I’ve got a big article about the real estate slump online and in the new issue of Time, which inexplicably features presidential candidates’ spouses on the cover instead of, well, real estate (although I’ll admit that the scoop about Bill and Hill loving Grey’s Anatomy is bigger than anything I came up with). It begins:
The housing market in Detroit is a mess. Such a mess that nobody tries to deny it, not even the real estate agents. “The market is very, very bad,” laments Jennifer Weight, hosting a deserted Sunday open house in the suburb of Bloomfield Hills. “It’s terrible.”
Across the country, in the anti-Detroit that is San Diego, real estate is also slumping. The gloom, however, is far less pervasive. “Yes, it’s a troublesome market, but it’s not terrible,” contends broker Leona Kline.
The reason for the difference in attitude is pretty simple. In metropolitan Detroit, the 11% drop in home prices over the past year was just one more sign of a local economy in decline thanks to the troubles of the auto industry. In San Diego, the drop of 7.3% came out of the clear blue sky. The city still has jobs to offer. Beaches too.
But it is the downturn in sunny San Diego that poses the far bigger risk to the U.S. economy. Detroit, Cleveland and some smaller Rust Belt cities are experiencing a traditional bust, in which economic woes spread to housing. In San Diego, the housing decline seems to be a self-generated phenomenon, the product of too-high prices and too-crazy lending practices. Now the “housing market is dragging down the rest of the economy,” says Alan Gin, an economist at the University of San Diego. The same is true in and around Los Angeles, San Francisco, Phoenix, Las Vegas, Miami, Washington, New York City and Tampa, Fla.–all metro areas where house prices skyrocketed until 2006 and have since fallen in the face of otherwise positive economic news. Nationally, house prices dropped 3.2% in the 12 months ending in June, while the economy grew 1.9%.
For much of this year it was tempting to see this disconnect as a good thing: strength elsewhere was compensating for the slowdown in housing. But when the Labor Department reported in September that job creation had lurched into reverse after four years of gains, the tune on Wall Street and elsewhere shifted abruptly. Economists began fretting that, for the first time, a real estate bust would throw the country into recession–a sustained period when the economy shrinks instead of grows and lots of people lose their jobs. Read more.
I’ll put up some related posts later. Also, Barbara Kiviat, who wrote a great story about Denver real estate last month, has some tips for buyers, sellers, renters, and other living things.