Could some of the most in-demand housing markets be cooling off?
Is This Real Change?
Let's be reasonable. Going back to the days of steady, sustainable development will be better for everyone
Do you remember back to the serious days following the 9/11 attacks? Across the nation, we speculated that these attacks had changed our country so significantly that we would no longer be the frivolous, Hollywood-obsessed, entertainment-saturated consumers we had been. Within months we were back to all Britney, all the time.
Do you remember back to when your parents or grandparents talked about the Great Depression, and how that event carved their understanding of America and how to live a life? The people who survived that event saved their pennies, spent discreetly, and ate all the leftovers. Today, we make sure to refrigerate the leftovers before we toss them. In contrast, my Depression-raised mother-in-law will clear a restaurant table and feed on it for a week.
My hope is that the seriousness of today's economic situation will create the kind of change we experienced in the '30s, not the formulaic, lip-serviced pabulum we voiced after 9/11. I would love to see lasting change, where the new watchword is “reduce.” Reduce our consumption. Reduce our debt. Reduce our waistlines.
What does that mean for housing? The willingness to take on greater debt was a shot for home building. People who chose to tie up 35 percent of their annual income on housing were a boon to builders, but only in the short term. The result of that willingness was a massive bubble that undermined major financial institutions and our world economy.
Yes, home ownership has been the single best predictor of financial security. We learned, though, that lowering the borrowing requirements for home ownership only transferred the issues of financial insolvency to the housing industry. That was a big mistake, which we're paying for several times over.
I believe that as an industry and as a country, we're better off with steadier, more sustainable development. One side effect of a steadier and more sustainable development — whether imposed by government, lenders or cultural restraint — is that we'll have fewer dilettantes in the home-building industry, and the work will be left to the true professionals.
In my own neighborhood, which has a large complement of aging, 2-bedroom bungalows on big lots, we saw tons of scrape-offs. The now-desirable location attracted speculators, who bought the property and erected 5,000-square-foot custom homes. Anyone with a couple of buddies and some free cash thought this was a good way to make an easy kill. When the bubble burst, the houses stood empty. Within a few blocks of my home, there are at least 10 homes standing vacant that are selling for upward of $2 million. Beautiful homes, blanketed now with light, blowing snow and sporting dark, blank windows. What a waste.