Friday, July 9, 2010

The Country Club Recession

Two interesting stories today on the effects of the so-called "Great Recession" in both college spending and delinquent home mortgages. First, on college campuses.

College Spending on Recreation Outpaces Other Areas:

American colleges are spending a smaller share of their budgets on instruction, and more on recreational facilities for students and on administration, according to a new study of college costs.

The trend toward increased spending on nonacademic areas prevailed across the higher education spectrum, with public and private, elite and community colleges increasing expenditures more for student services than for instruction, the report said.

“This is the country-clubization of the American university,” said Richard Vedder, a professor at Ohio University who studies the economics of higher education. “A lot of it is for great athletic centers and spectacular student union buildings. In the zeal to get students, they are going after them on the basis of recreational amenities.”

On average, spending on instruction increased 22 percent over the decade at private research universities, about the same as tuition, but 36 percent for student services and 36 percent for institutional support, a category that includes general administration, legal services and public relations, the study said.

At public research universities, spending for student services rose 20 percent over the decade, compared with 10 percent for instruction.

Even at community colleges, with their far smaller budgets, spending on students services increased 9.5 percent, compared with 3.4 percent for instruction.

Fascinating, but not altogether big news for those of us who have been in the higher education game the past decade. Even as states have slashed higher education funding to the bone the past two years, the "country clubbing" of higher education, with more Taj Mahal construction and so called "beautification" projects, remains rampant.

And instruction? LOL.

Meanwhile, speaking of country clubs...

Biggest Defaulters on Mortgages are the Rich:

Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.

More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.

“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.

Er, I think I'd substitute "ruthless" with "delinquent."

“Those with high net worth have other resources to lean on if they get in trouble,” said Mr. Khater, the analyst. “If they’re going delinquent faster than anyone else, that tells me they are doing so willingly.”

Willingly, but not necessarily publicly. The rapper Chamillionaire is a plain-talking exception. He recently walked away from a $2 million house he bought in Houston in 2006.

“I just decided to let it go, give it back to the bank,” he told the celebrity gossip TV show “TMZ.” “I just didn’t feel like it was a good investment.”

Isn't that outstanding? I'd like to know why these people aren't being either prosecuted or sued over this. Have we gotten to the point in this country where contracts (a real estate closing is a legally binding document) are now meaningless? "Well, it was ok when I wanted it, but now that I don't, here, you can have it back, it's all good."

Funny, but so much of the bleating about the foreclosure crisis since it began two years ago has always come in class terms, with disparaging comments made about working class and poor folks being in over their heads, too "stupid" to realize how they were being taken advantage of, etc.

When the poor are foreclosed on, they made bad choices and are getting what they deserve. When the rich are foreclosed on, it's a "business decision."

The country-clubbing of America, indeed.

2 comments:

LgLafa said...
This comment has been removed by the author.
LgLafa said...

I think the issue here still lends back to "money is power." The wealthy know how to work the system and can be provided with legal counsel providing them with the knowledge of how to bend the laws in their favor. The less wealthy have less power and/or ability to gain this knowledge and therefore continue to struggle to pay the mortgage not knowing other ways to get out of it.

PS-My mother's a mortgage broker. There's lots of ways to work the housing market, apparently.