Elizabeth Warren and The Middle Class Squeeze

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Real Estate Agent with RE/MAX Destiny Real Estate Cambridge, MA

Elizabeth Warren of Harvard Law School is one of my favorite writers and analysts.  She's a specialist in bankruptcy law, author of several books, and currently chair of the committee overseeing the economic stabilization act.  Catch her this evening on Rachel Maddow's show on MSNBC - it's on twice tonight.  She's absolutely great to listen to and has a very interesting take on the financial burdens facing most of America's families.  

In the book she wrote with her daughter, The Two-Income Trap: Why Middle Class Mothers and Fathers Are Going Broke, Warren writes about the increasing economic fragility of American families who need two incomes to survive and whose economic situation is twice as fragile since the loss of either income could tip the balance. She also writes and often speaks of how the middle class is being squeezed in large part because of the high cost of housing in neighborhoods with good schools.   

Some days I've felt like I'm on the Elizabeth Warren house tour. In towns known for their schools we see small houses in need of repair on busy streets.  Then we get to a town and for the same price we'll see lovely larger houses.  What's the difference?  Almost always it's the reputations of the schools in each town.   

What are parents to do?  They can adjust their expectations regarding the quality of the house they will buy. Or perhaps they can get very involved in the schools that their kids will attend and work with the community to improve them. Some will choose homeschooling, others private school.  Clearly there are no easy answers.

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Rainmaker
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Bob Foster
Century 21 Lanthorn R. E. Ltd. Belleville, Ontario - Belleville, ON

Hi Elizabeth,

As a former educator with a 38 year career, I would strongly advocate your second choice. Parents can make a huge difference in the quality of their children's education and there are a lot of schools in disadvantaged neighbourhoods that have become the cream of the crop.

Apart from that, I need to point out that the latest stats I have show that for every 6 houses built in a new subdivision, the schools can expect to get 1 student, and that parents with kids at home are only a small fraction of our ratepayers in most areas (about 30% or less). I guess some neighbourhoods needed to have me move in since I have been Dad or step-dad to 7 kids : )

Anyway, concern about schools only affects a small portion of our buyers. There should be opportunites in the situation you have described for buyers without children at home.

Feb 05, 2009 09:10 PM #1
Rainmaker
341,559
Elizabeth Bolton
RE/MAX Destiny Real Estate Cambridge, MA - Cambridge, MA
Cambridge MA Realtor

Hi Bob, Much of our market sounds similar to yours - and I'm part of that since I have no kids - just a cat.  We have plenty of DINKs (double-income, no kids), and singles of all ages in the area.  And Cambridge is very much the type of school system you're talking about - an urban school system with plenty of very involved parents. Still, once you get out of the city there's no denying that well regarded schools and high real estate prices seem to go hand in hand.  Thanks for your insights.

Liz

Feb 05, 2009 09:16 PM #2
Rainmaker
653,023
Bob & Carolin Benjamin
Benjamin Realty LLC - Gold Canyon, AZ
East Phoenix Arizona Homes

No easy answers at all ---- it is important to families to get into neighborhoods with good schools.

Feb 05, 2009 11:03 PM #3
Rainmaker
175,396
Leander McClain
North East, MD
Cecil & Harford County Realtor

Elizabeth,

This is a tough one.  However, there is hope. The example I continue to point to is General Colin Powell.  He was educated in the NYC school system by a single mother.  It goes to show you that a child who is destined to succeed WILL succeed in any school system

Have a great day

Make This YOUR Best Year Ever

Leander

Feb 06, 2009 07:21 AM #4
Rainer
131,969
Jon Wnoroski
America's 1st Choice RH Realty Co., Inc. - Green, OH
Summit County Realtor

Hi Elizabeth - Thank you for your article.  There are several families (young ones) in my development who need two incomes in order to maintain their standard of living.  In this economy they are truly at risk.  Should they lose one of those incomes because one member of the family gets caught up in a layoff or job loss they will find themselves in a terrible problem. 

Feb 06, 2009 08:41 AM #5
Anonymous
Anonymous

Out here it's just the high cost of housing, period, good schools or bad schools. I'm watching Rachel Maddow right now.

Feb 06, 2009 08:28 PM #6
Rainmaker
341,559
Elizabeth Bolton
RE/MAX Destiny Real Estate Cambridge, MA - Cambridge, MA
Cambridge MA Realtor

Bob and Carolin - "no easy answers" sure sums it up. 

Hi Leander. Absolutely - there are kids who rise above all sorts of challenges. I love reading about them - and I think you either have that resiliency in you to begin with or you're fortunate enough to meet some great people along the way who are able to bring out the best in you.

Thanks Jon. What you describe is exactly what Warren writes and speaks about.  My theory is that the full-scale entrance of women into the work force helped keep the middle class afloat from about the 1970s on, followed (again - my personal theory!!) in the late 1990s (not quite sure of my dates here) and after by the home equity loan and other increased credit.  Now they've pullled the plug and a lot of people are teetering on the edge.

Hi Russel - Absolutely.  I'm always sort of relieved that other parts of the country have high prices too - we're not way out at the edge all by ourselves here.

Feb 09, 2009 08:47 PM #7
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Elizabeth Bolton

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