Warren Buffett once told me that if you could fix housing, you could fix America. A study out a few days ago from the New York Federal Reserve notes that the housing market, which began growing again in 2012 and surpassed its pre-subprime crisis peak in terms of prices by 2017, is now fully recovered. Indeed, prices are 50 per cent above where they were in the trough of the crisis. Interestingly, though, housing debt has risen just 6 per cent since then.

At first glance, this seems like a very good thing — at a time when public and private debt is at record levels, and financial reform is being rolled back (the topic of my column this week) the last thing we want is another housing bubble. And yet, when you look more deeply, this juxtaposition between rising prices and muted debt reveals something disturbing — the housing market and housing wealth itself has become totally bifurcated. In a nutshell, housing wealth has shifted dramatically towards older borrowers, who now have 41 per cent of housing equity today, versus 24 per cent in 2006, and towards wealthier ones. High credit score borrowers now have 53 per cent of the total housing pie today, versus 44 per cent then.

Debt isn’t rising because these older, wealthier borrowers have more equity, and they also don’t use home equity loans for things like home improvements or education or vacations, the way younger people or those with children might. Again, you can argue that could be a good thing — but it’s also a dampener on consumption, which is a big issue in an economy made up 70 per cent of consumer spending.

What’s more, young people simply aren’t getting on the housing ladder the way they used to. That means that they don’t have access to the steady supply of wealth and upward mobility that a home represents (most Americans still keep most of their wealth in housing), and can’t access low-interest credit via a home-equity loan. While tight credit standards have played something of a role in suppressing millennial home ownership, rising student debt may be a more fundamental part of the equation, according to Beverly Hirtle, the executive vice-president and director of research at the NY Fed. Not only does that debt compress consumption (a major medium- and long-term growth issue according to the NY Fed), it can also result in lower credit scores and thus less immediate credit access, particularly for the most vulnerable borrowers.

The bottom line here is that the superstar phenomenon that I’ve written about in countries, companies, and among individual workers, has come to the housing market. The top markets and buyers are pulling away from everyone else. This is true in most parts of the world, now, not just the US.

On that score, I had a fascinating conservation over coffee last week with Zhang Xin, the co-founder of Soho, China’s leading luxury real estate developer, who set up an office in New York last year and is betting big on the city. This despite nosebleed prices and some recent corrections in the very high end of New York's luxury market, which had been driven in large part by money that’s now been limited via investment restrictions (both in the US and China).

While she’s quite concerned about the Committee on Foreign Investment in the US announcing more investment restrictions (a proposal to expand the mandate of Cfius is getting marked up in Congress this week, so watch that space), she wouldn’t think of leaving New York for London (which she believes is in long-term decline thanks to Brexit — sorry to my British colleagues), or a cheaper US city.

Regardless of price, “I think the top-tier cities are going to continue to pull away from others”, she says, in a snowball effect of inequality driven in part by the fact that so much more wealth now lives in technology. We both marvelled at how tech giants like Google are now spending their post-tax reform cash reserves on prime New York real estate. And as my colleague Gillian Tett points out, Jeff Bezos now doesn’t want to pay a small Seattle tax hike. Really?

Ed, this all puts me in mind of your wonderful column looking at anxiety and the education arms race among coast elites. Add housing into the mix and it feels more and more like the social drawbridge is going up.

Before it does, make sure you check out the following:

In the wake of the $500m Michigan State settlement to victims of former USA Gymnastics doctor Larry Nassar, it’s worth reading Jill Lepore’s new piece in the New Yorker about the history of victims’ rights, and how the trend has remade American justice. As she writes, “because victims’ rights is a marriage of feminism and conservatism, the logic behind its signal victory, the victim-impact statement, rests on both the therapeutic, speak your truth commitment of a trauma centered feminism and the punitive, lock them up imperative of the law-and-order conservatism. Arguably, this has been a bad marriage.”

My stepdaughter now works in an office where there is no assigned seating and desks are allocated on a “first come, first served” basis (presumably to get people in earlier?). According to the Wall Street Journal, lots of others do, too. I know the corporate social compact is broken, but please, can we just keep the same 60 x 30-inch space on a day-to-day basis?

And do read Paul Laity’s piece on how omnivore Michael Pollan is moving into hallucinogens. A natural brand extension, I say.

Ed Luce responds

Rana, you've struck a nerve. I once almost died in my ditch defending the retention of separate offices at the FT's Washington bureau from the open-plan proselytisers. My otherwise very talented then-boss, who shall remain nameless, but who went on to become the foreign minister of a G7 country beginning with C, said she thought my plan was "ridiculous". She nevertheless conceded it was my decision.

My argument was simple: people on acute daily deadlines don't like being disrupted by loud telephone conversations around them. Today, in the era of noise-cancelling headphones, I might have argued my case a little less strenuously. But I would still have come out in favour of separate offices. Studies link open plan work spaces to high absentee rates. Hot desking is even worse. If people cannot feel comfortable at work, most will react against it. Retaining your sense of individuality is paramount.

This is just one of the my reasons for disliking Silicon Valley-style work spaces. Don't get me started on primary colours and kindergarten furniture. 

Further reading

Chinese bank offers chance to meet Trump for $150k
Invitations from one of China’s biggest state-owned banks asked wealthy clients to pay $150,000 for a ticket to attend a Republican party fundraiser in the US and meet President Donald Trump, according to an invitation seen by the Financial Times. The invite from the private banking unit of China Construction Bank, the country’s second-largest state-owned lender, offered participants the chance to take photos with Mr Trump and mingle with US political and business figures. It also said that representatives from ZTE Group, the Chinese telecom company that is facing crippling US sanctions, would attend the event, to be held in Dallas. (FT)

Showdown at the WTO 
What happens when one country — and it’s a big one — decides it no longer wants to play by the rules of the world’s trade body? (Planet Money)

Trump campaign aides met another foreign power offering help
Three months before the 2016 election, Donald Trump’s son met with an emissary of two wealthy Arab princes offering help in his father’s campaign for president, an Israeli specialist in social media manipulation and a controversial private military security tycoon. George Nader — who is now co-operating with Robert Mueller’s probe into the Trump campaign — reportedly came representing the princes of Saudi Arabia and the United Arab Emirates, who were eager to help Mr Trump win the presidency. It is the latest example of the Trump campaign’s reported willingness to accept help from foreign powers, and raises questions about Mr Trump’s decision as president to side with the Saudis and UAE against Qatar, a US ally. (NYT)

Yet another US school shooting 
A 17-year-old killed 10 of his classmates and teachers and wounded others in Texas, as the US endured yet another school shooting. (FT)

Your feedback

We'd love to hear from you. You can email the team on swampnotes@ft.com, contact Ed on edward.luce@ft.com and Rana on rana.foroohar@ft.com, and follow them on Twitter at @RanaForoohar and @EdwardGLuce

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