Until AI takes over

From the APP:

College pays off in NJ: 7th highest median earnings for graduates

If you’re graduating from a New Jersey college, you might be in great shape.

According to a new study, the Garden State ranks in the top 10 of the highest median earnings.

The study, conducted by Teach Simple, uses data from the U.S. Department of Education to analyze institutions in each state based on the median earnings of individuals who began college 10 years ago to reveal the ranking. The study also looked at average annual cost that a student who receives federal financial aid will pay to cover expenses (e.g. tuition and living expenses) to attend a school, and the average graduation rate within eight years of entering the school. 

New Jersey ranks seventh, with an average of each institution’s median earnings at $57,381. It also says the average annual cost of NJ schools is $15,473 and the graduation rate is about 50 percent.

The top five states are Massachusetts ($65,319), Rhode Island ($64,818), Connecticut ($64,720), Maryland ($60,286) and Washington, D.C. ($59,364). California came in at No. 6 ($58,675), with Pennsylvania, New Hampshire and Illinois rounding out the top 10.

The five states with the lowest pay are New Mexico ($38,417), Mississippi ($39,235), Arkansas ($41,481), Kentucky ($42,000) and North Dakota ($43,000).

Posted in Demographics, Economics, Employment, New Jersey Real Estate | 98 Comments

PSA: Home prices and mortgage rates are not correlated

From CNN:

US home prices hit another record high in March

US home prices reached a record high in March, reflecting the housing market’s persistent affordability crisis.

The S&P CoreLogic Case-Shiller US National Home Price Index, a measure of home prices across the country, jumped 6.5% in March from a year earlier to a record high. It is the sixth time the index has reached a new record high over the past year.

The report showed that there’s strong demand for housing in urban population centers such as San Diego, New York, Cleveland and Los Angeles. The 20-city index rose in March at a slightly faster pace than in February.

“This month’s report boasts another all-time high,” said Brian Luke, head of commodities, real and digital assets, at S&P Dow Jones Indices. “We’ve witnessed records repeatedly break in both stock and housing markets over the past year.”

In addition to unrelentingly high home prices, the housing market is also grappling with a chronic lack of homes on the market and elevated mortgage rates. Put together, it has resulted in a tough housing market, especially first-time buyers.

The average 30-year fixed-rate mortgage fell below 7% last week, after rates began to surge in mid-April. Still, mortgage rates are higher than anything seen in the decade leading up to 2022. Economists don’t expect mortgage rates to decline meaningfully this year and could very well remain above 6%.

Posted in Economics, Housing Bubble, National Real Estate | 134 Comments

Will builders pull back?

From CNBC:

Sales of newly built homes tank in April, as prices and interest rates rise

Sales of newly built homes dropped 4.7% in April compared with March, and fell a larger 7.7% from the prior year, the U.S. Census said Thursday.

March sales were also revised significantly lower.

Higher mortgage rates are clearly hampering sales. The monthly reading is based on signed contracts, so it reflects people shopping during the month and inking deals based on current rates.

The average rate on the 30-year fixed mortgage was in the high 6% range at the end of March, but then shot up to 7.5% during April, cutting into affordability.

Adding to that, the median price of a new home sold in April was $433,500, 4% higher than it was in April 2023. Some of that is due to the mix of homes selling, which is mostly on the higher end of the market. Those buyers are not as influenced by mortgage rates, as they often use all cash.

Builders say they cannot lower prices due to high costs for land, labor and materials. The big production builders have been buying down mortgage rates to help boost sales, but they are able to do that because of their size. D.R. Horton and Toll Brothers reported strong earnings in their latest quarters, beating expectations and citing growing demand due to low supply in the resale market.

“For all the happy talk from the big builders (who are taking market share), the entire new build industry is selling new homes at a pace below the 5 yr average,” noted Peter Boockvar, chief investment officer at Bleakley Financial Group and a CNBC contributor.

In the first quarter of 2024, 38% of a median household income nationally was needed to make the mortgage payment on a median-priced new single-family home, according to a new index launched Thursday by the National Association of Home Builders and Wells Fargo. Low-income families, which it defines as those earning just 50% of the area’s median income, would have to spend 77% of their earnings to pay for the same new home. 

Prices continue to rise for both new and existing homes due to a lack of supply. There is very little available for sale on the lower end of the resale market. While the number of newly built homes continues to rise, up 12% year over year, new homes come at a price premium and are out of range for lower-income buyers.

“With a nationwide shortage of roughly 1.5 million homes, the lack of housing units is the primary cause of growing housing affordability challenges,” said Robert Dietz, NAHB’s chief economist. “Policymakers at all levels of government need to enact policy changes that will allow builders to construct more homes, such as speeding up permit approval times, providing resources for skilled labor training and fixing building material supply chains.” 

Posted in Demographics, Economics, Mortgages, National Real Estate, New Development | 37 Comments

New high for Hudson

From NJ.com:

N.J. home got $350K over asking, making it the most expensive sale in its county this year

Five days is all it took for this Hoboken brownstone to go under contract for $350,000 more than its asking price.

The six bedroom, four full and one half bathroom home was listed March 7 for $3.3 million. It closed last month for $3.65 million.

“It was insane,” said Kaja Bolton of Christie’s International Real Estate, the listing agent. “I think we had 70 groups come through. That’s more like suburb kind of activity. But right now there’s not a lot on the market so we get a lot more people. Normally, 40 groups would be amazing.”

The 4,000 square foot single family home on tree-lined Garden Street, a premiere area in Hoboken, is the highest-priced single family home to sell in Hudson County this year.

The previous highest sale was of a four bedroom, four bathroom Jersey City home that closed on March 12 for $3.25 million.

The home got eight offers.

Jim Ristagno, of Coldwell Banker Realty, was the agent for the winning bidder.

“This was a unique property because it’s 21 feet wide,” he said. “For Hoboken terms that is huge — and it’s a 4,000 square foot home.”

Homes in Hoboken typically range from 12.5 feet to 24 feet wide. “Getting to 20 feet wide is really rare,” Ristagno said.

The home also has 11-foot ceilings on the parlor level, original trim and it sits on a large 21 foot by 100 foot lot, giving it a larger backyard.

Posted in Gold Coast, Housing Bubble, New Jersey Real Estate, NYC | 9 Comments

The next tech hotspot?

From the NY Post:

Time to buy in ‘Quantum Valley’? Upstate New York home prices are set to skyrocket as Big Tech moves in

Will the San Francisco Bay Area tech hub known as Silicon Valley soon be eclipsed by the Hudson Valley?

The sleepy, bucolic area north of New York City, known for its farmhouses, rural ambiance, and spectacular views of the Hudson River, is poised to become the next big tech area if Nvidia co-founder Curtis Priem has his way.

“We’ve renamed Hudson Valley as Quantum Valley,” the multimillionaire told the Wall Street Journal. “It’s up to New York whether they want to become Silicon State—not just a valley.”

While the co-founder of one of the world’s largest microchip companies cashed out long before the market cap topped $2 trillion, he’s not hurting for money. He is reportedly donating $75 million to his alma mater, Rensselaer Polytechnic Institute in Troy, slightly north of Albany, so the school can buy an IBM-made quantum computing system. It would be the first of its kind on any campus in the world.

Priem told the Journal he hopes this gift will make the Hudson Valley the epicenter of quantum computing research, attracting the kind of talent that started billion-dollar disruptors such as Google, Microsoft, and Apple.

“At first, prices may rise as demand outpaces supply, but ultimately, developers will increase supply if that is the case,” he says. “We’ve seen similar success up in Malta, NY, about 40 minutes north, with the microchip factories. That development took place mostly on vacant land. A similar revival within a city itself, instead of farmland, would certainly be interesting to witness and be a part of. Troy would be a great fit.”

Cahill notes there are a lot of well-built structures still standing in Troy that were part of the manufacturing boom in the early 20th century that could be repurposed for condos. There is also a lot of vacant land around Troy, something getting increasingly more difficult to find in large metropolises.

Local real estate agent Harriet Norris, of Douglas Elliman, agrees that values in the area might not stay affordable for long.

“Property values in the area would certainly rise with the need for more housing and commercial space,” she says. “And good jobs in this new technology sector would bring growth and expansion to all sectors of the economy in Hudson Valley and upstate region. I think it’s good news all around.”

Cahill notes that the area has plenty of technology and engineering students because of the two local colleges, RPI and Union. But those students normally take their brain power elsewhere—to New York City, Boston, or Silicon Valley—once they graduate.

“If we could keep the talent here because these new computers are housed here in Troy, there is plenty of room for housing,” he says.

“If a high-tech corridor develops and companies create more high-paying jobs in the region, it could push home prices higher,” says Hale. “Already, relative affordability in the Albany-Schenectedy-Troy metro area, where the median home listing is priced at $449,900, according to Realtor.com, just above the national median of $430,000, makes the area attractive. The typical home listing price has risen 10.3% from one year ago in the area while Realtor.com reported that nationwide home prices were flat in April 2024.”

The upsides of the area include lots of leafy green preservations, a short commute to the capital city of Albany, many local highways, an international airport, and proximity not only to New York City but also to Vermont, New Hampshire, and Massachusetts.

Posted in Demographics, Economics, Employment, National Real Estate, North Jersey Real Estate, NYC | 45 Comments

April sales dip

From Reuters:

US home sales post second straight monthly drop; house prices accelerate

U.S. existing home sales unexpectedly fell in April as higher mortgage rates and house prices weighed on demand, dealing another setback to the housing market.

Though the report from the National Association of Realtors on Wednesday showed inventory increasing last month to a 2-1/2-year high entry-level homes remained scarce, accounting for the second straight monthly decline in sales.

The housing market has taken a step back after residential investment, which includes homebuilding, grew at its fastest pace in more than three years in the first quarter amid a resurgence in mortgage rates.

“Supply constraints are doing as much to hold back sales as demand-side weakness,” said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics. “Existing home sales will probably tread water, or perhaps even edge down a bit further, over the next few months.”

Home sales slipped 1.9% last month to a seasonally adjusted annual rate of 4.14 million units. Economists polled by Reuters had forecast home resales would rise to a rate of 4.21 million units. Home resales are counted at the closing of a contract.

April sales likely reflect contracts signed in the prior two months when the average rate on the popular 30-year fixed-rate mortgage was hovering just below 7%.

Sales fell in all four regions. The average rate on the 30-year fixed-rate mortgage has struggled to break back below 7% after surging to more than a five-month high of 7.22% in early May, data from mortgage finance agency Freddie Mac showed.

Posted in Economics, Housing Bubble, Mortgages, National Real Estate | 94 Comments

How much higher?

From Yahoo Finance:

U.S. Home Prices Reach Record High Despite Slow Market

Amid a broader market slowdown, U.S. home prices reached a historic peak in April, with the median sale price rising to $433,558, a 6.2% increase from the previous year, according to data issued by Redfin.

The rise in home prices suggests a lack of housing inventory coupled with the reluctance of homeowners to list their properties. Even as new listings slightly increased, they remained about 20% below pre-pandemic levels, Redfin said, leaving potential buyers grappling with high prices and the additional challenge of rising mortgage rates, which continue to hover near a two-decade high.

“It’s not all bad news for homebuyers,” Redfin Economics Research Lead Chen Zhao noted in the report. “Mortgage rates are already inching lower in response to this week’s inflation report, which signaled that the Fed may cut interest rates this summer — a possibility that just weeks ago many thought was off the table.”

The demand and constrained supply continue to drive the U.S. housing market to a landscape where even a slow trend does not deter the ascent of home prices.

In regions like San Jose, California and Rochester, New York, a competitive fervor remains, with a high portion of homes selling above the asking price. In April, 75.8% of homes sold in San Jose fetched more than their listed price, indicating a market that is defying broader slowdowns.

The trend is similar in Rochester, where 72.8% of homes sold above asking.

April saw a modest increase in new listings, rising 1.7% month-over-month and marking a 10.8% increase year-over-year; yet the figures still trail behind pre-pandemic levels. The reluctance to list is often attributed to homeowners being “locked in” by low mortgage rates obtained during the pandemic, disincentivizing them from selling in a higher rate environment.

Active listings, which reflect the total number of homes available for sale, also suggest that tension exists between supply and demand. While they increased by 0.3% from March to April and were up 7.5% from April last year, the total count remains markedly below the levels seen before the pandemic.

Posted in Housing Bubble, National Real Estate | 61 Comments

What would you trade?

From the Record:

What would you sacrifice to afford a home? A report shows the differences between generations

Generations often have differing perspectives on politics, work culture and family dynamics, so it might not come as a surprise that the real estate experiences of different generations vary, too.

While purchasing a home with a domestic partner or spouse is still the most common way (59%) that individuals across all generations are buying a home, millennials — who make up the majority of today’s homebuyers — are more likely than older generations to purchase a home in other ways, whether it be by themselves or with a friend or relative, according to Bankrate’s recent Homebuying Trends Survey.

“Our findings show a shift in how generations have purchased their homes. More millennials have opted for solo home purchases or co-buying with friends or family compared to their older counterparts,” said Alex Gailey, lead data reporter at Bankrate. “That’s likely due to a shift in generational norms. Younger Americans are partnering or marrying later today than in prior generations, but many still want to become homeowners.”

In the survey, 42% of millennials (ages 28-43) said they have purchased a home alone. This is compared to the 34% of Generation Xers (ages 44-59) and 22% of baby boomers (ages 60-78) who said they purchased a home alone.

When it comes to purchasing a home with friends, 10% of millennials said they’ve bought a house this way compared to just 3% of Gen Xers and 1% of baby boomers. And, 10% of millennials also said they have purchased a home with relatives, while only 5% of Gen Xers and 2% of baby boomers said they have done so.

In order to find more affordable housing, millennials are also willing to sacrifice more than their older counterparts, according to the survey. While 49% of Gen Xers and 62% of baby boomers are most willing to downsize their living space compared to other factors like moving out of state or buying a fixer upper, millennials are equally as likely (33%) to take any of these steps to find affordable housing.

Millennials are also more likely to consider moving farther from friends and family (29%), moving to a less desirable area (27%), taking on roommates or living with family members (24%) and moving farther from work (19%) than older generations are.

“Younger generations’ willingness to make more sacrifices amid ongoing affordability issues is a result of being at a point in their lives where they are ready to make the jump from renting to owning,” the report says. “On the other hand, older homebuyers are more likely to be repeat homebuyers who are driven by different motivations.”

Posted in Demographics, Economics, Housing Bubble, National Real Estate | 48 Comments

Price Reduced! Jeter’s House!

From NJ.com:

Derek Jeter’s Greenwood Lake ‘castle’ back on the market at drastically reduced price

Known locally as “the castle” on Greenwood Lake, Derek Jeter’s longtime lake house near the New York-New Jersey border is back on the market at a drastically reduced price.

Listed last week for $6.3 million, the home was previously marketed at nearly $15 million. The property, dating to 1903, has been linked to Jeter’s family for more than 70 years.

The former New York Yankees shortstop took ownership of the property in the early 2000s from the Tiedemann family trust. The existing home had been partitioned into apartments and was in a state of disrepair.

The property was originally built by a New York City doctor, Rudolph Gudewill, for his wife in 1903. Jeter’s grandfather, William Connors, lived on the property after he was adopted by John and Julia Tiedemann, who bought the site in 1952.

A transformation under Jeter’s ownership developed the three-parcel estate with a main house, a guest house, a pool house and a boat house. The grounds hold an infinity pool, intricately manicured gardens and a lagoon and are bordered by 6-foot-high stone walls. Located on the western side of Greenwood Lake, the roughly 4-acre site also includes 700 feet of lakefront.

The stone home at 14 Lake Shore Road in the Town of Warwick, N.Y., is defined by two turrets that give it its castle nickname. There are also two conference rooms, six bedrooms, 13 bathrooms and five kitchens. Four are indoors. One is outdoors and comes with a wood-burning fireplace, says an online listing from Wright Bros. Real Estate Inc. The annual property taxes are roughly $75,000, the listing says.

Jeter, who grew up in Kalamazoo, Mich., was born in Pequannock at Chilton Memorial Hospital. For a short time after, he lived in North Arlington.

Posted in New Jersey Real Estate, Price Reduced | 20 Comments

Nothing is cheap anymore

From MarketWatch:

Rents just surged 10% in this affordable housing market. It was ‘bound to happen,’ one economist says.

Renters are running away from high rents in expensive cities and moving to more affordable ones — but that’s pushing up rents as much as 10% in some major metropolitan areas, according to a new report by Redfin.

In a monthly market report, the residential real-estate brokerage RDFN, -1.57% found that in April, asking rents across 33 major metro areas rose 1.1% from a year ago, which was the first such increase in more than a year. The median U.S. asking rent was $1,648 in April.

The biggest rent increases were seen in markets in the Midwest, the report found, while the biggest declines were in the Sun Belt and in Seattle.

“Rents are only up 1% nationally, and that’s mostly because less affordable rental markets are getting even more expensive, which is bound to happen as people start to move to more affordable metros from expensive ones,” Daryl Fairweather, chief economist at Redfin, told MarketWatch.

Higher rents are an additional blow to many aspiring homeowners who currently rent a home. Elevated mortgage rates and high home prices have made it so unaffordable to buy a house that in February, Realtor.com said that it was cheaper to rent than to own in all of America’s top 50 metro areas.

Posted in Demographics, Economics, Housing Bubble, National Real Estate | 30 Comments

First to fall?

From Mansion Global:

Florida and Texas Show Signs of Home Prices Falling

Gary and Karen Steppe listed a condo in Indialantic, Fla., in February for $294,900. They expected the two-bedroom vacation home, which is in an oceanside town near Melbourne Beach, to sell quickly. But the couple initially received no bids. 

One reason: A rising number of homeowners in the area were also looking to sell. With more properties on the market, “buyers didn’t have that fear of missing out like they did when the inventory was less,” Gary Steppe said. 

The Steppes cut the price, then accepted an offer in April for about $275,000. “I wish I had…sold it two years ago,” when similar condos were selling for higher prices, he said.

In most of the U.S., the limited number of homes for sale is pushing prices back toward record highs. Sale prices for single-family existing homes rose in 93% of U.S. metro areas during the first quarter, according to the National Association of Realtors. The median single-family existing-home price grew 5% from a year ago to $389,400.

Yet the market is cooling and prices have started falling in some cities in Florida and Texas, where robust home-building activity in recent years has helped boost the number of homes for sale. The two states accounted for more than a quarter of all single-family residential building permits every year from 2019 to 2023, according to Census Bureau data.

In 10 Texas and Florida metro areas, the inventory of homes for sale in April exceeded typical prepandemic levels for this time of year, according to Realtor.com. In eight of those markets, pending sales in April fell from a year earlier.

In Florida and Texas, “we’re starting to get into a buyer’s market,” said Rick Palacios Jr., director of research at John Burns Research & Consulting. 

Posted in Demographics, Economics, Housing Bubble, National Real Estate | 80 Comments

Heading back below 7?

From CNBC:

Mortgage demand from homebuyers drops even as interest rates pull back to April lows

Mortgage rates last week dropped to the lowest level since April, but buyers are still struggling to afford today’s housing market. As a result, mortgage demand flattened at a weak pace. Total mortgage application volume inched up just 0.5% from one week earlier, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 7.08% from 7.18%, with points decreasing to 0.63 from 0.65 (including the origination fee) for loans with a 20% down payment.

Applications to refinance a home loan, which are most sensitive to weekly rate changes, increased 5% for the week and were 7% higher than the same week one year ago.

“Treasury yields continued to move lower last week and mortgage rates declined for the second week in a row,” said Joel Kan, MBA’s vice president and deputy chief economist. “The decline in rates led to a small boost to refinance applications, including another strong week for VA refinances. However, the overall level of refinance activity remains low.”

Applications for a mortgage to purchase a home fell 2% for the week and were 14% lower than the year-earlier period. The drop was driven by a 9% decline in FHA applications. Those loans are favored by first-time or lower income buyers because they allow much smaller down payments than conventional loans.

“While the downward move in rates benefits prospective homebuyers, mortgage rates are still much higher than they were a year ago, while for-sale inventory remains tight,” Kan added.

Posted in Economics, Housing Bubble, Mortgages, National Real Estate | 53 Comments

Different this time?

From the NY Post:

US home prices have soared 47% since 2020

A recent analysis by ResiClub of the Case-Shiller National Home Price Index has unveiled a jaw-dropping surge in US home prices, soaring a lofty 47.1% since the dawn of this decade.

The boom witnessed in the early years of the 2020s has outpaced not only the growth of the 1990s and 2010s — but is now threatening to surpass the entirety of the 2000s. 

Even the dizzying heights reached before the 2007 housing market meltdown are within striking distance.

This decade’s housing market frenzy was ignited by a perfect storm — the onset of the COVID-19 pandemic triggering an unprecedented rush among buyers. 

The result? A staggering 20% surge in prices within a mere 12 months.

Despite mortgage rates skyrocketing to around 7%, double what they were at the peak of the pandemic, home prices refuse to plateau. 

That’s due the insatiable appetite for housing coupled with a crippling shortage in supply.

“Because the Fed kept rates too low for too long during the pandemic, listing inventory was essentially wiped off the map, keeping prices rising sharply despite the surge in mortgage rates,” appraiser Jonathan Miller told The Post. “Would-be home sellers that bought or refinanced at a 2.5% to 4% rate during the pandemic became trapped due to the lock-in effect. They became reluctant to list their homes because, as new buyers, they would get a lot less for their money because of the much higher mortgage rates. The way out of this appears to be to hope for a drop in mortgage rates, but that could take years.”

To put things in perspective, the median US home sale price hit $420,800 in the first quarter of this year. Compare that to a modest $327,100 at the beginning of the decade. It was $124,800 at the dawn of the ’90s. 

Lance Lambert, co-founder of ResiClub, says housing price growth in the first 50 months of this decade has outpaced not just one, but the last three decades combined. 

It’s all an unfortunate cycle of events for those looking to achieve the American Dream — and for one age bracket in particular.

Posted in Demographics, Economics, Housing Bubble, National Real Estate | 95 Comments

90% of the country overpriced

From Fitch:

Real Home Price Appreciation Aligns with Sustainable Price Trends

Fitch Ratings estimates national home prices were 11.1% overvalued for 4Q23 on a population-weighted average basis, showing negligible difference from the previous quarter. 

The consistency in Fitch’s overvaluation estimates, maintained from the last quarter, was underpinned by concurrent increases in the Home Price Index and Sustainable Home Price (SHP). The increase in SHP for 4Q23 was primarily driven by rise in rents. Meanwhile, other factors such as unemployment rates, mortgage rates, real income, and household growth remained comparatively stable, leading to a moderation in the SHP Index. 

However, overvaluation still dominated nationwide. As of 4Q23, home prices in 90% of the country’s MSAs were overvalued, with 56% of these areas by 10% or more. The top three overvalued MSAs in the U.S. are Memphis, TN-MS-AR; Buffalo-Cheektowaga-Niagara Falls, NY, Indianapolis-Carmel-Anderson, IN.

There are early signs of a correction in the U.S. housing market, as indicated by the uptick in both active and new property listings. Challenges such as high mortgage rates and elevated home prices, which aggravate the affordability issue, continue to moderate the pace of this normalization.

In light of Fitch’s Global Economic Outlook (March 2024), Fitch predicts that the Fed will postpone rate cut until its meeting on July 30-31, 2024, which is a delay from the previously anticipated June timeline. Fitch also expects nominal national home prices to decelerate to 0%-3% in 2024 from 5.5% in 2023, as per Fitch’s Global Housing and Mortgage Outlook (December 2023).

Posted in Demographics, Economics, Housing Bubble, National Real Estate | 102 Comments

Fire all the professors

Not real estate related, but had to post this snarky masterpiece:

From The Atlantic:

No One Knows What Universities Are For

Last month, the Pomona College economist Gary N. Smith calculated that the number of tenured and tenure-track professors at his school declined from 1990 to 2022, while the number of administrators nearly sextupled in that period. “Happily, there is a simple solution,” Smith wrote in a droll Washington Post column. In the tradition of Jonathan Swift, his modest proposal called to get rid of all faculty and students at Pomona so that the college could fulfill its destiny as an institution run by and for nonteaching bureaucrats. At the very least, he said, “the elimination of professors and students would greatly improve most colleges’ financial position.”

Administrative growth isn’t unique to Pomona. In 2014, the political scientist Benjamin Ginsberg published The Fall of the Faculty: The Rise of the All-Administrative University and Why It Matters, in which he bemoaned the multi-decade expansion of “administrative blight.” From the early 1990s to 2009, administrative positions at colleges and universities grew 10 times fasterthan tenured-faculty positions, according to Department of Education data. Although administrative positions grew especially quickly at private universities and colleges, public institutions are not immune to the phenomenon. In the University of California system, the number of managers and senior professionals swelled by 60 percent from 2004 to 2014.

How and why did this happen? Some of this growth reflects benign, and perhaps positive, changes to U.S. higher education. More students are applying to college today, and their needs are more diverse than those of previous classes. Today’s students have more documented mental-health challenges. They take out more student loans. Expanded college-sports participation requires more athletic staff. Increased federal regulations require new departments, such as disability offices and quasi-legal investigation teams for sexual-assault complaints. As the modern college has become more complex and multifarious, there are simply more jobs to do. And the need to raise money to pay for those jobs requires larger advancement and alumni-relations offices—meaning even more administration.

But many of these jobs have a reputation for producing little outside of meeting invites. “I often ask myself, What do these people actually do?,” Ginsberg told me last week. “I think they spend much of their day living in an alternate universe called Meeting World. I think if you took every third person with vice associate or assistant in their title, and they disappeared, nobody would notice.”

Complex organizations need to do a lot of different jobs to appease their various stakeholders, and they need to hire people to do those jobs. But there is a value to institutional focus, and the past few months have shown just how destabilizing it is for colleges and universities to not have a clear sense of their priorities or be able to make those priorities transparent to faculty, students, donors, and the broader world. The ultimate problem isn’t just that too many administrators can make college expensive. It’s that too many administrative functions can make college institutionally incoherent.

In an email to me, Smith, the Pomona economist, said the biggest factor driving the growth of college admin was a phenomenon he called empire building. Administrators are emotionally and financially rewarded if they can hire more people beneath them, and those administrators, in time, will want to increase their own status by hiring more people underneath them. Before long, a human pyramid of bureaucrats has formed to take on jobs of dubious utility. And this can lead to an explosion of new mandates that push the broader institution toward confusion and incoherence.

Bureaucratic growth has a shadow self: mandate inflation. More college bureaucrats lead to new mandates for the organization, such as developing new technology in tech-transfer offices, advancing diversity in humanities classes through DEI offices, and ensuring inclusive living standards through student-affairs offices. As these missions become more important to the organization, they require more hires. Over time, new hires may request more responsibility and create new subgroups, which create even more mandates. Before long, a once-focused organization becomes anything but.

In sociology, this sort of muddle has a name. It is goal ambiguity—a state of confusion, or conflicting expectations, for what an organization should do or be. The modern university now has so many different jobs to do that it can be hard to tell what its priorities are, Gabriel Rossman, a sociologist at UCLA, told me. “For example, what is UCLA’s mission?” he said. “Research? Undergraduate teaching? Graduate teaching? Health care? Patents? Development? For a slightly simpler question, what about individual faculty? When I get back to my office, what should I spend my time on: my next article, editing my lecture notes, doing a peer review, doing service, or advancing diversity? Who knows.”

Goal ambiguity might be a natural by-product of modern institutions trying to be everything to everyone. But eventually, they’ll pay the price. Any institution that finds itself promoting a thousand priorities at once may find it difficult to promote any one of them effectively. In a crisis, goal ambiguity may look like fecklessness or hypocrisy.

Posted in Crisis, Economics, Employment | 57 Comments