SUBURBIA DELENDA EST, by Bill Bonner
"It was the flight to suburbia [after 1929] that smashed
land values in the big cities. That mighty blow to the
economic centers of the country helped to bring on the
Great Depression."
..... Jack Lessinger
A few months ago a friend, keeping me abreast of the
hometown news, sent a clipping.
"La Plata Destroyed by Tornado," said the news article.
The accompanying photograph showed several buildings
leveled...with bits of vinyl siding scattered on the
ground and fiberglass insulation hanging from a
surviving tree as though it was Spanish moss.
The report told how 3 or 4 people were killed when a
twister let loose and went through the Southern Maryland
town.
"Small price to pay to rid the world of La Plata," your
editor thought to himself. Even the debris was
embarrassing. A decent building would have yielded at
least a pile of bricks or stone. This stuff was so light
the cyclone must have ripped it apart like a child
opening a birthday present and carried it across the
bay. They're probably still finds bits of aluminum
siding and quarter-inch plywood over on the Eastern
shore.
La Plata was once a fairly decent little burg. Your
correspondent recalls his first summer job. Working for
a building contractor, he was given 5 minutes
instruction and put to work painting the new bank in the
center of town. As the white paint dripped down his arm,
he felt a little pride in having gainful employment and
on contributing to a handsome building - for the bank
was built on the colonial theme, out of brick with white
trim (and the occasional serendipitous splash of white
paint on red brick, courtesy of your editor).
Years later, Route 5 coming out of Washington was
widened, and in came the commuters, the shopping malls,
auto dealers, and almost every imaginable commerce that
a man can put a price behind and parking lot in front
of. Hamburgers, pizza, Chinese takeout, tacos...muffler
replacement, tires, lubrication...once the division of
labor took hold, there seemed no stopping it. You had
only to drive along in the far right lane, keep your
eyes open...and anything you might want would soon
appear, advertised on a billboard. And so convenient!
European cities are different from Americans ones:
people want to live in them.
Prices in Paris have risen sharply in the last 5 years.
A one-bedroom apartment of just 500 square feet sells
for $300,000. The closer to the center of town, the
higher the price. And no wonder, in the center of
European towns, you find good restaurants, movies, bars,
clubs, museums - sidewalk cafes and street life. At 6PM
on a Friday afternoon, when the weather is good, a
person can scarcely find an empty chair at the Paradis
across from our office.
By contrast, downtown Washington, at the vesper hour, is
deserted.
With a few exceptions, American cities are not places
people choose to live. They wouldn't choose to park
their cars downtown either, but it is a necessity. And
as soon as working hours are over, they get in their
cars after work, roll up the windows, and get on the
freeway. But instead of heading to some paradise beyond
the city walls, the poor hapless commuter spends an hour
in traffic to get nowhere. Driving down Route 5 to La
Plata, Maryland, for example, he finds no museums, no
cafes, no decent bars, no restaurants with a chef, no
charm, nothing but a wasteland of strip malls and
insipid houses tracked across the landscape like cogs in
a zipper.
Nor are there any public fountains, gardens, grand
avenues, parks worthy of the name...no history...and
here we offer a guess: no future. Nothing but a
desolation of parking lots and forlorn residential cul
de sacs where the trees have been cut down so the
streets could be named after them. On Dogwood Lane the
houses are butted up against one another so a man risks
splashing his neighbors when he washes his car. And over
on Maple View Drive the neo-plantation style houses
begin at $499,000, believe it or not. For the price, you
get all the latest popular conveniences - water jets in
the bathtubs, cable and alarm wiring, in-ground pool, 3
car garage, decks with barbecue and Jacuzzi, and heck,
maybe even a family dog. Just hope that no tornado whips
up and blows it all away.
It's the windows that bother us most. They stick the
$499,000 house out in the middle of a tobacco field
without even a locust tree for shade...and then nail the
vinyl shutters to the wall. You'd think for that kind of
money you'd get decent windows you could open...and
decent shutters you could close. But shutters went out
of fashion in America before WWII. Since then, people
just turn up the air-conditioning, draw the blinds, and
turn on the TV.
There are probably people who like suburbs. Of course,
there are people who like Barbra Streisand and sumo
wrestling. Most people look at the suburbs as a
necessary evil - like taxes, except that it is an evil
they plan to escape...after the kids have left home and
their retirements have begun.
Therein hangs a tale, we believe. For suburban real
estate represents the number one item on American's
balance sheets - and also their biggest liability. "Real
estate loans anchor our whole economy," writes Jack
Lessinger, an economist who specializes in real estate
patterns. "In the event of a large and permanent
collapse in real-estate values, property owners default
on their mortgages, banks and other lenders go belly up,
depositors aren't able to pay their bills, production
and consumption slow down, unemployment rises and
government is helpless because bailouts would be too
expensive."
As America's love affair with stocks began to turn a
little sour, investors slouched back to their
homes...and looked upon them with new favor. Every
passing day, the stock market seemed to get older and
uglier. But the real estate market never looked
finer...for every dollar their equities had lost, their
homes seemed to gain one - or almost. In the last five
years, stocks rose by $6 trillion...and then gave the
money back. The real estate market gained about $5
trillion and still has it in its pocket.
And Greenspan's low rates made it possible for a
homeowner to borrow out some of his "equity"...and still
end up with lower monthly payments. The consumer not
only did himself a favor by buying a new house - or
refinancing an old one - he gave a boost to the entire
economy. And Greenspan applauded his efforts on national
TV!
Houses, like automobiles, are considered "durable"
goods. They are meant to last. Automobiles lose value at
a notoriously fast speed. Until now, houses have
generally increased in price. Nothing says they have to;
suburban housing prices, in particular, may prove much
less durable than people expect.
Lessinger believes the next major phenomenon in the real
estate market will be the collapse of the suburbs.
America's baby boomers are not just getting older and
more desperate, says Lessinger, they are also changing
their minds about what they want:
"Suburbia is no longer the centerfold of the American
Dream..." The boomers want "something quite different,"
he continues, "life in a small, friendly community far
from congested freeways - a village in the midst of
natural and unpolluted open space. And since 9-11
there's another factor: Dense metro areas make inviting
targets for terrorists. As people are increasingly
anxious to leave, the demand for suburban real estate is
leaking away. When that leak becomes a flood...expect a
crash."
In the early 1900s, one of the surest investments one
could have made was in America's large cities. Rural
populations migrated to urban areas to find work...and
escape boring lives in hick towns. But by the 1920's a
new trend was already underway - the big cities were
filling up with Blacks and Catholics, so those who could
afford to were moving out of the center of town to
close-in suburbs. The market break in '29 marked the
end, not just of an mania for stocks, but also of in-
town property prices. Cities such as Baltimore, St.
Louis and Philadelphia hit their peaks around '29 - and
never recovered.
Likewise, Lessinger believes the current bear market on
Wall Street will take suburban property prices down with
it, permanently. Trendy, fashionable, wealthy people
will never again want to live in the suburbs. Which is
not to say that the suburbs will be destroyed like La
Plata. That is more than we could hope for.
Your editor, Bill Bonner |
