Party Like It's 1997
A Tear in the American Fabric
Over the past two weeks, there have been a number of articles taking positions that only a few years ago would have been unthinkable. On June 7th, Joe Nocera of the New York Times, in his piece entitled “Wake-Up Time for A Dream”, called into question whether home ownership is all it’s cracked up to be. From his perspective, the government’s guaranty of almost all mortgages is propping up a housing market otherwise on life support. As my friend, Malcolm Carter, asserted in his June 16th blog post, perhaps it’s time to end the mortgage interest deduction, “an insupportable policy that hinders critical long-term gains”.
This past week two more articles got added to the woe pile. First, David Streitfeld’s piece on June 16th in the Times, entitled “Housing Market Slows as Buyers Get Picky”, outlined how many real estate transactions are falling apart at the last minute as buyers seek concessions that sellers are unwilling to give. The deal falls apart at the eleventh hour, the house goes back on the market and the house sells at a lower price…or doesn’t sell at all. An aberration or a trend? Finally, David Wessel of the Wall Street Journal, in his June 17th article, “Rethinking Part of the American Dream”, echoes these views and suggests that maybe renting is healthier for the U.S. economy than home ownership. Someone should twitter: It’s now cool to rent, who knew?
Hitting the Reset Button
Taking prices and the number of mortgage applications into consideration, the residential real estate market looks a lot more like 1997 at the moment, than the middle of 2010. Many commentators love to use the expression, “hitting the reset button” when it comes to describing the current state of the economy and the real estate market specifically. But to what point have things actually been reset? With mortgage applications at 1997 levels (see Jonathan Miller’s June 17th Maxtrix blog), are these industry metrics just a snapshot of a real estate market trying to dust itself off after a really bad fall or symptomatic of a much more significant directional change in American culture. One would have to conclude that a seismic shift in home ownership philosophy is on the horizon and that the country is resetting to a point many years before the 1990’s. We all continue to hope that things will improve sooner rather than later. But hope is not a plan.
Residential Reality: Look Beyond Manhattan Island
The view from Midtown can skew reality. There’s always a crowd drifting onto Third Avenue from P.J. Clarke's, the high-end real estate action described on curbed seems to be endless and it’s silly season in the Hamptons. But when you leave the island, which I sometimes think is surrounded by a moat, the rest of the country is fighting a losing battle with our fragile economy. Exhibit One: the disintegrating real estate market. The inescapable conclusion appears to be that the component of the American Dream, called home ownership, which has been the goal of so many attempting to step into whatever remains of the middle class, is a window about to shut. Once closed, all signs indicate that the window will not reopen for many years to come…