Saturday, October 14, 2006

Were You Part of the Problem or the Solution?

So were you one of the people who let your greed, selfishness, and lack of foresight destroy housing affordability for so many people now and in the future? Was it worth it? Are you happy with yourself? How do you justify it to yourself, to your children? And what's the next get-rich-quick thing you'll be diving into?

Or were you one of the people who had the sense to stay out and not be part of the problem? How does it feel to be a martyr? How does it feel to have the affordability of something as important as housing be destroyed for you and your children?
ANNE TAYLOR FLEMING, NewsHour Essayist: It has finally happened. In the Sunday streets, here where I live in west Los Angeles, there has been a definite downshift. There are still plenty of open houses, still signs at the street corners beckoning drivers toward this or that destination.

But home sales dropped 25 percent in Southern California in August, the ninth straight month of falling sales. Nationally, new housing starts are down over 20 percent since their peak. In short, the air has definitely been let out of the housing bubble.

Now, we're a little shell-shocked as we look around at the crazy, manic time we have lived through and how it transformed the landscape. In my neighborhood, there was something wild about it, a kind of frantic, optimistic acquisitiveness, packs of people spending their Sundays roaming from house to house. Some, yes, just looking, but others intending to buy, a Tuscan villa, a mini-chateau, a fixer-upper, or a tear-down on a desirable lot where they could then build lot line to lot line.

Many of the small houses like mine have been scraped away to make way for giant replacements. There were many days I couldn't get down my street for all the trucks, the constant nerve-jangling noise of construction the daily soundtrack.

Of course, it wasn't just here in Southern California. Similar things went on in many other places: Vegas and Atlanta, Houston and Miami, and New York, too. People flipping houses, buying second ones, huge places with all the appurtenances, the granite countertops, and designer faucets, and flat-screen TVs.

A status issue

No question it was a status thing, people identifying themselves as one of the haves in an economically divided country. But there was something else, an attempt to stem some innate longing or loneliness or insecurity. "This is me. This is where I belong. Here I will be happy. Here I will be safe, from terrorists, and flu bugs, and gang-bangers."

Real estate brokers became the lead players in novels by some of our finest writers, Mona Simpson, and T.C. Boyle, and Richard Ford, all those fictional brokers ruminating about the American dream as they ushered perspective buyers through Midwestern tracts or gated L.A. communities or quaint East Coast towns.

Of course, plenty of people, the young, the poor, and even the middle class, were priced out of the frenzied real estate market going in. Even in parts of the country where prices never reached the stratosphere, hardworking people were not immune to refinancing their homes in order to buy all those relentlessly advertised goodies.

Now there does, at last, seem to be a respite from the frenzy. House prices are down, and so are those refis. People will be hurting, as usual, those who can least afford it, the construction and landscapers and those who work in plants that manufacture furniture, and appliances, and all the other symbols of the good life, not to mention those who signed on for one of those tricky mortgages.

And yet it is hard not to be happy about the cessation of this frenzy, certainly for anybody clinging to the old-fashioned notion of a neighborhood of small, friendly, affordable houses. Alas, in so many places -- certainly here where I've lived for 35 years -- that world is now permanently gone.

I'm Anne Taylor Fleming.
You can read the original transcript here or you can see the video here.


Blogger marinmaven said...

Was flipping through the September 2006 MARIN magazine and saw an interesting ad for these times. It was from HSBC and it featured a pricey monster home and an Asian-american family. The tagline promises getting "the home of your dreams." It offers "interest only and blended programs, accelorated approval and other limited documentation programs"

Oct 14, 2006, 3:59:00 PM  
Blogger sf jack said...

Give me a break... and talk about joining a bandwagon.

Let's ride herd on the elephant in the room, since it now cannot be ignored.

Where was Anne Taylor Fleming and other commentaries like this one - before now? How about in 2004, or at least a year ago?

Anything obvious today about the "destruction" of a way of life she, or others, are/were missing was certainly obvious then.

Cry me a river.

Oct 14, 2006, 10:12:00 PM  
Anonymous Anonymous said...

Well, hopefully, housing affordability in the USA has not been destroyed for present and future generations.

It will be catastrophic to let housing go back to affordable levels, but way MORE catastrophic to NOT allow that to happen, IMO.

I'm bracing for the severe correction, crash, whatever you want to call it.

Hopefully once it's been accomplished, some of the bullsh#t that allowed it to occur in the first place will be wiped out of the equation.

Things like: mortgage interest deduction, capital gains exclusions, Fannie Mae and other "affordbility" programs, and oh yeah let's not forget the totally corrupt lenders.

Oct 14, 2006, 10:23:00 PM  
Blogger marinmaven said...

I grew up in Menlo Park and I certainly witness the transformation of my old neighborhood. 1920s cottages have been knocked down with the surrounding trees to make way for the McMansion. Menlo Park had their boom early during the rise of Silicon Valley Boom. On one hand, it is hard to begrudge someone who just paid a million bucks for a property in building a house they want, but on the other hand, the act of creating a McMansion removes a once affordable house out of reach of the average family.

The house I grew up in is one of the few that seems to retain its original footprint, but it is one of the very few.

I have read on this website that prices are the way they are because of anti-growth policies of Marin, but growing up in the South Peninsula/South Bay where pro-growth was king, it had not a stitch to do with prices. Real estate down there is incredibly high, even with out of control development.

Prices are all about unbridled capitalism, insane lending policies that allow people to bid higher and higher and use their equity to upgrade their homes out of the reach of the average family.

Oct 15, 2006, 8:00:00 AM  
Blogger cajun100 said...

I saw that MARIN Magazine ad as well. But then, that whole production is geared to over-consumption, isn't it? No surprise there.

Yes, the "anti-growth" movement is given too much (negative) credit for high residential prices. And the comment about the South Bay is right on target -- growth was permitted in very large amounts both on the west and eastern bayside areas, and it spilled over into the valleys as well. And prices still skyrocketed in this last "boom".

I believe that the sheer amount of income available (via high employment and high wage positions) and other factors (racial and economic considerations) had more to do with the general rise of values (all other factos being equal: capital available, loose lending, real estate as an investment choice, etc.). What kept the fires burning was the fact that we really had fairly tough restrictions on new development in the "chosen" areas (pick your nice town good school district, good commute, and so on).

I too, remember Menlo Park well from the sixties, when I lived on the Peninsula. And Burlingame. And Belmont, San Carlos, etc. etc. All these nice little places needed was a lot of money in circulation, a growing younger population, changes in the financial environment, and the rest. The other positive ingredients were already in place. And the NEW residents wanted more than the 1928 bungalow as their message of success. It was inevitable. It just got compressed into five years or so rather than 15 or 20.

Oct 15, 2006, 9:58:00 AM  
Blogger Rob Dawg said...

I invested low and sold high holding with positive cash flow. I could only sell high becase of the bubble. I guess that makes me an enabler.

Oct 15, 2006, 11:33:00 AM  
Blogger Marinite said...

I have read on this website that prices are the way they are because of anti-growth policies

Correction. It's part of the problem. It has never been claimed (at least by me) to be the whole problem.

Oct 15, 2006, 2:13:00 PM  
Blogger sf jack said...

"I invested low and sold high holding with positive cash flow. I could only sell high becase of the bubble. I guess that makes me an enabler."


After seeing this, I want to add to my earlier comments.

It's that many "commentaters" such as AT Fleming, like many here in the SF Bay, like to have it both ways.

They want the benefits of capitalism for themselves individually or their family (the rising of the price of their own home), but not when it accrues to or happens in society as a "whole."

(I realize, not all benefit from capitalism, of course)

Then, to them, it suddenly becomes a problem.

In other words, Ms. Fleming will LOVE IT when she can sell her little bandbox for a million or two more than she paid - but somehow, in the same situation it's bad for society when everyone does the same thing, or tries to do it.

Somebody, as we see here as just one of millions, like Robert Cote.

So again - especially to those whining about what has happened to their neighborhoods or way of life, but nonetheless benefit - cry me a river.

Oct 15, 2006, 5:22:00 PM  
Blogger Rob Dawg said...

Maybe you don't read enough into my posts. I didn't want to sell, I had to sell. I had too much in Enron or Cisco Systems. It was insane to keep all that money tied up in a usually illiquid asset paying a rent "dividend" half what it had just 3 years prior. I would have been happy to keep landlording for another 2 or 4 decades but the economics stopped making sense. I'm only in my 40s but a friend in his 70s bailed at exactly the same time for exactly the same reasons. We never talked until after the fact. The point should be very disturbing. The rational, sane owners are out. The inmates have control of the asylum. They not only want and think they can get higher rents, they need higher rents. Not a good environment even for those of us who could have dropped rents and still made money. I don't remember who said it first but I also just didn't feel safe playing with all the amateurs on the field. I didn't want the problems of taxes and step basis and closing costs and all but an insane market is still the market.

There's going to be a lot of people hurt but not because of capitalism but rather a failure of capitalism. China could very well devolve into anarchy because of their banking irregularities. We could see a depression if unchecked. Capitalism is not Kudlow Unfettered Capitalism where indeed people do get hurt but a Capitalist economy ina democratic society. We are closest with our constrained socialism and representative government but very few ever make the rules. The best we can do is modify the rules and maybe exploit the rules.

I bought "fair" and sold with no coercion. I'll pay my taxes and reinvest my proceeds. I did exactly as was expected but the results are/were disaster for others. When property taxes jump from $60/mo to $200/mo the Kalifornia beast gets bigger and the local benefits smaller. That alone causes me to blanche, the buyer was an additional $140/mo in the hole for just taxes and couldn't possibly raise the rent that much for several years. He saw value at $1600 per year less than I could imagine. Iactually know what the psychology was; the location was special. As Ihave been told many times, the village is destined become the Beverly Hills/Pacific Palisades of San Bernardino County. Honestly, has there ever been a bigger signal to sell?

Oct 15, 2006, 10:45:00 PM  
Blogger mktmakr said...

There will ALWAYS be people who can't afford to buy in Marin or San Francisco, so by definition if you EVER buy a house at ANY time you are "destroying housing affordibility" for somebody. We can't ALL live in Marin. If it's too expensive for you, then move somewhere cheaper. If it becomes affordable for you then move back. If someone paid too much, they'll lose money. The free market is and will shake this all out.

Oct 16, 2006, 8:28:00 AM  
Blogger sf jack said...

"Somebody, as we see here as just one of millions, like Robert Cote."


Robert -

I read nothing into your post. You don't have to explain your actions to me.

You are just an example. One of millions of people who want(ed) to sell their house.

That's all I'm saying.

I'm not judging your behavior at all.

I'm questioning those who blame people like you for what has occurred. It's not your fault, nor do I see you as an "enabler".

They fail to see themselves in the many people like you.

Oct 16, 2006, 2:46:00 PM  
Blogger sf jack said...

"The free market is and will shake this all out."


Eggs-act-lee! This is part of my point.

Though I'm sure some will argue "it's not free."

[I agree with what he/she said above that, too; leave it to the mktmkr (market maker) to state it plainly]

Oct 16, 2006, 2:50:00 PM  
Anonymous Anonymous said...

If you want to lump in anyone who has bought a house in the last several years as greedy and selfish, then you are even more bitter than I thought. Why don't you also lump in anyone who didn't sell their home in Marin as greedy for allowing home prices to ride higher, without knocking them back into line? Why exactly do you stay in Marin anyway? I've never heard one positive thing out of you regarding Marin, whether it is housing, the culture, the people.

P.S. Thanks for all of the work you put into the site! And please post just one positive thing about Marin. If not for me then do it for the kids!

Oct 16, 2006, 3:28:00 PM  
Blogger Marinite said...

anon 3:28 PM --

Why exactly do you stay in Marin anyway?

My parents. To take care of them as they get on in age. That's what children do and that's why I moved back and that's why I am here. When they kick the bucket I might leave. But I might not; I have deep roots here. I haven't decided yet.

If you want to lump in anyone who has bought a house in the last several years as greedy and selfish...

I don't. And don't put words in my mouth. There is a lot of blame to go around. I know that. If you have read this blog at any length then you know perfectly well that I appreciate that this situation is not so one dimensional. I just don't feel like restating the same things over and over again with each new post just to assure people new to this blog that I am aware of all the complexities. I'm not writing stand-alone articles after all; I'm writing log entries. But yeah, a lot of people were being greedy and selfish and were part of the problem; the lesser part of the problem but a part nonetheless; sort of like voting. And knowing that there is a lot of blame to go around doesn't mean that we shouldn't stand up and speak out against something that we believe is wrong at least when taken to such extremes as this speculative mania. And if someone else stands up and points out what is wrong (like the author of the featured article), then I have no problem directing attention towards them even if I have to be a little sensational about it (which I have learned, since starting this blog, gets people more involved with the posts; a little tongue-in-cheek once in a while can be effective).

When I first started this blog it was a humble attempt to warn people that housing doesn't always go up, at least over the short term (a few years). I thought all the housing myths, like "housing always goes up", was putting a lot of people in jeopardy who would otherwise not be putting themselves in such danger. I got fed up with people with vested interests (e.g., most RE agents, lenders, etc.), popular media outlets (like the IJ), etc. spouting the RE party line without nary a word of caution all in the name of making more money for themselves. Of course, I am not alone -- the same motivation could be attributed to a lot of bubble blogs.

Another motivation was to make publicly available my modest attempts at gathering together real estate related data that was otherwise difficult to find and pull together. My attempts in this effort have been mediocre at best since it is so hard to get the data (btw, what better proof that I am in no way affiliated with the RE industry?). The idea here was so that people could make better, informed decisions as well as to counter the ceaseless RE cheerleading.

No one can deny that affordability has been destroyed in many places. And I dare anyone to argue that that is a good thing (besides increasing personal profits or those of an agent who has every reason to see prices go through the roof without giving a damn about the consequences). Declining affordability has also altered the character of many communities, splits families, put people at greater than necessary financial risk, etc. (Given how concerned Marin is with preserving community character then one might think declining affordability would be an important issue to Marinites.)

On balance, I see this housing bubble as more bad than good. Maybe I'm right in making that assessment or maybe I'm wrong. But one thing I know is that I could either be like your average American and obsess with American Idol or what the latest gossip is of my "favorite" celebs, or do something about it. I choose action over inaction any day even though my efforts don't make any real difference. At least I can say I tried to do something and maybe encourage by example others to take a stand on the things that concern them.

True, "market forces" will likely fix things. But unless people think about the costs, and not just on how they personally profited from it, and say something, then nothing will ever change and a repeat of this beast is more likely than not. I would like to believe that this mess could have been avoided, or at least attenuated, if people were better informed and took more personal responsibility for the part they played in it. This blog is just one, a lessor one I admit, of many that are trying to bring attention to what we see as a problem. It's too bad that most people's gut reaction to such bloggers is to invent unflattering motivations (e.g., bitter jealous renters, etc.).

Laugh all you want, but it's still true.

I've never heard one positive thing out of you regarding Marin...

That's because this is not a blog devoted to discussing the merits or demerits of Marin except as they relate to housing and the housing bubble. I just focus on Marin because that is where I currently live and think I know quite a lot about. Besides, there are other blogs that do a better job of discussing the housing bubble on a state-wide or national level. But since you have me thinking about it I frankly cannot think of one positive thing about Marin that is unique to Marin. However, I do like the fact that recycling is mandatory and not a lot of places that I've lived in do that (some but not all). I am rather fond of the Marin brewery but a lot of places have breweries that are at least as good. Oh, here's one -- I love the myth surrounding the indian princess that supposedly laid down on the side of Mt. Tam waiting for her lover to return as a fanciful explanation for the mountain's profile...that one is certainly unique to Marin.

Oct 16, 2006, 10:08:00 PM  
Blogger cajun100 said...

I just have to jump in here. Although I grant you this can be enjoyed in a very few other places, with slightly different topography, I nominate our evening fog (experienced in a good part of Marin) as a unique, majestic sight to see.

Over the years one of the great joys of owning my 70 year old, rather smallish Mill Valley home (not totally remodeled, folks!) has been taking the cooling air and watching the wisps of fog come over the hills to the west. A marvelous sight. Tends to wash away the day's hassles.

Oct 20, 2006, 12:41:00 PM  

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