’s what Mike Miedler, the president and CEO of real estate behemoth Century 21, sees as a possibility moving forward.
“It’s now where you’re schooling your kids and working from. And it’s now your home gym—it’s everything to you,” he tells Fortune. Miedler, who has sat atop the realty empire since last year, is hearing reports from his agents all across the country that the housing market is still booming. But he’s seeing some notable trends coming out of the woodwork that just may be solidified in a post-pandemic housing market.
Expect a rush into the market with ‘generationally’ low interest rates
The Federal Reserve has been working overtime to quell the pain in financial markets as the coronavirus crisis plunged the nation into a recession—including cutting interest rates to near zero, likely until 2022.
For the housing market, that’s meant 30-year fixed mortgage rates are at historic lows. Miedler thinks we’re seeing a surge in homebuying with the “generational opportunity with interest rates,” he says. That might make homes more affordable in high-priced markets like Washington, D.C., or New York City. “A couple percentage points will put thousands and thousands of dollars of home purchase power in your pocket, especially for the first-time home buyer,” Miedler notes. “That’s the big story right now, that we have so much pent-up demand.”
The exodus to the suburbs may stick
There’s mounting evidence of an exodus from cities to the suburbs, and Miedler sees that as a trend that could stick.
“A hundred days ago, I would give this speech on how I see a lot of millennials moving into city-type areas like Brooklyn, like Queens, like Hoboken, because they want that walking, they want the experience, they want to be able to get out of their building and go to the Whole Foods. And now that’s completely turned upside down on its head,” says Miedler. “We’re seeing people look at how they flee the cities and get into more suburban-type areas…And I do think we’re going to see a spreading out of the American population.”
For many of us now, working from home might be the new normal, while cities with their bars and restaurants (and dense populations) may be losing their luster amid shutdowns.
“My house and my basement [have] become my new office, and I think that folks are saying, ‘Hey, look, I might be willing to move to Westchester, to Long Island, or even D.C. if I can jump on the train to be up there a few days a week and deal with a three- or four-hour commute versus having to be in the office every single day,” says Miedler. “I absolutely think we’re going to continue to see that as we rethink the way that we work and school and conduct our lives.”
We may already be seeing early evidence of this flight to the suburbs: Searches for houses with zip codes in the suburbs rose 13% in May, according to Realtor.com, CNBC reported. Meanwhile, builder confidence for new homes has shot up to pre-pandemic levels, according to the July National Association of Home Builders/Wells Fargo Housing Market Index. And where new homes are being built is telling: “New home demand is improving in lower density markets, including small metro areas, rural markets and large metro exurbs, as people seek out larger homes and anticipate more flexibility for telework in the years ahead,” NAHB chief economist Robert Dietz said in the report. “Flight to the suburbs is real.”
Prices will keep rising across the country—but perhaps not in cities
But will prices drop? Yes and no.
The housing market, perhaps surprisingly, has held up pretty well during the crisis, and prices keep ticking up across the country. In fact, according to the National Association of Realtors, the median existing-home price has ticked up for 99 consecutive months, while inventory remains low. (It’s currently at 4.8 months of supply, according to the NAR.) Miedler sees a four-month supply of inventory as “the new norm” (read: lots of competition), and he believes “those prices will continue to creep up across the country. But in those markets where people are fleeing, you’re definitely going to see prices go down,” he says.
Indeed, early reports suggest prices in some cities like infamously expensive New York City may be getting ready to decline, as residential buildings empty out in the city. And it’s true that house prices have fallen in New York City in recent months: In June, the median rental price in the hub of Manhattan fell nearly 5%, according to a report by Douglas Elliman. But given the shutdowns and restrictions, the data will no doubt be in flux as the housing market reopens.
Yet as would-be homeowners continue to reevaluate their needs and new way of life, Miedler says he “can bet those numbers will start coming down.”
On a more sentimental note, he adds: “I do think housing, your home, has become more important than it’s probably ever been in our lifetimes.”


fortune--2020-07-17--Are people really fleeing cities because of COVID? Here’s what the data shows

This article is part of Fortune’s quarterly investment guide for Q3 2020.
As the pandemic devastated New York City in March, schoolteacher Ali Iberraken and her young family rushed to relocate outside the city—way outside the city. They left their two-bedroom Brooklyn brownstone for an Airbnb in the woods of Virginia’s Shenandoah Valley. The Iberrakens had planned to decamp for three weeks but ended up staying for two months, not least because they loved the peace and beauty of the bucolic environment.
“Virginia made me realize that’s exactly the lifestyle I wanted,” Iberraken said. “We tried to stay as long as we could, and upon coming back to New York, it was such a big difference. Now we’re going back to the same old playground in 90-degree heat and horrible humidity.”
She’s not the only one pining for a rural escape during the COVID-19 crisis. A spate of recent headlines such as “Coronavirus may prompt migration out of American cities” and “Americans flee cities for the suburbs” suggest a major demographic shift is underway—a shift that could have profound consequences for housing prices and the broader real estate market.
Tales of Americans fleeing cities in droves, however, are likely overstated. According to Jeff Tucker, an economist at the online real estate service Zillow, 64% of prospective homebuyers on the site are looking at suburban areas—a figure that has barely budged from previous years—while searches for property in rural and urban areas likewise represent about the same percentage as before.
Jonathan Miller, who writes a popular newsletter about New York real estate, is likewise skeptical that America’s cities will empty out.
“There is outbound migration. It’s certainly happening. But the current narrative suggests there will be five people left in Manhattan by September,” he says.
Miller likens what’s happening with COVID-19 to events like the Lehman Brothers collapse in 2008 and the 9/11 attacks. Those events likewise triggered a flight from New York, but only a temporary one; many of those who left returned in a year or two. Miller expects a similar phenomenon to occur with the pandemic.
That doesn’t mean the coronavirus won’t have significant impacts on the real estate market, of course. Respected housing economist Robert Shiller recently warned that urban home prices could decline, while civic boosters in Connecticut say early trends suggest the state could benefit from a long-awaited return to the suburbs.
Meanwhile, real estate experts say the pandemic has created or accelerated several notable shifts in behavior—shifts that could become permanent in the long term.
The ‘Brooklyn effect’ and virtual home tours
Zumper is a popular site for renters looking for a home. Founded in 2011, the company is also known for parsing housing data and for popularizing the term “Brooklyn effect” to describe the phenomenon of people leaving urban centers like Manhattan for adjacent locations. According to Zumper CEO Anthemos Georgiades, the effect has been especially pronounced during the COVID-19 pandemic.
He notes, for instance, that an outflow from San Francisco has contributed to rents shooting up 4% in nearby Oakland and 7% in Sacramento—a situation he says is unprecedented during a recession. Another example of the Brooklyn effect, says Georgiades, is taking place in Newark, N.J., where rents are up 15% as New Yorkers flock to that state.
For its part, Zillow has detected another COVID-related trend: A surge in virtual home tours. The company’s app has offered sellers the ability to show floor plans or 3D tours for some time, but these features have only taken off in recent months.
“Agents have absolutely upped their game to give people the virtual experience,” says Tucker of Zillow, who says the number of listings that include virtual features increased sixfold with the pandemic. Tucker predicts the popularity of such listings will become permanent as buyers realize it is safer and more efficient to go house-hunting on their phones rather than spending their Saturdays driving around.
And while the number of Americans fleeing cities appears to be more of a trickle than a flood, there is an exception: San Francisco. According to Zumper’s data, the average rent in the city has plunged by 11% this year, a figure that Georgiades describes as “staggering.” He says that the narrative of a flight from the pandemic is more true in the Bay Area than anywhere else in the country. The reason, he claims, is that tech companies are more inclined to embrace remote work both in the short term and long term—leading many workers, including some of the more than 40,000 employees at Facebook—to leave the Bay Area altogether.
If a broader movement to flee cities does take hold, it is this phenomenon—the rise of remote, Zoom-based work culture more than COVID-19 itself—that will be responsible, says Miller, the New York real estate maven.
“Zoom has lengthened the tether between work and home. You can now have fewer commutes but with the average commute getting longer,” he says.
Miller cautions not to overstate the implications, though, especially as remote work will mostly be an option reserved for professional employees. He also adds that the real estate industry simply doesn’t have enough data right now to draw firm conclusions about which changes wrought by the pandemic will be permanent. Meanwhile, housing prices will continue to be determined by the same factors that have informed them for decades.
Millennials and marriage remain a force
While the generation known as the millennials spans about 20 years, the cohort is not evenly spread. There is a large bulge within the generation, says Frank Nothaft, chief economist at data firm CoreLogic, and that bulge is beginning to turn 30. Like those who came before them, that subset of millennials is turning their mind to marriage, and moving to properties that offer more space.
It is macro-factors like this one that will have a major effect in shaping the housing market in the coming years, says Nothaft. Other ones include record low mortgage rates (many banks are offering rates well below 3%) and an ongoing shortage of inventory. Several real estate experts consulted for this story cited the latter factors as important in determining where prices might be headed.
In light of these subtle but significant factors, the more dramatic headlines about Americans “fleeing cities” can amount to noise that can obscure the market’s underlying signals. In light of this, bold predictions about the future of home prices are best taken with a grain of salt.
As for Iberraken, the schoolteacher who is also an app designer, her family’s sojourn in the woods of Virginia kindled a desire to leave New York, but she is discovering a permanent move is complicated. One big reason, she notes, is that the “Internet in rural Virginia is…slow.”
The family plans to be in Brooklyn for the foreseeable future.


fortune--2020-07-17--Trade is choppy as investors get slammed by conflicting economic data and spiking coronavirus infect

Trade is choppy as investors get slammed by conflicting economic data and spiking coronavirus infections

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Happy Friday, Bull Sheeters. Asian and European stocks, as well as U.S. futures, are trading sideways as investors weigh what the conflicting economic data and mounting COVID-19 case load means for the economic recovery… And, Netflix bulls, you may want to avert your eyes.
Let’s check in on the action.
Markets update
Asia
The major indexes are mixed, with the Hang Seng leading the way, up 0.5% .
leading the way, up . In their business dealings with China , U.S. corporate giants such as Walt Disney and Apple have become mere pawns of the Chinese Communist Party . The accusation of a disgruntled shareholder? Nope, that was Attorney General William Barr in a withering speech yesterday.
, U.S. corporate giants such as Walt Disney and Apple have become mere pawns of the . The accusation of a disgruntled shareholder? Nope, that was Attorney General in a withering speech yesterday. COVID-19 cases have raged past 1 million in India with more than 25,000 deaths, forcing the once-booming economic power to reimpose lockdown measures.
Europe
The European bourses were mixed at the open with Germany’s DAX up 0.3% , before slipping.
were mixed at the open with Germany’s up , before slipping. Euro stock- and bond bulls beware: EU leaders convene a two-day make-or-break summit today to decide on the €750 billion coronavirus bailout package. Dutch PM Mark Rutte, part of the “ frugal four ,” told reporters this morning that chances for a deal this weekend are less than 50% .
convene a two-day make-or-break today to decide on the coronavirus bailout package. Dutch PM Mark Rutte, part of the “ ,” told reporters this morning that chances for a deal this weekend are less than . An EU court yesterday threw out a U.S.-EU data-sharing deal on Thursday, plunging the “$7.1 trillion transatlantic economic relationship,” as the U.S. Commerce Department calls it, into disarray.
U.S.
The major averages all fell yesterday on divergent economic data and a record spike in coronavirus cases. The jobless claims , meanwhile, were worse than expected, dousing any enthusiasm from strong retail figures.
all fell yesterday on divergent economic data and a record spike in coronavirus cases. The , meanwhile, were worse than expected, dousing any enthusiasm from strong retail figures. Netflix shares are down 7% , off bigger declines, in pre-market trading after it delivered a weak subscriber forecast for the current quarter yesterday and announced a shakeup in the C-suite.
are down , off bigger declines, in pre-market trading after it delivered a forecast for the current quarter yesterday and announced a shakeup in the C-suite. Morgan Stanley shares climbed 2.5% after reporting record top- and bottom-line results yesterday, fueled by knockout trading revenues. On cue, Northman Trader’s Sven Henrich quipped: “So the Fed made the banks a bunch of dough. Imagine that.”
Elsewhere
Gold is flat.
is flat. As is the dollar .
. Crude is down as America’s problems containing the coronavirus contagion muddles the demand outlook. Goldman Sachs now calls a year-end $45 price tag on Brent.
By the Numbers
17 straight. For the seventeenth consecutive time, weekly jobless claims came in yesterday above 1 million. The past few weeks have been among the most worrying as the claims number has more or less plateaued. Yesterday’s official number was 1.3 million, almost exactly as rough as the week prior. Economists had been forecasting 1.25 million. The number was bad enough to wipe out any momentum from yesterday’s impressive retail sales figure, sending markets into the red. With coronaviurus spiking across the country, the hopes for a quick recovery in the labor market, or in the U.S. economy, are fading fast. “Absent a vaccine, the need for ongoing physical distancing will prevent a full recovery,” Michael Pearce, senior U.S. economist at Capital Economics was quoted in CNBC was quoted as saying. The Thursday number is increasingly becoming the number to watch to gauge the health of the U.S. labor market. The monthly jobs report, courtesy of the U.S. Bureau of Labor Statistics, is rife with errors.
-5%. Last week we were marveling at the Shanghai Composite’s bull run. It had climbed 17.8% between June 15 and July 10, beating even the Nasdaq over that period. Since I wrote that, it’s down 5%. Much of the decline started when the state-run China Economic Times warned last week about the dangers of a “crazy” bull market. Now investment professionals are drawing the same conclusion. “We downgraded China about a week ago, for the very simple reason … it is expensive on an absolute basis, it’s rallied very much to outperform the rest of the region,” Herald van der Linde, head of Asia Pacific equity strategy at HSBC, told CNBC yesterday. Citing Refinitiv data, Market Ear points out that the surge up and and the slump down have both been on huge volumes.
$35 billion. Looking for a decent metric on the true health of the U.S. economy? Follow the billions the banks are pulling from the “P” column on their P&L to cover loan losses—this is the swelling number of business proprietors, home owners and consumers on the brink of default. In the past three days, the big U.S. banks have detailed they’ve set aside $35 billion for Q2. That’s on top of the $24 billion set aside in Q1, according to Bloomberg. The banks are preparing for the worst. So far, provisions from the CARES Act have kept millions of Americans and American businesses solvent. If Congress and the White House fail to agree to an extension in the coming weeks, the banks fear, the insolvencies will skyrocket.
***
Have a nice weekend, everyone.
A programming note: in a few hours, I’ll be driving down South for a week’s vacation. Bull Sheet will be in the capable hands of Rey Mashayekhi next week. I’ll be reading along from Magna Grecia.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
Today's reads
PPP goes crypto. The Department of Justice charged a Texas man with fraud for securing $1 million in federal paycheck protection bailout money and allegedly investing the proceeds in bitcoin. The man got the dough for his "Texas Barbecue" business, which is little more than a website with no employees.
Quarterly Investment Guide. Fortune's crack team of finance reporters have been working on the new investors' quarterly. This edition will be dedicated to real estate. Fortune subscribers get first crack at their findings, analysis and rich data beginning today at 6 a.m. ET (noon, Rome time). Here's the link.
Some of these stories require a subscription to access. There is a discount offer for our loyal readers if you use this link to sign up. Thank you for supporting our journalism.
Market candy
79%
According to a new academic study, removing passengers from the middle row of a commercial airplane will reduce the COVID risk by 79%—and [not calculated] boost passenger satisfaction by a few million percent. So, all U.S. carriers are keeping the middle row clear, right? Wrong. As Fortune's Jeff John Roberts notes, "Delta, JetBlue and Southwest have chosen to keep middle seats empty, while United and Spirit are filling them."


fortune--2020-07-18--Parts of the Internet are disrupted by outage at service provider

Will we see election chaos in Florida again with the Supreme Court ’ s felon law ruling ?

Cloudflare suffered an outage on Friday, disrupting some parts of the internet. The company said it identified the problem and a fix is in place.
Cloudflare provides important services for the internet to function, such as load balancing, security, domain registration and video streaming. When the company experiences technical snafus, that can reverberate across the web.
“This afternoon we saw an outage across some parts of our network. It was not as a result of an attack,” the company said in a blog post. “A fix has been implemented and we are monitoring the results.”
The problems affected 12 data centers in the U.S. and Europe, according to Cloudflare. Several online businesses, including digital storefront operator Shopify Inc., reported disruptions.
The outage even impacted Downdetector.com, a service that is supposed to report problems with sites across the web.
“What turned out to be an issue at Cloudflare took down a large number of websites and online services,” Downdetector owner Ookla said in a blog post. “Downdetector was also briefly impacted by Cloudfare’s outage, during which time users in the U.S. and Europe were unable to reach the site.”


fortune--2020-07-17--Will we see election chaos in Florida again with the Supreme Court’s felon law ruling?

Parts of the Internet are disrupted by outage at service provider

This is the web version of raceAhead, Fortune’s twice weekly newsletter on race and culture. Sign up to get it delivered free to your inbox.
SCOTUS scuttles the hopes of Florida voters. As newsrooms reckon with race, publishing houses make strides, TIAA’s Roger Ferguson wants you to get on with it, already. Are the Black women in your workplace paying an emotional tax? (Spoiler: yes.)
But first, here’s your Cole Porter inspired in review in Haiku.
This story is much
too sad to be told: Wonder
why all the news leaves
me totally cold?
Maybe it’s ‘cause of this case —
On a quiet street,
fighting vainly for
PPE, I suddenly
turn and see……and see…
Your “fabulous” face.
I get no kick from the shame
you don’t feel when you
put folks at risk, as
if you don’t have a clue. Yes,
I’d kick you out, too.
Hope you get a kick out of your weekend. We just think you’re the top! You’re the Coliseum, even.
Ellen McGirt
@ellmcgirt
Ellen.McGirt@fortune.com
On point
SCOTUS upholds a Florida law that bars formerly incarcerated people from voting The issue is unpaid fines associated with their convictions; the Supreme Court decision will allow the state to uphold the law, which will likely be in effect for the November election. "This Court's order prevents thousands of otherwise eligible voters from participating in Florida's primary election simply because they are poor," Justice Sonia Sotomayor wrote in the dissent. The situation is compounded by the problematic state of Florida’s records. “The scheme might function properly if Florida could identify residents with unpaid court charges and calculate how much they owe,” reports Slate. “But the state cannot do any of that, because it does not know who owes courts money or how much they owe.” In most cases, the records do not exist.
CNN
Advice on diverse corporate leadership from one of the four Black Fortune 500 CEOs That's right, just four out of 500. Roger Ferguson has headed up the No. 81 ranked financial services provider Teachers Insurance and Annuity Association of America, or TIAA, since 2008. His advice for other CEOs looking to create diverse teams? "Frankly, get on with it," he tells Fortune correspondent Susie Gharib. "Be very, very intentional about it... There's more and more data that shows that diverse boards, diverse teams, lead to better outcomes. So as a CEO, you ought to say, 'This is not just the morally nice thing to do, or right thing to do. It's a smart, savvy thing to do as well.'" He adds that strong pillars of diversity, inclusion, and equity will not only lead to better outcomes for employees, but shareholders and customers, too.
Fortune
Newsrooms and the reckoning on race What does the future of reporting look like if newsrooms actually diversify? Black journalists and other journalists of color have been candid on social media, sharing stories of what it’s like to work in a majority white industry that has the power to shape global narratives. On his outstanding podcast, Sam Sanders catches up with The Undefeated's Soraya Nadia McDonald, Futuro Media president and founder and Latino USA host Maria Hinojosa, and NPR public editor Kelly McBride to help chart a better future. “The credibility crisis that [journalism has], I think, actually bears a lot of similarities to our current voter disenfranchisement problem,” says McDonald. “There needs to be a baseline of literacy, when it comes to how we talk about race within America, how it operates within American history, and how that informs our present and what role news media has played in that.”
NPR
Lisa Lucas is having a moment The now former executive director of the National Book Foundation is joining Knopf, to become publisher of Pantheon and Schocken Books. Her job, she says, is the whole world. “To really be as open-minded as possible about who might want to connect with any given book,” she says. One of her last great acts? Joining forces with the Academy of American Poets (AAP) and the Community of Literary Magazines and Presses (CLMP), in establishing a new Literary Arts Emergency Fund, which will provide $3.5 million to literary arts organizations, devastated by COVID-19-related disinvestment. The fund is made possible by a grant from The Andrew W. Mellon Foundation. But Lucas’s ascension is a clear sign that the publishing world is (finally) changing.
New York Times
What’s an emotional tax? Women of color pay an additional price at work, explains Catalyst, a nonprofit that advances progress for women in the workplace. Black, Latinx, and Asian women are often on guard against bias, a form of “emotional tax” that can impact their health and productivity. RaceAhead has covered the research behind this phenomenon in depth, but this helpful short video can nudge anyone who may need a little inclusive leadership coaching. It seemed worth the reminder, particularly now.
Catalyst
On background
The power of white rage A rare moment of thanks to the YouTube algorithm who served up what I needed today, in the form of this passionate and brilliant lecture delivered by my new cousin, Carol Anderson, the Charles Howard Candler Professor and Chair of African American Studies at Emory University. The occasion was the 2018 John F. Morgan Sr. Distinguished Faculty Lecture, and she showed up ready. Funny, kind, and utterly engaging, she weaves a tale that explains the kindling that made Ferguson burn, by touching on Jim Crow, Brown v. Board of education and so much more. “I began to think about the way that white rage worked,” she says. It’s not visible violence, it’s subtle, corrosive, and operates through legislatures, the judiciary and school boards. Charting white rage from the Civil War to the present, she discovered and explains what triggers white rage, every time. She drops it at the 14 minute mark, but do yourself a favor and watch the whole thing. Really.
John F. Morgan Sr. Distinguished Faculty Lecture, 2018
On being Korean all alone This is a gorgeous essay, filled with detail and cultural nuance that is both specific and familiar. Michelle Zauner begins by explaining the unique pain of being of Korean descent in America without your lifeline. “When I was growing up, with a Caucasian father and a Korean mother, my mom was my access point for our Korean heritage,” she explains, a complex and lifelong lesson that played out mostly around food. Which is why H Mart, a supermarket chain offering Asian fare, has now become the emotional epicenter of her identity. “I can hardly speak Korean, but in H Mart I feel like I’m fluent,” she says. Without giving too much away, this story will make your eyes water with hunger and grief and love.
New Yorker
Remembering the Red Summer Hundreds of black children, women, and men were murdered during the long, hot summer of 1919, set upon by white mobs in small towns and large cities, lynched, shot, burned alive, hanged, beaten. Homes and businesses were razed or seized. And yet, history barely remembers the event. “The people who were the icons of the civil rights movement were raised by the people who survived Red Summer,” said history professor Saje Mathieu. Experts say that social forces – like the Great Migration and returning World War I veterans in search of equal rights spurred the violence. “Ethnic cleansing was the goal of the white rioters,” says William Tuttle, an author and retired professor. ″They wanted to kill as many black people as possible and to terrorize the rest until they were willing to leave and live someplace else.”
AP News
The Harlem Renaissance in photos Starting in the 1930s, Harlem became the epicenter of a cultural revolution, as artists, writers, poets and musicians flocked to the NYC neighborhood in search of opportunity. The Addison Gallery of American Art staged an exhibit celebrating the phenomenon, beautifully chronicled in this short video from PBS. Stephanie Sparling Williams, the exhibit’s curator, is also featured. “The art was important then in creating a new visual lexicon for African Americans against histories of dehumanizing and degrading stereotypes and imagery in the American popular imagination,” she says. The photos are inherently inspiring, she suggests. “I see vibrance. I see a people who have been through so much and were given so little and have made this out of it, this miraculous — this place.”
PBS
raceAhead is edited by Aric Jenkins.
Today's mood board
If you want to get invited to all the best parties, be an artist, like Andy W.
Image courtesy of Jessica Helfand