WEBVTT - 56: Actually, You Probably Can't Make It in New York 0:00:00.080 --> 0:00:02.480 And he goes to his parents showing how it's a 0:00:02.520 --> 0:00:04.960 great investment and if they'll only give him, you know, 0:00:05.000 --> 0:00:07.720 three hundred and fifty thousand dollars, it will be a 0:00:07.720 --> 0:00:09.920 great investment. Blah blah blah. The apartment is about one 0:00:09.920 --> 0:00:13.240 point two million dollars. And the kicker, of course, is 0:00:13.280 --> 0:00:22.760 that the apartment is five hundred square feet. Hi, and 0:00:22.800 --> 0:00:25.880 welcome back to Bloomberg Benchmark let show about the global economy. 0:00:26.000 --> 0:00:28.680 It is Thursday, September twenty nine, and I'm Keith Smith, 0:00:28.920 --> 0:00:31.120 editor for Bloomberg News here in New York. I am 0:00:31.200 --> 0:00:34.560 joined today by my co host, Dan Moss, Executive editor 0:00:34.640 --> 0:00:37.400 for Economics, Hi Kate. Today we're going to be talking 0:00:37.440 --> 0:00:41.440 about home price inequality. Now, it's no surprise that in 0:00:41.520 --> 0:00:44.400 some metro areas of the United States, like New York 0:00:44.760 --> 0:00:49.199 and San Francisco, home prices are incredibly expensive. What you 0:00:49.320 --> 0:00:53.120 might not know is that the growth of house values 0:00:53.280 --> 0:00:58.840 in those areas has significantly, and we mean significantly, outpaced 0:00:58.920 --> 0:01:01.440 other parts of the country. It's true over the past 0:01:01.480 --> 0:01:05.080 thirty years, apparently, prices in the twenty most expensive markets 0:01:05.319 --> 0:01:08.399 have risen much faster and much much faster. Like Dan 0:01:08.480 --> 0:01:12.120 was saying in prices in the twenty least expensive markets, 0:01:12.160 --> 0:01:14.720 according to a truly A report that was written by 0:01:14.840 --> 0:01:18.200 Ralph McLaughlin. For those of you who don't know, Trulya 0:01:18.319 --> 0:01:22.440 is an online aggregator of real estate listings across the US. Now, Dan, 0:01:22.720 --> 0:01:25.840 what I found really really interesting about this report is 0:01:25.840 --> 0:01:28.120 that it confirmed this theory that I've had about New York, 0:01:28.360 --> 0:01:31.080 specifically Manhattan for a while. In New York is so 0:01:31.280 --> 0:01:34.280 unique to me in that it's a city of successful 0:01:34.319 --> 0:01:37.480 wealthy people, but not just that those people had to 0:01:37.520 --> 0:01:40.800 have been raised by successful wealthy people, and that I 0:01:40.840 --> 0:01:44.000 think makes it really unique and completely cut off to 0:01:44.120 --> 0:01:46.679 people who, let's face it, just didn't grow up with 0:01:46.720 --> 0:01:51.400 financial stability. It's another take on this term inequality, which 0:01:51.440 --> 0:01:54.320 seems to be everywhere at the moment. But before we 0:01:54.360 --> 0:01:57.240 get to New York and spoiler a look, we're going 0:01:57.280 --> 0:02:01.080 to talk about your apartment as well. Before we get 0:02:01.120 --> 0:02:03.040 to New York and where he can still make it here, 0:02:03.080 --> 0:02:05.840 let's focus first on the country as a whole to 0:02:05.960 --> 0:02:09.120 talk about housing inequality. We have Robert Shiller on the 0:02:09.120 --> 0:02:12.800 line joining us from New Haven, Connecticut. Robert's really the 0:02:12.840 --> 0:02:15.840 gold standard when it comes to home prices. He's the 0:02:15.960 --> 0:02:19.760 name behind the Case Shiller Index, the authority on housing 0:02:19.800 --> 0:02:22.880 prices in America. He's a Nobel laureate, the second we've 0:02:22.880 --> 0:02:26.280 had on the show, and currently Sterling Economic Professor at 0:02:26.400 --> 0:02:31.440 Yale University. He probably even owns a house. Robert, thanks 0:02:31.480 --> 0:02:35.080 so much for joining us. My pleasure, Bob. So I 0:02:35.080 --> 0:02:37.240 want to get your thoughts on this trilier report. Do 0:02:37.280 --> 0:02:40.200 you buy the idea that the most expensive areas in 0:02:40.200 --> 0:02:43.119 the US are growing much much faster than the least 0:02:43.160 --> 0:02:47.320 expensive that that seems to have an element of truth 0:02:47.360 --> 0:02:49.640 to it. You have to specify the time and of 0:02:49.639 --> 0:02:54.079 all that. I'm thinking. For example, San Francisco is among 0:02:54.120 --> 0:02:58.560 the most expensive cities, and it has been growing lately, 0:02:59.200 --> 0:03:01.160 but it's slowed down on a little bit in our 0:03:01.280 --> 0:03:06.200 latest numbers. It's a complicated picture, of course. Historically the 0:03:06.240 --> 0:03:10.680 most expensive places must have grown faster than others at 0:03:10.720 --> 0:03:14.760 some point in history. But it's a complicated story. You know. 0:03:14.800 --> 0:03:19.680 It's expensive places don't necessarily grow fast. I think maybe 0:03:19.720 --> 0:03:23.320 it is happening now, but I'd have to carefully study 0:03:23.360 --> 0:03:27.680 how accurate that statement is, and with a one year 0:03:27.840 --> 0:03:30.960 time interval, So the truly report was actually looking at 0:03:31.000 --> 0:03:33.960 a thirty year time horizon, and they were looking at 0:03:34.040 --> 0:03:38.160 areas specifically like San Jose and San Francisco into the 0:03:38.200 --> 0:03:40.480 Bay Area of course, and then New York and a 0:03:40.480 --> 0:03:43.360 couple others, and that it was that those had grown 0:03:43.360 --> 0:03:47.160 at such an exponentially larger, larger pace, faster pace. I 0:03:47.160 --> 0:03:50.720 should say, Oh, you're talking Silicon Valley. Yes, I can 0:03:50.800 --> 0:03:55.120 certainly believe that because there was a technological revolution in 0:03:55.160 --> 0:03:58.360 the last thirty years and they're the center for that. 0:03:58.800 --> 0:04:01.160 So I certainly believe that. And how about the New 0:04:01.240 --> 0:04:04.560 York question, Well, New York is an expensive city, but 0:04:05.000 --> 0:04:08.920 lately it hasn't been growing, not over thirty years. I 0:04:08.960 --> 0:04:11.720 think it has grown substantially, but not as much as 0:04:11.760 --> 0:04:18.560 people might think. New York has emerged as the financial 0:04:18.640 --> 0:04:24.440 center that it is, uh since uh the early nineteenth century, 0:04:24.680 --> 0:04:27.480 so it's had two hundred years. So you know, you 0:04:27.600 --> 0:04:30.120 figure out what's the excess return on New York real 0:04:30.200 --> 0:04:33.680 estate over two centuries, it's going to be something like 0:04:33.720 --> 0:04:36.919 one percent a year. Nothing to get that excited about. 0:04:37.279 --> 0:04:41.880 So people often make that mistake in judging differences between cities. Well, 0:04:42.000 --> 0:04:45.000 talk about the long view. How do you account for 0:04:45.040 --> 0:04:50.880 this difference between perception and what your dater is indicating. Well, 0:04:50.920 --> 0:04:54.479 I think people are fascinated by the housing market and 0:04:54.839 --> 0:04:58.720 they love to tell stories, but that doesn't mean they 0:04:58.720 --> 0:05:02.960 ever look at data and do calculations. The cities that 0:05:03.000 --> 0:05:08.679 have achieved high levels are not surprisingly glamorous cities, cities 0:05:08.720 --> 0:05:13.080 that celebrities live in, and the stories about those cities 0:05:13.120 --> 0:05:18.720 feel people's imagination. It's not surprising. We're human, most of 0:05:18.800 --> 0:05:22.479 us aren't financial analysts. So in terms of real estate, 0:05:22.800 --> 0:05:26.960 are these cities even part of the United States national economy? 0:05:27.080 --> 0:05:29.960 Are they really part of an economy that is comprised 0:05:30.000 --> 0:05:35.560 of sy Singapore, Dubai and neighborhoods in London? Well, uh, 0:05:35.640 --> 0:05:38.960 the problem with real estate, it's a very diverse thing. 0:05:40.160 --> 0:05:43.479 There's always a story practically for all of these. When 0:05:43.480 --> 0:05:47.560 you say London, London has more stories written about it 0:05:47.560 --> 0:05:51.359 than just about any other any other city, and it 0:05:51.440 --> 0:05:56.680 has been a world financial center of great distinction. So 0:05:57.080 --> 0:06:02.799 it seems plausible to investors from wherever, China, India, Russia, 0:06:02.880 --> 0:06:06.400 wherever they're coming from, that's the place to put money. 0:06:06.440 --> 0:06:11.320 And it's also London has a reputation for political stability, 0:06:11.440 --> 0:06:16.559 and lack of usurpations. So all those things come together 0:06:16.600 --> 0:06:19.640 to a story for London. I'm not surprised that there's 0:06:19.680 --> 0:06:24.040 a vulnerability to bubbles in London real estate. Let me 0:06:24.120 --> 0:06:26.159 jump in here and bring it back to the US 0:06:26.240 --> 0:06:28.479 for just a second and kind of trying to tie 0:06:28.520 --> 0:06:31.680 this together with income growth, I mean, in in your 0:06:31.720 --> 0:06:34.359 own research and the way you've seen kind of the 0:06:34.360 --> 0:06:37.279 way prices have evolved over the past thirty years. Is 0:06:37.320 --> 0:06:40.640 there a strong correlation between income growth in a particular 0:06:41.200 --> 0:06:44.240 area and the home prices or do they tend to 0:06:44.279 --> 0:06:51.039 be decoupled. We find a correlation and forecasting we've found 0:06:51.160 --> 0:06:56.320 especially useful employment growth that means more people coming into 0:06:56.320 --> 0:06:59.600 the city, and you can find a fairly good correlation 0:06:59.680 --> 0:07:05.120 between in home price increases across cities and employment growth. 0:07:05.240 --> 0:07:09.160 So here's what happens. Some industry starts expanding in a city, 0:07:09.400 --> 0:07:12.440 They start hiring and bring people in. There aren't enough 0:07:12.440 --> 0:07:16.160 houses for all these people, so they start bidding against 0:07:16.160 --> 0:07:19.080 the residents, and you know, some of the residents will 0:07:19.200 --> 0:07:23.240 end up if they're lower income, they can't win the bid, 0:07:23.320 --> 0:07:25.480 so they end up moving in with their parents or 0:07:25.520 --> 0:07:29.720 something like that. But that stimulates the construction industry, and 0:07:29.760 --> 0:07:35.760 the construction industry then increases the supply, and eventually prices 0:07:36.280 --> 0:07:39.080 tend to come back down or at least slow their appreciation. 0:07:39.600 --> 0:07:42.440 So that's a typical cycle of cities there. Their growth 0:07:42.520 --> 0:07:46.240 is irregular through time, and you see bursts of home 0:07:46.280 --> 0:07:50.480 price increases that will later very likely be reversed. Now fault. 0:07:50.560 --> 0:07:53.360 That line about people moving in with their parents is 0:07:53.400 --> 0:07:56.360 a good one. There's been a lot said and written 0:07:57.240 --> 0:08:00.920 about that. Lightly Kite is a MILLENNIAU all herself and 0:08:01.000 --> 0:08:04.560 has an interesting personal story, and Bob, i'd like you 0:08:04.600 --> 0:08:07.160 to comment on whether you think that is part of 0:08:07.160 --> 0:08:09.240 what's going on right now. And before I get into 0:08:09.280 --> 0:08:11.560 my personal story, I'd like to get some numbers, because 0:08:11.560 --> 0:08:15.320 it's not just me. Right. One in three adult children 0:08:15.520 --> 0:08:18.240 in the US they receive monetary support of some kind 0:08:18.280 --> 0:08:20.600 of their parents. And that's not just on the other 0:08:20.760 --> 0:08:23.280 end of the spectrum of you know, the millennial sleeping 0:08:23.280 --> 0:08:26.680 on their parents couch. It's the millennial receiving you know, 0:08:26.880 --> 0:08:29.200 a rent subsidy from mom and dad so that they 0:08:29.200 --> 0:08:32.120 can live in Manhattan and pursue their dream of whatever. 0:08:32.720 --> 0:08:35.280 So one thing that I find interesting living in New 0:08:35.360 --> 0:08:37.560 York is that there are very very few people I 0:08:37.640 --> 0:08:41.320 know that have not received some kind of parental subsidy 0:08:41.360 --> 0:08:44.920 along the way to get here. Me personally, I was 0:08:44.960 --> 0:08:47.600 only able to move into my first apartment because my 0:08:47.679 --> 0:08:51.360 parents were willing to co sign my lease and to 0:08:51.800 --> 0:08:55.520 give our listeners a little peek into what the glamorous 0:08:55.840 --> 0:08:59.000 life is like in New York. This was a maybe 0:08:59.160 --> 0:09:03.040 three hundred fifty square foot studio if I'm being generous, 0:09:03.600 --> 0:09:08.640 in Hell's Kitchen for sixteen fifteen a month, and what 0:09:08.760 --> 0:09:12.800 that required was excellent credit and I'm talking like seven fifty. 0:09:13.080 --> 0:09:16.920 My income had to be forty times the monthly rent, 0:09:17.120 --> 0:09:20.560 and the guarant tour had to be eighty. So the 0:09:20.600 --> 0:09:22.480 only way I could have moved into that apartment was 0:09:22.600 --> 0:09:24.800 with my parents co signing at least, And I thought 0:09:24.840 --> 0:09:27.559 that was fascinating. When I spoke to my friends, I 0:09:27.600 --> 0:09:30.360 was actually receiving some of the least amount of support 0:09:30.440 --> 0:09:32.440 some of them were getting, you know, I mean, I 0:09:32.480 --> 0:09:36.480 have one friend whose mom pays for half her rent. Like, so, Robert, 0:09:36.520 --> 0:09:39.600 can you tell me about how is the parental subsidy 0:09:40.040 --> 0:09:44.200 issue impacting rents in places like Manhattan? It's interesting you 0:09:44.240 --> 0:09:47.920 mentioned that my own son is not getting He has 0:09:47.920 --> 0:09:52.640 an apartment in the New York near Manhattan. Um, maybe 0:09:52.679 --> 0:09:56.040 he didn't go to Manhattan. Maybe it's cheaper a little 0:09:56.040 --> 0:10:00.320 bit further out, but I think that yeah. I mean, 0:10:00.440 --> 0:10:04.000 it's it's natural that this would happen because people have 0:10:04.040 --> 0:10:08.240 an instinct to promote their own children. And I think 0:10:08.280 --> 0:10:11.160 it's probably since time and memorial, right, they were doing 0:10:11.160 --> 0:10:14.760 that in ancient Rome too. Our bet now, just to 0:10:14.880 --> 0:10:17.720 bring it back to this issue of inequality, and Bob, 0:10:17.800 --> 0:10:20.320 you know this better than anyone. It's a term that 0:10:20.360 --> 0:10:25.000 has a lot of buzz right now. Picketty didn't specifically 0:10:25.120 --> 0:10:29.600 discuss millennials and Manhattan real estate in his book, but 0:10:30.240 --> 0:10:35.599 to the general idea of inequality, is this a manifestation 0:10:36.240 --> 0:10:40.439 of inequality? Wealthy parents beget kids getting a foothold in 0:10:40.480 --> 0:10:43.680 a major city, which begets the opportunity to work for 0:10:43.760 --> 0:10:51.719 fantastic companies like Bloomberg. Is this fueling this inequality zeitgeist? Well, 0:10:51.760 --> 0:10:55.120 I think that it's it's stronger than it was in 0:10:55.160 --> 0:11:00.720 the past. That it's the millennial generation that I'm not 0:11:00.760 --> 0:11:03.800 an expert on this, but my impression is they weren't 0:11:03.800 --> 0:11:07.360 asked to do any household chores when they were children. 0:11:08.559 --> 0:11:14.720 Used to be you did, But most parents today are 0:11:14.720 --> 0:11:19.040 are preoccupied on getting their kids an advantage, So you 0:11:19.040 --> 0:11:21.160 don't want them to do Most people don't want them 0:11:21.160 --> 0:11:23.560 to do a household chores because that takes away from 0:11:23.600 --> 0:11:26.600 their studying and they've got to get into a good 0:11:26.880 --> 0:11:30.160 high school or a good college and a good job 0:11:30.240 --> 0:11:35.440 after that. And parents, Uh, I think that's the sitegeist 0:11:35.640 --> 0:11:40.439 right now, and so renting them an apartment in New 0:11:40.520 --> 0:11:44.560 York sounds perfectly believable for for now, and I'm bet 0:11:44.640 --> 0:11:47.160 it's much stronger than it was fifty or a hundred 0:11:47.240 --> 0:11:50.520 years ago. Is that a good thing for economic mobility 0:11:50.559 --> 0:11:54.959 in the country? Well, I think, Uh, what's the alternative? 0:11:55.160 --> 0:12:00.520 Carl Marks okay, and with angles in eight wrote the 0:12:00.559 --> 0:12:03.920 communists they didn't want to know about, but they want 0:12:03.920 --> 0:12:08.719 to abolish the family. It didn't happen. I think this 0:12:09.280 --> 0:12:12.320 shows that they were stronger on rhetoric than rhetoric than 0:12:12.360 --> 0:12:17.320 they were on observing reality. Uh, there's a parental instinct 0:12:17.520 --> 0:12:20.720 to want your children to do well. And once we 0:12:20.760 --> 0:12:25.000 get past the marginal living, what do parents want to 0:12:25.000 --> 0:12:27.800 do with their income is to help promote their children. 0:12:28.000 --> 0:12:31.920 But of course the idea of parental support is is 0:12:31.960 --> 0:12:34.600 certainly nothing new, obviously, But I think what I find 0:12:34.640 --> 0:12:38.160 interesting is and it's universal, but it's not universal that 0:12:38.240 --> 0:12:42.160 parents can afford that, right, So like only a certain 0:12:42.280 --> 0:12:46.079 kind of parent and a certain kind of person can 0:12:46.440 --> 0:12:49.120 is able to afford to spend that kind of money 0:12:49.120 --> 0:12:50.880 on their kids. So I think I think that's what 0:12:50.920 --> 0:12:54.000 we're talking about a little bit about the economic mobility question, 0:12:54.000 --> 0:12:57.720 because it's not universal that everyone can move to New 0:12:57.760 --> 0:12:59.679 York and have half their rent paid for by mom 0:12:59.679 --> 0:13:03.400 and dad, right, right. And it's getting as you know, 0:13:04.000 --> 0:13:09.959 Thomas Picquety showed that it's getting worse. I think it's 0:13:11.080 --> 0:13:14.319 getting to the point where if you are in what 0:13:14.360 --> 0:13:18.400 he calls the Tope one, there's almost no way to 0:13:18.440 --> 0:13:21.960 spend the money on yourself. That's why you've ended up 0:13:22.040 --> 0:13:25.960 lavishing it on your children, and that we would hope 0:13:25.960 --> 0:13:30.200 they would do more on philanthropy, but somehow the children 0:13:30.360 --> 0:13:33.800 get favored. What you described would certainly pick true in 0:13:33.840 --> 0:13:36.800 some parts of the United States, but in others. I'm 0:13:36.800 --> 0:13:39.679 thinking about New York City. To live the life that 0:13:39.800 --> 0:13:42.480 you've described, you need a bit more than that wouldn't you. 0:13:43.080 --> 0:13:46.000 I haven't done the calculations you think going out to 0:13:46.040 --> 0:13:48.520 eat and going to show. I mean this figorite. We 0:13:48.559 --> 0:13:52.480 can try to figure it out. But in all seriousness though, 0:13:52.480 --> 0:13:55.720 I mean, there's been a lot said and written about 0:13:56.000 --> 0:13:59.640 income disparity in various parts of the country. New York 0:13:59.640 --> 0:14:02.640 Times had a big piece on this last Sunday, and 0:14:02.720 --> 0:14:06.360 the extent to which this might be entrenched. The phenomenon 0:14:06.480 --> 0:14:10.720 that we're talking about in say New York City or 0:14:10.960 --> 0:14:16.240 San Francisco, has measured over the past thirty years. Again, 0:14:16.320 --> 0:14:19.920 just to press you on this, it is fueling this 0:14:20.200 --> 0:14:26.960 sense of inequality and political and economic discomfort. I think 0:14:26.960 --> 0:14:31.560 that it's the trouble of our times, and it's reflected 0:14:31.600 --> 0:14:38.760 in the election campaign recent election campaign. I think if 0:14:38.760 --> 0:14:41.400 you read Toma Picat, I'm trying to pronounce it right. 0:14:41.480 --> 0:14:47.480 He's French, okay. Uh. The A lot of what's in 0:14:47.600 --> 0:14:51.160 his book is a discussion of the literature at the 0:14:51.400 --> 0:14:55.160 at different times in history, notably the so called Gilded Age, 0:14:55.760 --> 0:15:02.040 around when inequality was especially add and he argued that 0:15:02.120 --> 0:15:05.880 it affects their their whole sense of life and living 0:15:05.960 --> 0:15:09.360 and even romance. You know, a lot of novels of 0:15:09.480 --> 0:15:14.240 that time would talk about marrying into wealth because that 0:15:14.440 --> 0:15:18.520 was perceived as the only way you could arrive inequality 0:15:18.520 --> 0:15:23.120 being so high. Now, Kate, you have some more stories, 0:15:23.600 --> 0:15:26.240 some of which might surprise our listeners, but they may 0:15:26.280 --> 0:15:32.160 not surprise Bob. It's beyond parents um being sort of 0:15:32.200 --> 0:15:35.440 hassled by their children to contribute to a down payment, 0:15:35.720 --> 0:15:38.640 and it's beyond rental subsidies, and it's beyond your own 0:15:38.680 --> 0:15:44.160 experience of least guaranteurs. You know, people who are doing 0:15:44.280 --> 0:15:49.760 spreadsheet presentations for their parents about liquidity and rates of 0:15:49.840 --> 0:15:52.000 returning if only they can help them with the down 0:15:52.080 --> 0:15:55.000 payment exactly. And I think that's I mean, it almost 0:15:55.040 --> 0:15:58.800 seems like a parody. It is. I mean, are you 0:15:59.680 --> 0:16:04.080 saying that they're optimistic about housing as an investment. Yes. Absolutely. 0:16:04.160 --> 0:16:07.000 I was talking to a friend last night, and I 0:16:07.000 --> 0:16:10.680 should mention that he he owns an apartment on the 0:16:11.600 --> 0:16:14.480 Midtown East. He doesn't actually live in it, though, and 0:16:14.520 --> 0:16:18.360 he was talking about how he views New York real estate, 0:16:18.440 --> 0:16:20.520 and he is not American. He views New York real 0:16:20.640 --> 0:16:24.280 estate as the ultimate investment that he could possibly make 0:16:24.320 --> 0:16:27.880 with his money, because it is to him always growing 0:16:27.880 --> 0:16:30.160 you're never gonna you're hardly ever going to experience a 0:16:30.240 --> 0:16:32.600 loss in New York City real estate. And then it's 0:16:32.640 --> 0:16:35.080 liquid and more. Look what I should say, then, let's 0:16:35.080 --> 0:16:37.160 say a hedge funder private equity. So if he wants 0:16:37.200 --> 0:16:41.200 to park a million dollars, what better way to do 0:16:41.240 --> 0:16:43.680 it than Manhattan real estate to him? So it's not 0:16:43.800 --> 0:16:46.280 like dad kind of borrowed the car. He sits his 0:16:46.400 --> 0:16:51.160 parents down and does a spreadsheet presentation based on rights 0:16:51.160 --> 0:16:53.240 of return as a wife of persuading his parents to 0:16:53.320 --> 0:16:55.600 cough up a down payment. Bob, you're gonna love this. 0:16:55.640 --> 0:16:58.560 So the guy who bought that apartment, he was able 0:16:58.600 --> 0:17:00.320 to afford it on his own, but I know another 0:17:00.400 --> 0:17:03.520 person who I mean, I guess he didn't really afford it. 0:17:03.560 --> 0:17:05.680 But anyway, so he wants to buy an apartment in 0:17:05.680 --> 0:17:07.960 the West Village. And for our listeners who aren't in 0:17:08.040 --> 0:17:10.679 New York, West Village is I think one of the 0:17:10.760 --> 0:17:14.280 most expensive neighborhoods in Manhattan. It's beautiful, it's you know, 0:17:14.400 --> 0:17:16.600 tree lined. When you think of New York, this is 0:17:16.600 --> 0:17:19.359 the neighborhood you're thinking of. Probably, So anyway, so he 0:17:19.400 --> 0:17:23.119 wants to buy an apartment in in that neighborhood, and 0:17:23.160 --> 0:17:25.919 he goes to his parents and he comes up with 0:17:26.040 --> 0:17:29.720 a power point presentation showing how it's a great investment 0:17:29.800 --> 0:17:31.920 and if they'll only give him, you know, three hundred 0:17:31.960 --> 0:17:34.840 and fifty thou dollars, it'll be you know, they'll make 0:17:34.840 --> 0:17:37.400 their money back. It'll be a great investment. Blah blah blah. 0:17:37.400 --> 0:17:40.840 The apartment is about one point two million dollars, and 0:17:40.880 --> 0:17:43.520 they agree, and it's just this investment that they view. 0:17:43.720 --> 0:17:45.600 And the kicker, of course, is that the apartment is 0:17:45.600 --> 0:17:49.160 five hundred square feet. And I think that was kind 0:17:49.160 --> 0:17:50.560 of like what Dan and I are talking to. Is 0:17:50.560 --> 0:17:56.120 there just I mean, how many families have the liquidity 0:17:56.160 --> 0:17:59.040 and the cash that they can just look at a 0:17:59.160 --> 0:18:01.600 presentation say okay, yeah, that makes sense for me to 0:18:01.600 --> 0:18:05.560 give to my kid. I just have to imagine that 0:18:05.560 --> 0:18:09.880 that's not a universal phenomenon. It can't be. No, it's 0:18:09.920 --> 0:18:13.920 not you're talking about. But that's who New York is now. 0:18:14.160 --> 0:18:19.760 But this feels like it's of it does, and I 0:18:19.800 --> 0:18:22.960 think making it more universal, that's to me what it 0:18:23.640 --> 0:18:26.520 New York has become. Because that's the only way you 0:18:26.560 --> 0:18:29.440 can buy a home in New York. By the way, 0:18:29.840 --> 0:18:35.240 our numbers for New York metro area show a one 0:18:35.320 --> 0:18:39.120 point seven increase in home prices over the last year. 0:18:39.680 --> 0:18:42.159 Now is that New York, Brooklyn, all the borrows or 0:18:42.200 --> 0:18:45.359 is that just Manhattan. Well, in fact, that is the 0:18:45.520 --> 0:18:50.320 emphasizing in Manhattan really because we're talking about I don't 0:18:50.400 --> 0:18:55.600 think we represent the co ops. Well, maybe it's not 0:18:55.840 --> 0:18:58.480 the only number that you could look at. I think 0:18:58.720 --> 0:19:01.400 New York, you know, the tens to go through periods 0:19:01.400 --> 0:19:05.000 of strength and weakness, and New York was weakened by 0:19:05.000 --> 0:19:09.119 the financial it being a financial center. Of course, London 0:19:09.200 --> 0:19:12.040 is still going up. And I can't really explain all 0:19:12.080 --> 0:19:15.920 these things. But I'm wondering what the spreadsheet that this 0:19:16.200 --> 0:19:19.879 person showed and what the time horizon was. But I 0:19:19.960 --> 0:19:25.119 have a spreadsheet showing US home price, not Manhattan, US 0:19:25.200 --> 0:19:29.560 home prices back to eight and it shows that between 0:19:29.640 --> 0:19:34.440 eighteen ninety and nine, home prices in the US did 0:19:34.440 --> 0:19:39.119 a little better than increase with inflation. But there's often 0:19:39.160 --> 0:19:43.080 been an idea that it's done well. It seems to 0:19:43.119 --> 0:19:46.560 be apocryphal, but it does. Of course. I mean, of 0:19:46.600 --> 0:19:51.639 course New York has become an expensive city, and that 0:19:51.800 --> 0:19:55.399 happened over a long time, and it gave people, you know, 0:19:55.480 --> 0:19:58.840 one or two percent a year return on capital gains. 0:19:59.520 --> 0:20:01.679 I find it a little strange that people are so 0:20:01.800 --> 0:20:06.160 excited about it at various times, but that's human nature, 0:20:06.240 --> 0:20:10.720 I suppose, so, Bob, again taking the long view, and 0:20:11.000 --> 0:20:14.160 you're very good at this, looking at these cycles over 0:20:14.200 --> 0:20:18.120 the past hundred hundred fifty years, seeing what you see now, 0:20:18.680 --> 0:20:22.840 discussing what we're discussing now in the big picture. How 0:20:22.920 --> 0:20:26.280 does this end for our economy? Well, I hope there 0:20:26.359 --> 0:20:32.320 isn't an end for our economy. Um, the bubble and 0:20:32.400 --> 0:20:34.600 burst that we saw that peaked in two thousand and 0:20:34.680 --> 0:20:39.399 six was a huge historical anomaly. We've never seen anything 0:20:39.480 --> 0:20:44.840 that dramatic. There was the the bubble in Florida in 0:20:44.680 --> 0:20:50.280 the mid nineties, but that was more isolated. So I 0:20:50.320 --> 0:20:55.480 don't know what to make of of these Uh why 0:20:55.520 --> 0:21:00.960 are we likely to have that happen again? I don't maybe, 0:21:01.840 --> 0:21:04.960 but right now it's not really happening. It's not that 0:21:05.080 --> 0:21:09.359 dramatic on a broad scale. Maybe in certain places. Robert, 0:21:09.440 --> 0:21:11.959 this has been a fascinating conversation. Thank you so much 0:21:12.000 --> 0:21:17.080 for joining us. We've enjoined it immensely. Benchmark Will be 0:21:17.119 --> 0:21:19.320 back next week, and until then, you can find us 0:21:19.359 --> 0:21:22.239 on the Bloomberg Terminal and on Bloomberg dot com, as 0:21:22.240 --> 0:21:25.560 well as on iTunes, podcast, and Stitcher. While you're there, 0:21:25.880 --> 0:21:27.719 take a minute to rate and review the show so 0:21:27.760 --> 0:21:30.040 that more listeners can find us and do let us 0:21:30.040 --> 0:21:32.040 know what you thought of the show. You can talk 0:21:32.080 --> 0:21:34.800 to and follow us on Twitter at at Daniel Moss 0:21:34.880 --> 0:21:37.880 d C and at by Kate Smith, and you can 0:21:37.920 --> 0:21:40.119 follow our guest as well. Robert can be found on 0:21:40.160 --> 0:21:44.800 Twitter at at Robert J. Schiller. We'll have to get 0:21:44.840 --> 0:21:47.760 your spreadsheet friend and here. I don't think he's going 0:21:47.800 --> 0:21:50.800 to want to come in here after the show. See 0:21:50.800 --> 0:21:51.359 you next week.