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College Kids Live in the Lap of Luxury... For Now

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College: four years spent living on pizza and beer, occasionally attending class and racking up untenable levels of debt.  Oh, and of course renting newly built McMansions that might just be nicer than the houses students grew up in.

According to a recent story in the New York Times, students at the University of California’s Merced campus have been taking over subdivisions in the foreclosure-wrought city. Merced, a city of 79,000 people, is ranked 3rd nationally, behind Las Vegas and Vallejo, CA, in metropolitan area home foreclosures.

Merced’s UC campus opened in 2005 and currently suffers from a lack of student housing. Thanks to a phased dorm construction plan, there is only enough room on campus for 1600 of the 5200 enrolled students.

All in all, though, this seems to be working out for both the city and the students. The Times quotes former Merced mayor Ellie Wooten, who says that student rentals have been a blessing for the town’s suffering real estate market.

Low rental prices have been a pretty big blessing for the kids as well.  A room in a Merced McMansion goes for between $200-$350 a month and includes all the trappings of pre-2007 conspicuous consumption.  Yearly, this is about half as much as on campus housing.  

And, as the Times story makes abundantly clear, these homes are very nice.  Students study in Jacuzzi tubs and read in their “light filled living room” while “soaking a silk caftan in one of two master bathroom sinks.”  While most college students struggle to fit all of their Ikea and Target furniture into tiny dorms, kids at Merced’s worry about getting all their cars to fit in the driveway.

One, older and obviously bitter resident refers to his subdivision as “an edge-of-town, Desperate Housewifey community.”  Or, anyways, that’s what it was supposed to be.

Unfortunately college only lasts four years.  As Moody’s Analytics recently reported, American’s now have about $750 billion in student loan debt.  For kids in Merced, college might be their only taste of luxury before a lifetime of crushing debt.
POSITION:  No positions in stocks mentioned.