From a small northwestern observatory…

Other than a few of the permanent pages (over on the right of your screen), I’ve let this blog die on the vine this year.   It’s actually been a surprisingly busy year, so busy that I’ve not had the time to write much!  My lack of intellectual output on this blog is mirrored in my other writings, and all of that needs to change.

Lynnda and I spent this past weekend at the Aspen Institute, which hosted one of the regional Renaissance Weekends.  I spoke on a couple of topics, most notably on real estate (of course).  I wanted to share with you a bit of what I had to say.

First, let me lay the groundwork.  Renaissance Weekend is now in it’s 35th year, and has held about 125 such gatherings.  It is a non-partisan, invitation-only gathering of thought leaders from a variety of fields (government, science, business, show business, astronauts, authors, Nobel Laureates, etc.).  All discussions are strictly off the record (although a speaker, like myself, is free to share what I personally said).  The first one was held at the home of Phil and Linda Lader.  At the time, he was the developer of Sea Pines Plantation on Hilton Head and went on to be the U.S. Ambassador to England during the Clinton Administration.  They wanted a gathering of families over the New Years weekend to talk about important issues of the day — the sort of informal chats we all used to have in college outside of the pure classroom setting.  Over the years, Renaissance has grown, and is now held in Charleston every new years.  The Charleston event draws 1,100 or so, and over the years, many of the participants wanted smaller, more intimate gatherings. Hence, Renaissance also meets on major holidays (July 4, Labor Day, President’s Day) in places like Napa Valley, Santa Monica, Jackson Hole, and Banff, British Columbia.  The Clintons were regulars at Renaissance back when he was Governor and President, and President and Mrs. Ford were also regulars.  All in all, about 20 presidential candidates, countless Senators, Representatives, Governors, and elected officials from every level and both parties have attended over the years.

Labor day was hosted by the Aspen Institute, which is a non-partisan forum for values-based leadership and the exchange of ideas.  It has earned a reputation for gathering diverse thought leaders, scholars, and members of the public to address some of the world’s most complex problems. It was founded in 1949 by Walter Paepcke, then the Chairman of Container Corporation of America.  His first gathering drew such luminaries as Albert Schweitzer, Jose Ortega y Gasset, Thornton Wilder, and Arthur Rubinstein, along with members of the international press and more than 2,000 other attendees. Through reading and discussing selections from the works of classic and modern writers, leaders better understand the human challenges facing the organizations and communities they serve. “The Executive Seminar was not intended to make a corporate treasurer a more skilled corporate treasurer,” said Paepcke, “but to help a leader gain access to his or her own humanity by becoming more self-aware, more self-correcting, and more self-fulfilling.”

One of my talks was about housing, and specifically addressing an accusatory issue being tossed around in political circles that “homeownership in America is at its lowest level in 50 years.”  Like so much in politics, that is technically true, but may not be a bad thing.  Home ownership in the U.S. hit record levels during the bubble — slightly over 69%.  Today, the homeownership rate is about 64%.  If you look back at periods when home ownership in America was stable and healthy, the ownership rate hovered around 64%.  Thus, from an ownership rate perspective, we may be at a very good level.

The bigger problem we have is home ownership equity.  For many years, the aggregate equity enjoyed by homeowners was about 60% of the aggregate value of the homes in America.  That means that on average an American homeowner had about 60% equity and about 40% debt.  From an equilibrium perspective, that appeared to be pretty good.  At the trough of the recession, roughly early 2008, that level got down to about 35%, which everyone would agree was a terrible number.   Today, we stand at about 55%.  By the way, this is a LOT of money — the aggregate value of all residences in America today is slightly over $20 TRILLION.  That means the aggregate equity in America is close to $11 TRILLION.  Getting from where we are to where we used to be means we need to create about another $1 Trillion in equity.

So yes, the housing market is still a bit in disequilibrium, but not from the decline in the home ownership rate, but rather from the decline in home equity.  The good news is that we’re headed in the right direction.  Recent projections from the National Association of Realtors suggest we may get back to “normal” in the 2018-ish period.

P.S. — Not everything at Renaissance is as boring as I’ve made it sound!  Lynnda and I had several great chats and dinner with Jay  Sandrich and his wife Linda.  He directed two-thirds of the episodes of the Mary Tyler Moore Show, the first three seasons of the Cosby Show, and many other iconic productions.  The behind-the-scenes tales were awesome!