The cabin, the kids and the Great Recession

Updated: September 25, 2010 - 9:26 PM

Views about the "lake place'' change with the economy and the interests of succeeding generations.

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GAINS & LOSSES ROSS LEVIN

One of our clients was describing the dozen people it took to pull his neighbor's boat lift out of the water. Bad backs are a rite of passage during cabin-closing season.

Since the Great Recession, cabin life has changed. A second home becomes less affordable when you are struggling to make payments on your first home. As the sometimes cruel but immutable laws of economics play out, cabin prices have plummeted as listings have skyrocketed.

Is now the time to swoop down and pick up a great place at a decent price? If you want to spend your money on experiences and believe this may represent a way for you to build family dreams, then maybe so. If you believe this is a bargain that won't last and you will be able to flip the property when your kids trade diapers for Droids, forget it.

While financial assets such as stocks will go up and down based on future corporate earnings, cabin prices will probably stay down for a number of reasons.

If the teens and twentysomethings of today are the eventual generation of cabin buyers, then how many of them will want what we wanted? For many of us, cabins not only represented recreation, but an escape from work that exhausted us. Young observers of their parents were aware of this trade-off.

In his book "The Great Reset -- How New Ways of Living and Working Drive Post-Crash Prosperity,'' Richard Florida writes, "When people cease to find meaning in work, when work is boring, alienating and dehumanizing, the only option becomes the urge to consume -- to buy happiness off the shelf."

While this may be an extreme explanation of the job scene, it still is troubling to children who watched their parents work in jobs they didn't love (and maybe even lost) for a future that turned out to be less certain than they'd expected.

Many children today are far less connected to nature than we were. Year-round sports and a weak economy have caused many summer camps to struggle. Usage of state and national parks -- two of the greatest values for experiences in the United States -- has waned. And for many cabin owners with kids, computer joysticks have replaced "pick-up sticks" as an evening ritual.

Children starting in the workforce are likely to have lower lifetime earnings than baby boomers had. While I believe that the job market will improve and actually be robust again, kids are starting their careers later. Remember that the key to investing is time and compound interest -- earnings on your earnings. This late start will mean they will have to work longer to earn the same amount of inflation-adjusted money.

And while there is going to be a great wealth transfer from this generation to the next, based on the miracles of modern science, the cost of long-term care and taxes, it will be later and less than what may be expected.

None of these things are bad, they are simply different. While the kids of tomorrow may be more mobile and less inclined to spend as much on housing or cars, they are also going to be more interested in community and building strong social networks. Cities will be revitalized. Richard Florida points out from a Gallup Poll three key attributes that make people happy in their communities: "The first is the physical beauty -- great open spaces and parks, the second is the ease with which people can meet others, and the third is the level of diversity, open-mindedness, and acceptance.'' As this evolves, there is less need to escape up north.

If you think it's time to sell your cabin, then try to sell it. Your annual costs of ownership for a place that you are not using most likely will be higher than the annual appreciation of your cabin -- even at these distressed levels. Even if you have no debt on the place, you still have an opportunity cost with the money tied up in it.

If you are enjoying the walks in the woods, the fight of a walleye, the smell of a roaring fire, the bright stars in the sky, and an ice pack on your spine, then count your blessings and remember that this is why you bought it in the first place.

Spend your life wisely.

Ross Levin is the founding principal of Accredited Investors Inc. in Edina. He is a certified financial planner and author of "Spend Your Life Wisely -- The Deeper Meaning of Money'' and "The Wealth Management Index." His Gains & Losses column appears on the fourth and fifth Sundays of the month. His e-mail is ross@accredited.com.

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