The house my parents owned when I was born recently sold for $4000 [1]. I'm not omitting a zero or two. That's about the price of a used 2001 Honda Civic with 150,000 miles -- maybe the Honda is worth a bit more. My parents sold the house for $12,000 (three zeros) in the '70s. Times have been tough for as long as I can remember my hometown of Jamestown (about 60 miles from Buffalo), NY, but I still found this surprising. This is especially astonishing if your are faced with increasing rent and real estate prices in metropolitan areas like NYC, Seattle, and San Francisco.
Jamestown was a furniture and tool manufacturing hub and is still dotted with the buildings which sheltered the industry of a turn-of-the-20th-century boom town. The brick, labor, and craftsmanship that went into creating them have kept them standing in the face of decades of neglect. When our ancestors put their roots down in the Great Lakes they planned to stay and had no reason to believe anything other
than economic prosperity lie in their future.
But manufacturing has all but abandoned the area leaving the skeleton of the past in its wake. I watched this progression play out throughout my childhood and from a distance as an adult. Now in middle age, I realize how my perspective has been shaped by this trend. I believed downside risk to be real and often underestimated upside potential. When your childhood home sells for $4000 it is hard to explain to your parents that you are spending $375,000 on a fixer-upper or imagine a web site being worth over $1 billion.
I saw a talk by Chris Sacca (who grew up in Buffalo and lives across Lake Tahoe in Truckee) a couple years ago. He was discussing selling a company for what Michael Arrington called bullshit money and said something to the effect of, "$600,000 is a lot of money to my parents back in Buffalo." $600,000 is a lot of money to many people (myself included), but it can be an even more unfathomable amount when living through perpetual economic decline.
While the west coast has seen it's booms and busts the trajectory in anyone's lifetime has been up. In the time I've lived in Tahoe entire cities have risen up from the empty pastures of the Central Valley. When you are from California it is hard not to believe the future will be more prosperous then today. Life has benefited those who have taken risks and acted sooner than later. I don't think it is a coincidence that Silicon Valley grew around Stanford and not Carnegie Mellon. The population of California has a perception of growth, while the Rust Belt has a perception of decline. This must effect the collective psyche to point where taking risk becomes less socially acceptable. Taking entrepreneurial or financial risk when you are gainfully employed is less tolerated when many
people around you (and in fact entire industries) are struggling to get by.
When I left Upstate NY, I realized the economic situation wasn't as bad everywhere as it was in my hometown, but what I didn't appreciate was the extreme case I experienced. Along with Detroit, Western New York has some of the lowest property values in the country. At the other extreme are the $25 million properties a few miles from my current home in Lake Tahoe. Much of life happens in the middle of the bell curve, but my perception was skewed toward the left tail.
While it is easier to take risks when you are young and have nothing to lose, it is also hard to start from nothing at 40. Maybe wisdom is the ability to not focus on the extremes, but to prepare for the more likely outcome of landing in the middle. Sometimes houses depreciate from $12,000 to $4000 and sometimes they appreciate from $250,000 to $10million, but most often it is somewhere in between.
[1] For those who know the area, this in on Price St. off of Prendergast.