The Three Cornered Hat

All housing built in the United States during the last fifty years or so, is a result of difficult compromises between three partners: local governments, builders, and buyers. These compromises have resulted in the finest homes built anywhere in the world. Improvements to the basic housing stock, like airbags and ABS in cars, have created safer, warmer, more cost effective and more durable homes than at any time in the past.

The continual push and pull between these three has forced up the price of homes and driven them into the ground, created surpluses and shortages, and put more enough politicians in jeopardy (or worse, jail) than prohibition. Billions of taxpayer’s dollars have gone into local and regional planning to try and conjure a strategy for the future placement of homes and other land uses. It can be more profitable for some than winning the lottery. Just put the right color on the map over my property and bingo – “Johnny we have a winner!”

The builders (it really makes no difference whether they build twenty custom homes a year or are the mega-giants), have to find the land. Like 21st century prospectors, their search pushes them into the hinterlands and marginal areas trying to keep their basis low, or into strange alliances with base closures, derelict urban properties and surplus school sites.

But the real power, as we have seen these past three years, is held by the buyer. Argue all you will about the banks and the manipulations that went one, point the finger everywhere, but the fundamental collapse of the market is due to the buyer – the marketplace – stepping away and saying enough. And this “enough” ripples through builders and governments like the Black Plague through Europe in the 14th century; even the fittest were thrown down.

Currently governments are trying to consolidate their positions, and for the smart ones, prepare strategies for the next push of the marketplace. General Plans are being updated and new ordinances that tend toward the Green Movement are being passed – solar, water quality, water use, and density are high on their agendas. Most are benign or at worse preemptive; governments hope the systems will be affordable and available when this turns around.

The builders are either hiding out in Hawaii or prospecting, very few are building. Each believes they have the model for success for infill properties or old school sites. They will dance with the devil (local and/or federal partners) and hope to not get their toes stepped on. Or maybe they can invent profits from thin air, like ancient alchemists. For now, the smart ones are drinking Mai Tais on the beach.

The buyers are also sitting this one out – for now. But their numbers are steadily growing. According the last census (2000) and modified by adding ten years to the count, there are 40 million citizens between the ages of 20 to 30 and many are starting families. And I would guess a good chunk of them are living at home or renting. This is a huge demographic to anticipate for both the building industry and city governments - and it is a good bet these people will not be buying McMansions. How this demographic groups acts with respect to housing will determine what the next song on the dance floor will be. Will it be the Texas two-step, the jerk, or a new form of break-dancing? My guess - a combination, watch your back.

Stay tuned . . . .