When I first moved to Calgary to work in the oil and gas industry in early 2006, it was right around the top of the property boom, and affordable housing was next to impossible to find.  Not wanting to shell out half my salary for an apartment, and spending months to fill it up with furniture, I decided to go the room rental route.

Little did we know at the time, but towards the end of 2006, the market was slowly but surely moving from sellers’ to one that favoured buyers.  Ones in the know, i.e. people with family members that dabbled in real estate, already sold in late 2005 or early 2006. But the media and the rest of us general public have always been slow to catch on.  And you wouldn’t know, from the construction buzz around the city, to the countless “For Help” signs hanging haplessly outside shop windows, to stories of McDonald’s and Starbucks paying upward of $14 an hour plus benefits to attract and retain employees.

My second landlord, a sweet spinster in her 60s, believed in the power of real estate as much as she believed in the miracle that is modern medicine.  She credited her various real estate investments for her comfortable lifestyle, despite not having worked out of her home for more than decade.  Her piece of advice to any young-uns that cross her path, is the adage that we should all invest in real estate sooner rather than later.  I can’t blame her or others her generation  for their spectacular confidence in the strength of the housing market.  Their experience of ever-rising property prices facilitated that expectation.  It certainly looked good at the time, with housing prices that doubled within a few years.  Houses that were hardly 1,000 square feet would go for 400,000 to 500,000 dollars in certain parts of the city.  The gains were ludicrous.  And the whole town was drunk on the sudden discovery that, thanks to oil sands in their back yards, a lot of them were paper millionaires!

In early 2007, cracks were already apparent.  One of my bosses bought a yet-to-be-built house on a new lot on a fixed price, while trying to sell her existing dwelling.  Within the span of a couple of months between when her house was valued, and when it went on the market, the price had already dropped by 10,000.  That’s the problem with houses.  You have to live in one. So unless one can capitalize on the gains immediately, and move elsewhere, one only ends up upgrading to an even more over-valued house.  Luckily, the housing boom in Canada, even western Canada, still paled in comparison to what went on in California, the UK, and Spain.  Even the sharpest decline was contained within teen digits.  But for the people that bought into the perpetual rise of property value, is the current market decline a temporary setback, or something that will linger indefinitely?

Jon Carney at Clusterstock seems to favour the latter theory.  From a demographic perspective, this certainly makes sense.

1. Baby-boomers in the US and Europe more or less carried the property markets for the last few decades.  Their continuous demand for housing, whether they be condos, starter-homes, or suburban mansions, drove the market.  As this population ages and trade down, we might se an increase in demand of condos, retirement homes or assisted living complexes, but a drop in market demands for larger homes.

2. Those of us who belong to Gen X or Gen Ys are just not large enough of cohorts to fill the shoes.  There’s the issue of massive student debts, due to the boom and the increasing necessity of acquiring a college education.  Then there’s the shortage of Gen X to move into excess dwellings available on the market.  According to Carney, “only 44 million people were born into Generation X. There are currently 19 million empty homes in the US. That means that if Gen X pairs up through marriages, cohabitation or roommating, they can live in the empty homes without ever buying a new one.”

3. There is compelling evidence that once a bubble bursts, it hardly ever reflates.  The Tulip bubble never came back again, nor did the tech bubble.  So unless the property market can demonstrates and rationalizes rising valuation, it will not climb back to the mid-2000 level.  The public and the media will probably move on to some other new asset class.

4. Inflation or deflation, the property market doesn’t stand a chance.  Should inflation take place from the massive printing job various governments around the world participate in, it can potentially eat up gains made in real estate.  Should deflation becomes the reality, then according to Charles Hugh Smith, “debt grows ever more burdensome as money becomes more valuable and wages and income drop. As a result, assets dependent on debt ( that is, real estate) drop in value. In deflation, real estate become a “capital trap” which loses value as cash gains in value. As incomes plummet, so do rents, i.e. the income stream which real estate earns, further impairing its value.”

5. Low interest lending is gone.  Interest rates will climb higher again, particularly in the US.  The artificial low interest rates can only last as long as the rest of the world had the cash and desire to lend it.  And the spectacular failure that came out of the Democrats’ goodwill to support low-income home ownership will have people questioning the wisdom of policies that justified low interest rates, perhaps even interest deductibility on mortgages that fanned speculation and unaffordable mortgages.  As a side note, Canada does not allow interest deduction, yet home ownership is higher than in the US.  Just saying.

picture source: semideus

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A couple of days ago, a fellow blogger commented on this rather unfortunate Fortune article on his blog.  It is interesting for several reasons.

First, the ideas are cookie-cutter and stale.  Us Gen Yers had been told (to a certain extent) that we were on the cusp of a great demographic shift, where baby boomers’ impending departure would wreak havoc on corporate health.  True, some of us were led to believe that our contribution would be valued at a premium, which would in turn translate into lots of choices and result in us hopping through the corporate environment at break-neck speed.  In reality? Highly unlikely.  The smart ones among us always knew that good jobs are competitive, and supply almost always outstrip demand, especially at the bottom rung. But the media kept up the propaganda – to what end, I don’t know.  Every once in a while, articles like this appear.

Second, the timing is totally off.  Because of economic realities, many boomers simply can’t afford to retire.  More and more Gen Yers find themselves in a much more competitive environment than they were led to believe.  Now everybody is learning to make do with less and to compromise.  Exactly who is out pandering to those misunderstood geniuses, I’m not sure.

The somewhat hilarious prescriptions thrown around by the Fortune writer, and the kick my blogger friend got out of it, reminds me of a book I heard about recently.  In this book, the authors address the various social and consumerist constructions of the Gen Y generation.  I took some notes, here’s a broad overview of the ideas.

School: the obsession with feeling good at all cost

According to the book, the ME culture evolved over several decades, but found its decisive start within the school system.  The baby boomer generation struck out, rejected authority and tried to find its own path.  In their children, they instituted and obsessed over instilling self-esteem.  Subsequently, various forms of formal, or informal self-esteem programs were introduced in school.  They generally aim to make children feel good about themselves at all times and at all cost, with messages like: you are special, you are unique, you are fine just the way you are.

This relentless focus on the self led to some friction as children of those baby-boomers moved through the school system.  In one instance, red pen were deemed too harsh a colour to mark mistakes, so lavender was used instead.  Participation trophies in sports were introduced.

Over time, various institutions have had to deal with this cohort and adjust to its various demands.  In universities, some professors are now faced with complaints when handing out marks: some children and their parents simply would not accept bad ones. In this case, education is viewed as a business transaction, and entitlement rears its ugly head: students are customers of a product, and universities are there to provide it.  Therefore, they feel entitled to walk away with a degree, and a degree with hounours at that.

The road to hell is often paved with good intentions.  Child psychologists now recognize that instead of instilling self-confidence and self-esteem in children, this generational focus on feeling good has created quite the problematic outcome.  The languages and tools used throughout the school system has created an environment where competition is eliminated or downplayed, criticisms are removed when deemed too harsh, children are protected from failures, and as a rule, any kind of output – meaningful or not, is lavished with praise.  In hindsight, this created us: a generation hooked on constant validation and affirmation, perhaps with an unrealistic sense of our own strengths and shortcomings.

The extent to whether the above analysis is in fact accurate, is questionable.  The teachers and lecturers I encountered during my school years were for the most part, fair, constructive, and honest.  But I have noticed the emergence in a brand of bland, neutral and non-critical teachers into the classroom. With various changes taking place in the education system, and more teachers seeing themselves not as teachers but facilitators, what can we expect from the next generation?

The market feeds the beast: unique, customized, and controlled by you

Marketing shifted its focus when it comes to psychological selling.  In the past, the advertising world used to sell based on aspirations.   The marketing message then was: you are not good enough unless you buy our products.  Since nobody will ever be “good enough”, one is left to buy in perpetuity.

That message lost its lustre a while ago.  The message that sells now is something quite different.  Marketers tap into our sense of entailment , our vanity, our need to feel good, and our need for “self-expression” and self-validation through the idea of: you are important, you are unique, you are great the way you are. Now all you need is a product that we have to express your uniqueness.

If we think of some of the most successful products and services to emerge in the past decade, what comes to mind? Facebook, Youtube, IPod, Starbucks.  What do they have in common?  They all capture our need to exert and broadcast our presence, our importance, and our uniqueness to the world.

The trend that pander to the idea of self-expression and self-importance developed when the current Gen Yers were still in their tweens – the term has only been in existence for under two decades.  It was back then marketers first tasted the success of marketing to kids that had their own brand of shampoo.  Since then, that market had been segmented and targeted as one that has the power to make or break products.  I know a little about that.  I still remember the Tomagochi craze and the hand I had played in that hype with my baby alien.

Since then, our generation had not been without this constant bombardment of “uniqueness” marketing.  Marketers are also astute to introduce a sense of “control” back to the consumers: you know better than us, so tell us how and what you want.  Starbucks sells to that – customized coffee experience; burger and sandwich places want to sell you “your” burger or sandwich; cultish spiritual books sell on that – The Secret is to conform the world to your divine force; new condos targeting young urban yuppies – customize your living space by checking a few boxes.

Of course, the true irony of the situation is: the more we buy into the message of customization, the more we are essentially the same.  No matter what colour of IPod we choose, how obscure our coffee order is, or what kind of boxes we tick off when it comes to picking our condo tile or flooring colours, we are buying into the same message of uniqueness.

Arguably one of the most consistently powerful and seductive marketing pitch of our time is one that centres around the idea of: you deserve it.  The L’Oreal commercial and Oprah alike appeal to their audiences this way.  There’s nothing wrong with leading the best life that we can have.  But after years of the same self-congratulatory refrain, we have internalized the idea that luxury is for the masses and not only the rich.  In doing so, we have become accustomed to living the life we want, or “deserve”, rather than the life we can afford.  That sense of entitlement has us hooked on swiping those credit cards.  In one way or another, those self-affirmation and feel-good principles seeded during our school years, carefully nurtured by teachers, parents and marketers alike, came to fruition.

Now, the workplace

The problem gets a little more interesting when my generation enters the workforce.  The old guards are not used to tell us how valuable we are, or hold our hands for constant validation or feedback, or have the patience to listen to our unidirectional broadcast.

All the arguments given above is predicated on the idea that we are indeed a cohort, and this kind of attitude is prevalent in our generation.  In many cases, family influences can trump socialization.  Even so, I have to say that whether I like it or not, my generation probably embodies more Me-ness than generations past.  Whether these are attributable to our age and brashness, or some wider social forces, I cannot be certain.

But the ego-massaging activities the marketing community readily offers is beginning to seem more cynical than clever to me.  If they are indeed fostering a generation that is both insecure and vain, unable to cope with failure and assess ourselves critically and realistically, then perhaps we are better off without them.