Tuesday, May 5, 2009

Yes, I was on Glenn Beck

This should be subtitled "What you can't get into a four-minute Fox News show and we're afraid to ask."

Yes, I was on the Glenn Beck show this evening. That was me, answering questions about the US real estate market, hoping I would not be one of Mr. Beck's shredded targets. It's nice not being a target.

The interview featured your humble scribe talking about why it's too soon to be optimistic about the US real estate market. I had to qualify my comments, since in reality there is no ONE US real estate market. There are metro areas, neighborhoods, regions, states and whole corridors where people are walking away from homes and ghost town developments. They have been devastated for different reasons.

* In South Florida, where I was a few months ago, developers overbuilt and speculators used the cheap Fed bubble money like it was buttered popcorn.

* In Southern California, prices were -- and still -- obnoxiously high relative to the rest of the country, so homebuyers did everything they could to get into a house. Bankers and real estate agents bent over backwards (play limbo song here) to get them into these homes, some of which were located in the sprawling Mojave Desert and blistering Central Valley.

* In Michigan and Northern Ohio, you know what happened to the US auto industry.

* Elsewhere, price declines weren't as severe as the West Coast. Still, folks are hurting.

I believe that a combination of unemployment, supply and demand (too many homes, too few buyers), the complexities of mortgage guarantees (not enough of them), the failure to stem foreclosures (they continue) and the aging of the Baby Boomers (were downsizing the love shack, baby) all contribute to this housing malaise, which could last for decades.

Since that's a lot to squeeze into four minutes, I'm afraid I failed on that account and must have sounded like someone who's just a pessimist.

I'm a realist and believe that the mainstream media not only largely ignored the bubble but is failing to grasp the long-term consequences of the housing bust. Here's a few observations, all of which I expound on in my upcoming book "The Cul-de-Sac Syndrome," now available for pre-orders on amazon.com.

* Aging boomers will not be buying McMansions or moving to sprawling burbs, which I call "spurbs" in my book. They will want to be near amenities like museums, music venues, universities and cultural treasures. That means condos and townhomes in cities and inner suburbs.

* Large-scale superstores and malls are going to shrink big time. Boomers are scared to death of their diminished nest eggs. First they got clobbered by the dot-com scam, then the credit bubble, then the housing meltdown. They know they will have to work and SAVE much longer than they anticipated. They won't have their parent's retirement.

* Those places that were overbuilt (there are several lists in my book) will be crippled for perhaps a decade, maybe more.

* Congress and the Obama Administration haven't even begun to address the housing meltdown. They're going to have to do a LOT more than offer first-time homebuyers an $8,000 credit and a $1,000 check to loan servicers to modify the interest rate on mortgages that may be foreclosed upon. Mortgage guarantees need to cover most of the market for at least 10 years, either through Fannie Mae and Freddie Mac (which need to be restructured) or the FHA. The secondary market for mortgages either needs to be reinvented or government sponsored. Either way, you need to be able to sell a mortgage to an investor again.

* Congress needs to get realistic about lost equity. Some $6 trillion is gone and not coming back. I know the Senate killed a bill that would have allowed home owners to write down mortgage principal in bankruptcy, but that needs to be reconsidered. Write down the evaporated equity and move on. That's what the banks are doing.

So, dear readers, I can't possibly cover this ground (and more) in four minutes on national television, so I hope that you'll forgive me and give The Cul-de-Sac Syndrome a try. It will take more than four minutes of your time, but it might give you some novel ideas. For too long, "home was where the heart is." Let's start using our brains again when it comes to our domiciles.

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