CHAPTER 12: family structures and economics

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CHAPTER 12: family structures

and economicsLearning ObjectivesThe importance of family structures and other relationship dynamics are critically important to the real estate profession and other financial and economic interests. Over the past 40+ years, the number of children born per household has fallen substantially. Additionally, marriage rates have fallen over the past several decades, both nationally and within the state of California. Readers of this chapter will learn the direct and indirect ways these ever-changing demographics are impacting investments and the real estate profession overall.

chapter 12: family structures and economics

322 323L U M B L E A U R E A L E S T A T E S C H O O L

“Money is only a tool. It will take you wherever you wish, but it will

not replace you as the driver.”Ayn Rand


key terms

Family Historical Trends in the U�S�The cost of living was much cheaper and affordable for U.S. families in the middle part of the 20th century as compared with recent years. One of the primary causes of family dysfunction and break-ups is directly related to money worries. The rapidly increasing costs associated with medical bills over the past few decades are the #1 cause of personal bankruptcies, both within California and nationally.

Inflation destroys the value of money over time. It is akin to a hidden form of taxation and can be positive or negative to the prices of goods, services, or assets, depending upon whether one is a buyer, seller, owner, lessor, lessee, or some other party directly involved. Real estate values have actually snowballed and escalated in price well above the national historical inflation rate percentages.

The well-known phrase “Keeping up with the Joneses” has been used for several decades to describe the desire of American households and families to try to buy as many nice products or assets like their neighbors including new televisions, computers, smart devices, furniture, backyard pools, cars, boats, and even homes. In many ways, this term is used in a pejorative or belittling way against the family.

The “Keeping up with the Joneses” tag may have been more appropriate and applicable back in the booming 1950s era as newfound wealth creation continued at a rapid pace right

Balancing Equation

Consensual Union

Fertility

Financialization

Growth Rate

Marital Fertility Rate

Morbidity

Net Migration

No-fault divorce

Remarriage Rate

Replacement-Level

Fertility

Reproductive Age

Sex Ratio

Short Sale

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along with the size of the middle class. Since the start of the new millennium in 2000, more Americans are just trying to cover their weekly or monthly bills as opposed to trying to impress their neighbors.

Let’s take a look at the significant price differences related to living in 1950 in the United States:

m The average U.S. family income: $3,300

m The average automobile cost: $1,510

m The median home price: $7,354

Let’s go further back and take a look at how much it cost to live in the United States in 1938 near the end of the Great Depression. One would first think that Americans living back during the times of the Great Depression would have far less purchasing power than people living today in more recent years. Yet, the numbers listed below show otherwise.

(Source: Reddit)

Cost of Living: 1938

New House

Average Income

New Car

Average Rent

Tuition: Harvard University

Movie Ticket

Gasoline

US. Postage Stamp

$3,900.00

$1,731.00 per year

$860.00

$27.00 per month

$420.00 per year

.25¢ each

.10¢ per gallon

.3¢ each

Granulated Sugar

Vitamin D Milk

Ground Coffee

Bacon

Eggs

.59¢ for 10 pounds

.50¢ per gallon

.39¢ per pound

.32¢ per pound

.18¢ per dozen

Living

Food



A new home in 1938 was priced at about two times the annual average income at the time. A new car was only about one-third the cost of the annual average income for Americans. The middle class did not really begin to increase significantly in size in the United States until after the mid-1940s and early 1950s, so the vast majority of Americans were considered middle class or very wealthy during the end of the Great Depression era. Additionally, access to third-party credit was just at a fraction of levels back then as compared with the end of the 20th century.

Let’s now take a look at the comparison of the inflation-weighted costs for goods, services, and assets in 1938 and 2013.

Item Price (1938 – Dollars) Price (2013 - $$$) 2013 Price (Actual)

New Home $3,900 $64,597.83 $245,000

Average Income $1,731/yr. $28,671.50 $51,017

New Car $860.00 $14,244.65 $31,252

Average Rent $27 per month $447.22/mo. $821 / mo.

Harvard Tuition $420 per year $6,956.69/yr. $54,496/yr.

Movie Ticket $0.25 $4.14 $7.84

Gasoline $0.10 per gallon $1.66 $3.24

U.S. Stamp $0.03 $0.50 $0.46

(Sources: Bureau of Labor Statistics (BLS), Reddit, My Budget 360)

According to the numbers in the chart above, the best bargain in America back in 2013 was a postage stamp. Sadly, stamp prices continue to increase. Yet, they are still priced just below the inflation-weighted prices between 1938 and 2013.

The current price above that really stands out is the median price of a home at $245,000 in 2013. This number is almost four times the inflation-weighted number estimates for a home at just under $65,000.

The Financialization of Assets: Financialization is the incentivization, or encouragement, of the creation of more debt at much higher leverage levels. The financialization of assets was originally partly tied to the petrodollar (oil for dollars) system created by President Nixon and his advisors back in the early 1970s. The U.S. government had lots of incentive to drive oil prices up, directly or indirectly, since increasing oil prices boosted the need for more dollars worldwide.

The U.S. Treasury and the Federal Reserve worked closely to create more dollars “out of thin air” by way of our fiat-based currency system and fractional reserve lending system where banks leverage deposits a multitude of times in order to make more bank loans to their customers. Another way to describe the financialization of assets is to say “debt begets more debt.” Dollars are created as debt payable with interest by the Federal Reserve and then lent out to the U.S. Treasury. The more money that there is in circulation, the more debt there is as well.

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As debt increases, the purchasing power of the U.S. dollar decreases. Americans then scramble to buy inflation-hedged assets like real estate, stocks, or commodities in order to at least maintain the pace of annual inflation. Individuals, business entities, and governments around the world then start aggressively investing in income-producing assets at any price possible using the highest leverage available such as 97% to 100% LTV mortgage loans in hopes that the asset investments will increase in value at a much faster pace than inflation.

A prime example of the financialization of assets is quantitative easing (QE). As noted before, quantitative easing was the Federal Reserve’s strategy of creating money “out of thin air” prior to purchasing upwards of $85 billion dollars’ worth of asset such as stocks, bond, and mortgages in order to boost values. The Fed did an excellent job with boosting values for current asset owners, but made many of these same assets unaffordable for new buyers due to the rapidly skyrocketing prices as noted by the 10,000 to 11,000-point increase for the Dow Jones and the rapidly increasing real estate prices.



California Household Demographic TrendsIn the mid to late-20th century, families could live quite comfortably off of the income brought in by just one parent in the household. In the majority of the cases, it was the father who was working full-time outside of the home while the mother stayed home with the children. As the cost of living began to rapidly increase, especially at a much faster pace in California as compared with the rest of the nation, more mothers decided to get part-time or full-time jobs outside of the home while also helping to raise the children and manage the overall household.

The Income Gap Begins To Widen In California: Between 1969 and 1997, the inflation-adjusted wage income for male workers increased by 13% for those Californians in the top 90th percentile (or top 10% of income earners) of the income distribution chart while falling by almost 40% for those in the much lower 25th percentile (bottom 25% of income earners), according to data reported by the Public Policy Institute of California in February 1999.

Education Gap, Experience, and Income Inequality: A native born Californian with a bachelor’s degree from a college or university in 1969 took home almost 50% more income than a similarly skilled worker who only had a high school diploma. By 1997, a person with a bachelor’s degree earned nearly 70% more income than a similar worker who just had a high school diploma.

A native-born Californian worker with 25 years of experience back in 1969 earned 68% more income than another native-born worker with just five years of experience. By 1997, these numbers had increased to 91% more income for a senior, experienced worker as compared with a newer employee.

Lower Income Workers: Between 1969 and 1997, the mean weekly income amounts for native-born California workers with 15 years of work experience and no high school diploma fell by about one-third, falling from $750 per week down to $500 per week. Yet, the mean weekly wages for California native workers and a high school diploma remained fairly consistent at $1,200 per week between the same period of time between 1969 and 1997.

wwwPublic Policy Institute of California:

Lumbleau.com/PPI-CA-report

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California vs� National Household Income Histories Year U.S. California

2014 $53,657 $61,933

2013 $53,105 $61,175

2012 $52,970 $60,144

2011 $53,162 $60,304

2010 $54,343 $62,663

2009 $55,415 $65,026

2008 $57,211 $67,098

2007 $57,936 $68,450

2006 $56,892 $66,513

2005 $56,058 $65,013(Source: Department of Numbers)

U�S� Census Bureau – Quick Facts on California (2014 Household Numbers)

m Population (2014) – 38,802,500

m Persons under 5 years – 6.5%

m Persons under 18 years – 23.6%

m Persons 65 and older – 12.9%

m Female persons – 50.3%

m White, living alone – 73.2%

m Black or African American, living alone – 6.5%

m American Indian and Alaska Native, living alone – 1.7%

m Asian, living alone – 14.4%

m Native Hawaiian and Pacific Islander, living alone – 0.5%

m Two or more races – 3.7%

m Hispanic or Latino – 38.6%

m Living in same residence over one year – 84.2%

m Foreign born persons – 27.0%

m Language other than English spoken at home – 43.7%

m High school graduate or higher (25 years or older) – 81.2%

m Bachelor’s degree or higher (25 years or older) – 30.7%

m Veterans – 1,893,539

m Mean travel time to work in minutes (16 years or older) – 27.2



m Housing units – 13,900,766

m Homeownership rate – 55.3%

m Housing units in multiunit structures – 31.0%

m Median value of owner-occupied housing units (’09 – ’13) - $366,400

m Households (’09 – ’13) – 12,542,460

m Persons per household – 2.94

m Per capita money income in past 12 months - $29,527

m Median household income (’09 – ’13) - $61,094

m Persons below poverty level (’09 – ’13) – 15.9%

California Population Estimates and Future ProjectionsPer the Governor’s Budget Summary 2015 – 2016 for the state of California, here are some the most current reported demographic numbers as well as future projections and forecasts over the next several years.

Population Numbers: There were an estimated 38.5 million California residents as of mid-2014. The population numbers were expected to rise to 38.9 million by July 2015 and to 39.2 million by July 2016. These increases would be equivalent to short-term annual growth rates of 0.9% between 2015 and 2016.

The state’s Governor’s Office is forecasting that California will grow in size by 351,000 residents each year over the next five years (2015/2016 to 2020/2021). Fertility rates for California households have continued to decline, especially after the year 2007 when the financial and real estate markets began to weaken. Yet, the natural increase (births minus deaths) will account for the majority of this growth even over and above ongoing immigration relocation into the state.

In spite of the high numbers of people moving out of the state partly due to California having one of the highest costs of living for any U.S. region, the projected overall net migration (the difference between outflow and inflow of residents) is expected to remain positive.

California is on pace to reach 40 million residents near the end of 2018, per the Governor’s Office.

By July 2019, the state is expected to grow to 40.3 million residents. If these numbers hold up, this will be a five-year growth rate of 4.6%.

Race and Ethnic Distribution: After 2014, California became the very first large state and the third overall along with Hawaii and New Mexico without a white, non-Hispanic majority. The California Hispanic population is now the largest race or ethnic group with an estimated population of over 15 million residents. The three largest race or ethnic groups are:

1. Hispanic – Just over 15 million residents or 39% of the state.

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2. White, Non-Hispanic – Just under 15 million residents or 38% of the state.

3. Asians – There are an estimated 5 million Asian residents or upwards of 13% of the state.

Age Distribution: California has one of the most balanced age group distributions of any state today. The California age group trends continue to grow in positive ways for all age groups, except college age residents. The higher costs of living and expenses related to California colleges and universities is potentially one of the primary factors causing college age numbers to go negative.

Projected California Population Growth Rate by Age Group (2014 – 2019)Age Ranges Percentage Increases or Decreases

All Ages + 4.6%

Seniors (85 +) + 9.0%

Mature Retirees (75 – 84) + 17.9%

Young Retirees (65 – 74) + 25.0%

Working Age (25 – 64) + 4.0%

College Age (18 – 24) - 4�5% (Negative)

School Age (5 – 17) + 0.3%

Preschool Age (0-4) + 3.0%

(Source: California’s Governor’s Budget Summary 2015 – 2016)

Crisis Opportunities for Real Estate AgentsAs noted before, it has been alleged over the years that the origin of the word “crisis” is derived from two Chinese characters meaning both “danger” and “opportunity.” The financial stresses and dangers associated with economic periods of time when the economy is much weaker can be quite challenging for many people.

Yet, the opportunities during these same sluggish or down economic time periods can be seemingly unlimited if a person like a real estate agent focuses on their goals and targets

wwwCalifornia’s Governor’s Budget Summary 2015-2016:

Lumbleau.com/CA-governors-budget


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“Buy land, they’re not making it anymore.”

Mark Twain

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as opposed to the obstacles which may stand in their way. These opportunities for agents can include working on distressed foreclosure, divorce, or bankruptcy situations in which the agent can earn a nice commission while helping a grateful and very appreciative client at the same time.

Foreclosures and Short Sales: There are a number of opportunities for real estate agents in California as well as the rest of the nation to create marketing campaigns in order to find distressed homeowners in need of selling their home prior to losing it in a foreclosure situation. A high percentage of real estate agents in their careers have worked on at least one foreclosure or short sale situation. Many of these agents focus the bulk of their business on working on foreclosure or short sales with various lenders and mortgage loan service companies around the country.

The entire foreclosure process in the state of California that is not delayed or postponed for any number of reasons is technically just under four months (111 days) from after the filing of the notice of default (NOD) by the lender or mortgage loan servicing company. The notice of default can be filed after just a few missed mortgage payments. The NOD is then followed by a notice of trustee’s sale approximately 90 days later, which notifies the homeowner and the general public of the scheduled foreclosure auction date.

Lenders typically will advertise the scheduled trustee’s foreclosure auction (e.g., date, time, location, loan amounts, back interest, fees, penalties, legal fees, and trustee’s fees) one day per week for three consecutive weeks in local, small legal newspapers prior to an appointed neutral trustee holding the foreclosure auction.

Any investor who shows up with either cash or cash-like instruments can bid at any amount over the starting bid price. If no investor successfully wins the bid, the property will transfer back to the lending institution as an REO (real estate owned or bank-owned property). Some of the most successful agents in California and abroad have established relationships with many of these foreclosing financial institutions in order to get the listings for their REO property pools.

A significant number of small, mid-sized, and very large lending entities have hundreds or thousands of properties in their portfolios which they need to later sell to the general public individually or packaged together in pools of hundreds at a time to very wealthy institutions with “deep pockets” like investment firms on Wall Street, hedge funds, or crowdfunding platforms for real estate. Agents who learn the short sale (when lenders agree to take a payoff less than the existing mortgage loan balance) process with various lenders will find tremendous ongoing opportunities as well.


wwwSource: Find The Data.org

Lumbleau.com/resources/find-the-data


Divorce and Broken Households: The average minimum processing time for a divorce in the state of California is 360 days. In a contested divorce case with no attempt at mediation or settlement, a high number of divorce cases such as “high conflict divorce cases” can take several years or even decades to complete, especially when there are children and significant assets involved. It is quite common for many divorce cases in California to cost parties hundreds of thousands of dollars up to several million dollars.

Financial pressures are one of the main reasons why marriages break-up. Since 2007, there have literally been millions of non-performing residential mortgages just within the state of California alone. The foreclosure cycle and divorce cycle can intersect and parallel one another, sadly.

A large number of listings picked up by real estate agents in California and elsewhere have come from agents target marketing properties associated with divorcing households. Since much of this divorce information is of public record, if the parties are not willing to settle or mediate privately, there is a substantial amount of public data available to agents such as existing loan amounts, estimated values, and the divorce status. The most empathetic and compassionate agents who work closely with these families going through financial and relationship traumas can find very loyal and long-term clients.

Jobs, Wealth, and Agency OpportunitiesThe best opportunities for business owners, real estate investors, real estate agents, and others is directly associated with the strength of the local economy. The U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) released a detailed report which found that the top 20 metropolitan regions represented over 52% of the total GDP (Gross Domestic Product) in the United States. This same study noted that GDP for all metropolitan regions grew by 2.3% in 2014 and 1.9% back in 2013.

The New York City region provided almost 10% of the total GDP for the entire nation in 2014.

Let’s take a look below at the top 5 metropolitan regions and states, per the same BEA report.

GDP by Metropolitan Region (2014)Metro Region GPD Amount ($) Annual Growth % Increase

1. New Jersey-New York $1.5 Trillion + 2.4% (2014 vs. 2013)

2. Los Angeles $866 Billion + 2.3%

3. Chicago $610 Billion + 1.8%

4. Houston $525 Billion (not published)

5. Dallas $504 Billion (not published)

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GDP by State (2014)The top 5 GDP states nationally may have created approximately 40% of the overall GDP for the nation in 2014. Not surprisingly, California leads all other states nationally with GDP output.

California: $2.11 trillion dollars, 13% of overall U.S. GDP

Texas: $1.46 trillion dollars, 9.5% of overall U.S. GDP

New York: $1.28 trillion dollars, 8.4% of overall U.S. GDP

Florida: $769 billion dollars, 4.8% of overall U.S. GDP

Illinois: $680 billion dollars, 4.3% of overall U.S. GDP

Source: U.S. Dept. of Commerce’s Bureau of Economic Analysis http://www.bea.gov

Source: HowMuch.net and The U.S. Department of Commerce’s Bureau of Economic Analysis

Where is the Money?Break Down of America’s Economic Output

1. New York • Newark • Jersey City2. Los Angeles • Long Beach • Anaheim

3. Chicago • Naperville • Elgin4. Houston • The Woodlands • Sugar Land

5. Dallas • Fort Worth • Arlington

$1.56 Trillion$867 Billion$611 Billion$525 Billion$504 Billion

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How Broken Families Impact Real Estate The field of real estate is a “people business”, first and foremost. Family structures vary. Large families may need a 4-bedroom house to accommodate all of the family members. Other buyers may be that of a 100-person corporation in need of an entire floor on a high-rise office building. Most people work part or full-time jobs in order to support themselves as well as their family members who live with them, nearby, or in another state.

An impending or imminent divorce can be one of the most common reasons why a family will list a home and other investment properties for sale. In fact, a large number of real estate agents specialize in focusing on the potential listing of properties for sale after they see the divorce filing notices in public records. With increasing divorce percentage numbers and decreasing marriage and fertility rates, the real estate industry continues to change over the years right alongside the family structures.

The phrase “numbers don’t lie” is one favored by many economists and financial advisors when presenting their case either in favor or against a specific topic. With that phrase in mind, listed below are some eye-opening statistics about the ever-changing family structure as well as the health and well-being of Americans today:

m National overall divorce rate in America: 50%+.

m 41% of first marriages end in divorce.

m 60% of second marriages end in divorce.

m 73% of third marriages end in divorce.

m The average length of marriages that ends in divorce is 8 years.

m There is one divorce every 36 seconds on average; 2,400 divorces per day; 16,800 divorces per week; and 800,000 to 900,000 divorces each year.

m The percentage number of men between the ages of 20 and 39 who are now married has fallen by half (35% of men are married as of 2017) since the early 1970s when 70% of men were married.

m Unmarried parents who live together are likelier to split up than married parents, per the Brookings Institute.

m Per the CDC in 2016, U.S. fertility rates were the lowest ever recorded since fewer couples have children.

m 92.3 marriages for every 1,000 unmarried women in 1920; 31.1 marriages for every unmarried woman in 2012, according to the National Center for Family & Marriage Research at Bowling Green University.

m 78% of all households contained one married couple in 1950. Today, married households are near 48%.

m In 2010, the Pew Research Center reported that 44% of respondents polled in the 18 to 29 year old age range believed that “marriage was becoming obsolete.”

m The Pew Research Center in 2014 reported that the answer of “steady job” was the number one thing that women were looking for in a husband.

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m Divorce rates for people over the age of 50 have doubled between 1990 and 2015, according to Pew Research Center.

m The U.S. has the highest percentage rates for single person households in the world.

m In 1956, 5% of babies were born to unwed mothers. Between 2008 and 2016, the number of babies born to unwed mothers was nearly 40%.

m Upwards of 50% of children in impoverished regions live in homes without fathers.

m 46% of children live at home with a mother and father who were in their first marriage together.

m The average woman in 1970 had her first child at 21.4 years of age. Today, the woman is 25.6 years.

m As of 2014, there were 2.7 million American children with a parent in prison (92% were fathers), according to the National Fatherhood Initiative.

m Over 50% of all prisoners (male and female) today may have at least one child under the age of 18. 25% of the world’s entire prison population is based in the United States.

m The U.S. has the highest teen pregnancy rate in the industrialized world.

m In 2010, the average U.S. teen was taking 1.2 central nervous system drugs.

m Three times as many U.S. children take antidepressants than European children.

m 70% of Americans adults are classified as overweight or obese.

m 33% of American adult employees polled suffer from “chronic debilitating stress.”

m 50% of Millennials surveyed experience such severe stress that it keeps them awake many nights.

m According to the New York Times, 28 million Americans suffer from serious drinking problems while an estimated 22 million Americans use illegal drugs.

m More than 50% of children are born to single women under the age of 30.

m America has the #1 largest prison population in the world.

m A Swedish study found that a commute of 45 or more minutes each day increases divorce by 40%.

Divorce by Age Range and Gender:Age Women MenUnder 20 years 27.6% 11.7%20 to 24 years 36.6% 38.8%25 to 29 years 16.4% 22.3%30 to 34 years 8.5% 11.6%35 to 39 years 5.1% 6.5%* Sources above and below include Family and Court Disorder (all information reprinted with author’s permission), End of the American Dream.com, Boston Globe, American Public Health Association, Stars and Stripes, Business Insider, New York Times, NationMaster, Newsweek, The Atlantic, National Review, AllGov.com, and ABC News


Declining Marriage and Divorce NumbersThe “American Dream” of suburban homes with white picket fences, green lawns, and large backyards for the children to play in for families was fueled by the housing boom of the second half of the 20th century (1950-2000). This was especially true throughout parts of California as Americans flocked to the Golden State in search of their perceived idea of coastal suburban utopia as partly glorified by Disneyland and Hollywood located in the heart of Orange and Los Angeles Counties, respectively. The growth of suburbia also increased the construction of freeways, highways, bridges, streets, parks, schools, and other public places as well as increased the demand for automobiles such as station wagons, mini-vans, and larger 4-door sedans that could hold the typical four or five-person family.

As time moved forward in both California and the rest of the nation, the ideal suburban family structure began to rapidly decrease on a more regular basis. Divorce led to many families selling their beloved 2,500 square foot dream homes located on an 8,000-square foot lot prior to splitting up the family units into two smaller apartment or condominium units with somewhere between 700 and 1,500 square feet in each unit. The shortening amount of time that married or unmarried couples (with or without shared children) now spend together is one of the driving forces behind current housing trends. An example today might include a 300 or 400 square foot micro-apartment unit built in Huntington Beach, Irvine, or near the San Francisco region that was primarily designed for just one single tenant who may have been recently divorced or never married.

In the second half of the 20th century, it was quite common for men and women to marry one another by the age of 19 to 23 years of age. Shortly after marriage, many married couples would have children together. As these families grew larger, their demand for more living space increased as they moved from small apartments to larger single-family homes in suburban neighborhood regions that were surrounded by other young families, schools, parks, and playgrounds.

In the 21st century, the housing demand trend is reversing in many regions as once loving married couples are splitting up and divorcing each other while fighting over who gets the children for the next several years in family court. This is especially true in California as families move from single-family homes into separate smaller apartment, condominium, or townhome units. In many situations, the rental payments for the smaller units are the same or higher than the previous mortgage payments on their family’s home.

In 2011, the average age of marriage for men in the U.S. was 29.8 years of age and 26.9 years for women, per the Pew Research Center. Around the world, 80% of men and women have been married at least once by the age of 49, per Priceonomics.

The History of No-Fault DivorceThe practice of no-fault divorce in the 20th century made it much easier for married couples to dissolve their marriages without the requirement of showing any fault or wrongdoing on the other spouse, such as a romantic affair outside of marriage, serious gambling problems, or severe alcohol and drug addictions. The ease of which divorce cases could begin as a no-

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fault divorce case without having to hire private investigators to follow a cheating husband or wife around town so that the other spouse could have factual proof of the ongoing affair which caused the divorce.

California was the first state in the nation to offer no-fault divorce options. It was passed and signed into law by Governor Ronald Reagan in 1969. The basis for the new no-fault laws in California was partly tied to a non-governmental organization called the National Conference of Commissioners on Uniform States Laws. This group began drafting a no-fault model of legal statutes for various states to consider two years earlier in 1967. The earliest origins of no-fault divorce date back to 1917 in the Soviet Union, under the depths of their communistic regimes, where more power of the families and their assets were transferred to the state.

Highest Divorce Rates Worldwide1. Belgium - 71%

2. Portugal - 68%

3. Hungary - 67%

4. Czech Republic - 66%

5. Spain - 61%

6. Luxembourg - 60%

7. Estonia - 58%

8. Cuba - 56%

9. France - 55%

10. USA - 53%

Millennials’ Family DisillusionmentThe divorce rates in California for first-time marriages can be as high as 60%, per various estimates. As compared with the rest of the nation, few states have higher divorce rates or more costly and lengthy family court battles than the Golden State. More money today passes through the family court system across America than all other court systems combined. Since there is more individual wealth in California as compared with most other states, the legal battles can go on for many years or decades. Divorce is forcing many family members to liquidate their real estate assets and/or buy other types of real estate assets to house the one or more family members as a result of the newly designed family structure.

A major fallout or adverse reaction from these ongoing family law disputes and broken family situations is that younger generations of people are questioning whether or not to enter marriage themselves or even date another person for more than a few dates. Additionally, a high number of children in their 20’s, 30’s, 40’s, and even 50’s aren’t leaving their parent’s home where they may have lived for much of their lives. Some of the reasons why younger Americans aren’t moving out of their parent’s home after their graduation from high school, college, or graduate school is that they can’t afford to pay for an apartment by themselves and they have no desire to marry and start their own family.


The Digital Family Divide The digital world is both helping and hurting the real estate industry, especially for real estate agents. On the positive end of the digital and real estate agent discussion, agents and brokers can reach out to a much larger audience around California, the nation, and even the rest of the world. On the negative end of the digital and real estate field discussion, more buyer, seller, tenant, or landlord prospects can find their own people to buy, sell, or lease their properties without having to pay a real estate commission. Interestingly though, upwards of 95% of all buyer prospects first start researching properties on the internet before contacting a real estate agent to assist them. Yet, most of these buyer prospects eventually hire a licensed real estate agent partly after learning how complex it is to buy properties due to all of the paperwork involved.

Millions, if not billions, of people around the world are replacing their real families with virtual “families” by connecting with hundreds or thousands of people through social media. More people today communicate with friends and family by way of the digital world rather than the actual real world. In some cases, individuals can be on their smartphones, tablets, or desktop computers for upwards of 12 hours per day. This is another reason why disconnected people are choosing to either live at home with their parents or move to studio or one-bedroom apartments by themselves because they just need enough room for one person and all their digital gadgets to stay connected to the rest of the world.

How the Digital World is Shortening Connections The famous research study conducted by Microsoft a few times over the past 17 years that was briefly referenced earlier in this book concluded that Americans have about a seven (7) or eight (8) second attention spans. Microsoft studied both Canadians and Americans as far back as 2000 (the start of the new millennium or 21st century). Microsoft’s research team compared the attention spans of people in the year 2000 by conducting a survey of 2,000 participants as well as studying the brain activity of 112 other individuals by studying the details of their EEG (electroencephalograms) brain scans. In 2000, the research team found that the average attention span was 12 seconds while later they discovered that the newer respondents in 2015 had seven (7) or eight (8) second attention spans.

One of the main questions asked to people involved with the Microsoft attention span survey was as follows:

“When nothing is occupying my attention, the first thing I do is reach for my phone?”

18 to 24 ages: 77% vs.

Over 65 years of age: 10%Another research study conducted by the Daily Mail newspaper in the UK in 2014 found that

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the average married, or unmarried romantic relationship term, had fallen to just 2 years and 9 months in length. Some of the key findings from this study regarding how the use of digital gadgets had adversely affected relationships and housing situations included these points:

m 79% said that both partners had been actively using social media.

m 36% of respondents said that they had met their former partner online through social media, a dating site, or some other type of digital location.

m 54% thought that social media usage was one of the main reasons for the relationship break-up.

m 34% of polled respondents thought that their former partner has met someone new on social media or elsewhere in the digital world.

m 23% stated that they had rushed into the relationship too quickly because they believed that they knew each other fairly well from their profiles and posts seen on social media.

How the Digital World is Reducing Attachments Both younger and older Americans today are using their smartphones, tablets, desktop computers to find love, money by way of new jobs or investment opportunities related to real estate and stocks, and places to buy, sell, or lease. It can’t be minimized how people are affected today by their long-term use of digital gadgets that are shortening their attention spans, dividing families, friends, and/or business associates, and positively or negatively impacting people to search for new places to live as a result.

Some tenant or buyer prospects are more concerned with the quality of their Wi-Fi connections for their digital devices in places that they look at in person either by themselves or with their real estate agents than whether or not it has a nice view of the city, beach, or park nearby. If the bulk of their food comes to their door by a pizza delivery person or from some sort of a futuristic type of drone system promoted by companies such as Amazon and their affiliates like Whole Foods, then the need for a large kitchen for a single person living in a tiny micro-apartment near downtown Los Angeles or San Diego is not all that important to a person who doesn’t cook or entertain others very often.

With almost 100% of California’s population that hovers near 40 million people as of 2017, the residents of the state live on only 5% of the state’s land. So, there is plenty of room to expand development in the future if the city, county, and state planners would allow it. Due to the high cost of building permits and the push towards more high-density living with attached homes, condominiums, townhomes, and apartments, many of the latest residential and commercial projects will have access to the most powerful digital connections available for their buyers and tenants. As a result, agents will be wise to closely pay attention to the latest trends with digital technologies, high-density planning, shortening attention spans, and the primary motivations of their client prospects who might have come from divorced homes or recent relationship break-ups themselves.



Chapter Summary Families had much better purchasing power in the middle part of the 20th century as compared with the 21st century. For example, the average family income in the U.S. was $3,300 in 1950, the average new automobile cost was priced just above $1,500, and the median home was priced above $7,300.

The U.S. middle class was possibly much larger back in the 20th century as compared with the recent years in the 21st century. Since the U.S. dollar was much stronger back then on a comparative basis, the dollar could buy more goods, services, and assets. A new home in 1938 was priced just over two times the annual average income at the time. Additionally, a new car was priced at about one-third of the average annual income.

In 2015, a median priced California home is priced somewhere closer to eight times (800%) an entire household’s combined income while many new average priced cars are near 100% or more of just one person’s annual income.

The Financialization of assets is a way to increase the supply of new money with much higher leverage opportunities in order to attempt to boost asset prices such as stocks or real estate. Quantitative easing would be a prime example.

Hispanics in California became the majority as of 2014, per the U.S. Census Bureau. Per the same data, Hispanics represent just over 15 million of the state’s residents (39% of the population base). White, Non-Hispanics made up just under 15 million of the state’s residents (38%).

California was the #1 reported state for GDP (Gross Domestic Product) output with $2.11 trillion dollars back in 2014 (13% of the overall US economy). Texas, New York, Florida, and Illinois rounded out the top 5 states with the highest annual GDP numbers.

The practice of no-fault divorce in the 20th century made it much easier for married couples to dissolve their marriages without the requirement of showing any fault or wrongdoing on the other spouse, such as a romantic affair outside of marriage, serious gambling problems, or severe alcohol and drug addictions. The ease of which divorce cases could begin as a no-fault divorce case without having to hire private investigators to follow a cheating husband or wife around town so that the other spouse could have factual proof of the ongoing affair which caused the divorce.

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The practice of no-fault divorce in the 20th century made it much easier for married couples to dissolve their marriages without the requirement of showing any fault or wrongdoing on the other spouse, such as a romantic affair outside of marriage, serious gambling problems, or severe alcohol and drug addictions. The ease of which divorce cases could begin as a no-fault divorce case without having to hire private investigators to follow a cheating husband or wife around town so that the other spouse could have factual proof of the ongoing affair which caused the divorce�


GlossaryBalancing Equation: The balancing equation factors which can keep population trends fairly consistent include births, deaths, immigration, emigration, and in-migration and out-migration (movements within the same country).

Consensual Union: The living together by an unmarried couple for an extended period of time.

Fertility: The actual reproductive performance of an individual, married or unmarried couple, a group, or a population as it relates to bearing new children in a region.

Financialization: To create more debt or encourage the use of leverage to finance more assets.

Growth Rate: The number of new people added or subtracted from a region’s population trends due to factors such as birth and death rates as well as immigration and emigration.

Marital Fertility Rate: The number of live births to married women per 1,000 people within the ages of 15 – 49 in any given year.

Morbidity: The frequency of illness, disease, injuries, disabilities, and death within a specific household or population.

Net Migration: The difference between outflow and inflow of residents.

No-fault divorce: Dissolution of marriage without the requirement of showing any fault or wrong doing on the other spouse.

Remarriage Rate: The number of remarriages per 1,000 formerly married people in any given year.

Replacement-Level Fertility: The level of fertility rate at which a couple has enough children to replace themselves (or 2 children per household with 2 parents).

Reproductive Age: The typical childbearing years for girls or women between the ages of 15 and the low to high 40s.

Sex Ratio: The number of males per 100 females within a specific population at any given time.

Short Sale: When lenders agree to take a payoff less than the existing mortgage loan balance.

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chapter 12 quiz

1� What was the average family income in 1950? A. $3,300 B. $5,100 C. $6,250 D. $8,170

2� What was the approximate price of a new home near the end of the Great Depression in 1938? A. $8,000 B. $6,700 C. $5,300 D. $3,900

3� What was the median priced U�S� home in 2014? A. $135,000 B. $189,000 C. $245,000 D. $308,000

4� The financialization of assets can also be described as: A. Debt begets more debt B. Leveraging with more debt C. Price deflation D. Both A and B

5� What is the best example of financialization? A. Secondary market purchases B. Quantitative easing C. The conversion of assets into liquid cash D. Rate increases

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chapter 12 quiz

6� Which group represents the largest number of residents in California as of 2015? A. Hispanics B. Whites, Non-Hispanic C. FHA mortgage holders D. VA mortgage holders

7� Which population age range in California is projected to decline between the years 2014 and 2019? A. Over 65 B. 18 to 24 C. 35 to 42 D. 49 to 55

8� When is California expected to surpass 40 million residents, per the Governor’s Office? A. By the end of 2016 B. By the start of 2018 C. By the end of 2018 D. By the start of 2020

9� What is the average processing time for a divorce in California? A. 60 days B. 90 days C. 180 days D. 360 days

10� What was the approximate estimated Gross Domestic Product (GDP) output by California in 2014? A. $402 million B. $624 billion C. $1.2 trillion D. $2.11 trillion

CHAPTER 12: family structures and economics

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