After looking at the title of this missive I am shocked that I even have a tenth of the expertise to ponder such a thought. Let’s go over my qualifications: homeowner, community planner, urban designer, mortgage holder, and California resident. I do not have banking credentials, a financial resume, or even a minor in accounting. So there . . . I have all the necessary qualifications and maybe more than the usual talking face on the tube.
I just finished reading John Mauldin’s latest newsletter on the current state of banking and mortgages. If I wasn’t concerned before, I am very close to extremely concerned and breathing heavily now. I recommend his weekly newsletter, it is free and worth millions.
Without the underpinning of secure titles and mortgage papers there will not be a housing industry. If there is no assurance by a title company that the house and property being purchased has clear title, no one will expose himself or herself to the risk. The banks won’t, the builders won’t, the landowners won’t, and the buyers won’t.
A few months back I wrote about whether the master planned community is dead, I offered that I thought it was. The reasons are numerous and obvious to all in and out of the industry. Now I am concerned that this mortgage mess and with it the attendant foreclosures will lay low the housing industry as a whole for years to come. There are very few adults supervising the children now. Lax management, creative and outright fraudulent banking practices, too much money chasing too much money, and a general “I am in it for myself,” attitude has contributed to this mess. With very, very, few examples most of the players in this industry have contributed to the problems we face today. Builders, developers, bankers, unions, politicians, and even the buyers have all had their collective hands in the cookie jar. The jar is now empty and there is a sharp bear trap on the dark bottom.
There will be a few housing projects that will move forward. Most are urban high-density projects that have some political muscle behind them. They fit agendas and programs created through the particular cities they are in. Salvaged school sites, environmental reclamations, transit oriented communities, and maybe even a few old fashion developments. But large-scale communities with thousands of acres and units are well out of the realm of the possible now. And probably through the rest of this decade; we are reliving the 1930s.
Coming is a time of retrenchment and financial reconstruction on a scale not seen in modern banking and it will be worldwide. This banking rebirth must be based on the underlying principle of property rights and ownership and on the free market exchange of money, goods, and land. If these are not supported through regulation, law and insurance they are meaningless.
As can be seen in the Mauldin article we are in tenuous times and I fear for the whole structure of our industry. The first blog I wrote in early summer dealt with the demise of the design industry and the collapse of architectural and engineering firms. While some still cling to a few projects it is now a war of attrition and survival. This economic disease will spread through the construction industry; few will remain and they will be the very large conglomerates and the very small custom builders.
Look at a house. Walk through a new home (assuming you can find one) and count the industries it took to build, equip, and furnish it. Then multiply those items by one and a half million and you will understand what I mean. We waste our political wind taking about green industries, alternative energies, electric cars, iPads and other distractions. To say our politicians are intellectually lazy would be too kind, these impacts on the banking and housing industry need far more coverage than the sound bites of the foreclosed house sign and the grieving owner. Where are the adults when the sand box needs them?
Stay tuned . . .