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The Next Slum? Atlantic Monthly On Crashing Mcmansion Suburbs

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hi

from "the Atlantic" this month. Surprisingly bullish about inner city living but a nightmare-scenario-situation wrt the McMansion suburbs.

http://www.theatlantic.com/doc/200803/subprime

"Strange days are upon the residents of many a suburban cul-de-sac. Once-tidy yards have become overgrown, as the houses they front have gone vacant. Signs of physical and social disorder are spreading.

At Windy Ridge, a recently built starter-home development seven miles northwest of Charlotte, North Carolina, 81 of the community’s 132 small, vinyl-sided houses were in foreclosure as of late last year. Vandals have kicked in doors and stripped the copper wire from vacant houses; drug users and homeless people have furtively moved in. In December, after a stray bullet blasted through her son’s bedroom and into her own, Laurie Talbot, who’d moved to Windy Ridge from New York in 2005, told The Charlotte Observer, “I thought I’d bought a home in Pleasantville. I never imagined in my wildest dreams that stuff like this would happen.”

In the Franklin Reserve neighborhood of Elk Grove, California, south of Sacramento, the houses are nicer than those at Windy Ridge—many once sold for well over $500,000—but the phenomenon is the same. At the height of the boom, 10,000 new homes were built there in just four years. Now many are empty; renters of dubious character occupy others. Graffiti, broken windows, and other markers of decay have multiplied. Susan McDonald, president of the local residents’ association and an executive at a local bank, told the Associated Press, “There’s been gang activity. Things have really been changing, the last few years.”

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At Windy Ridge, a recently built starter-home development seven miles northwest of Charlotte, North Carolina, 81 of the community’s 132 small, vinyl-sided houses were in foreclosure as of late last year.

...

:o

Thanks for posting.

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The results were bracing: Nelson forecasts a likely surplus of 22 million large-lot homes (houses built on a sixth of an acre or more) by 2025—that’s roughly 40 percent of the large-lot homes in existence today.

Blimey! Food for thought indeed....

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housing.jpg

The do look nice; butclearly looks aren't everything.

modern suburban houses, even high-end McMansions, are cheaply built. Hollow doors and wallboard are less durable than solid-oak doors and lath-and-plaster walls. The plywood floors that lurk under wood veneers or carpeting tend to break up and warp as the glue that holds the wood together dries out; asphalt-shingle roofs typically need replacing after 10 years. :blink: Many recently built houses take what structural integrity they have from drywall—their thin wooden frames are too flimsy to hold the houses up.

The article is all about demand shift. Pump oil price increase into the mix and it don't look good.

The US's equivalent of our inner city & coastal resort BTLs.

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In Detroit you can now buy 3 bed houses for £50.

Though these houses are your worst nightmare. The suburban developments look great and you would want to live there. I have family and firends in the US leaving in these suburbs. I won't be sending them the link.

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At Windy Ridge, a recently built starter-home development seven miles northwest of Charlotte, North Carolina, 81 of the community’s 132 small, vinyl-sided houses were in foreclosure as of late last year.

are these houses really made of plastic?

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The more I see the more I become convinced that another Big One is here. 1929 revisited but this time far more global in its impact. Take what you see happening in the US now and prepare for the same here very soon. IIRC there was a story in our press recently to the effect that over 80% of our new builds are substandard. Typical of boom periods as people just want to get on the ladder and don't think about quality issues.

Anyone starting to think that the Big One will take house prioces down more than 60%?

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I remember in the housng crash of the early 1990s there were stories like this of really beautiful mansions in huge grounds in Colorado being abandoned by their owners and sold off for 10% of their original peak value all stripped of their copper wire etc but nevertheless in really desirable areas.

Of course these McMansions are not real mansions but the crash always starts at the bottom and works its way up the food chain.

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are these houses really made of plastic?

The vinyl is the outer thin cladding that is weatherproof and of aesthetic value. It is quite often produced to look like colonial timber weather board external cladding. Plastics are common for windows but I dont beleive that they are used as structural members or framing yet.

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In December, after a stray bullet blasted through her son’s bedroom and into her own, Laurie Talbot, who’d moved to Windy Ridge from New York in 2005, told The Charlotte Observer, “I thought I’d bought a home in Pleasantville. I never imagined in my wildest dreams that stuff like this would happen.”

Linear expectations in a non-linear world.

So property prices are remaining stronger select urban areas, and people are choosing urban living so as to be close to law abiding people, employment opportunities - to have less reliance on cars/oil, and get away from the increasing poverty and lawlessness of the suburban wastelands? I expect that the people relocating to urban/city living will have future shocks of their own to cope with to spark a fifth migration.

It's breathtaking how rapidly circumstances can change with this subprime / credit crunch / liquidity crisis.

Wherever prosperity exists, it is natural for people to expect prosperity to continue. For this reason, much of the history of human society is a record of astonishment. Time and again, people have marginalised their affairs, rendering themselves increasingly crisis-prone. They have gone into debt, extending claims on resources to an extreme that could be supported only if current conditions were sustained uninterrupted into the future. Times and again these hopes have been disappointed.

Whenever prosperity has seemed permanent, some apparently minute change - a shift in the wind patterns in the upper atmosphere that altered the fall of rains and flow of rivers, a mutation in the genetic composition of a virus or bacterium to produce a new form of pestilence for which human beings or their food stocks had no defence, or a technological twist like the addition of a stirrup to the riding gear of horse - could produce astonishingly large nonlinear shifts in the organisation of human society.

Souce: The Great Reckoning (1992 - James Dale Davidson & William Rees-Mogg)

The Migration of the Affluent

The fourth migration of American life, the move to suburbia, was the first to involve a movement within the boundaries of a settled nation rather than a migration to the frontier. It was also the first in which the new regions of opportunity - the emerging suburbs - attracted primarily the more wealthy members of society, rather than the "failures," to use Stevenson's term.

The fourth migration was only incidentally a migration of Okies and movie stars to California. It was more significantly the move to suburbia. It took place throughout America, and is dated by demographers as having begun in 1929. The first stirrings of this migration, however, were evident earlier. An intelligent observer could have spotted the growth of the suburbs by the middle twenties. By 1929, the Connecticut suburbs of New York were already so jammed with commuters who had grown rich in the bull market that choice properties were selling for as much as a million dollars. As Jim Grant points out, this was actually the top of the market for that type of suburban property. The million-dollar houses in Greenwich of 1929 "changed hands for as little as $75,000 in the 1930s." Suburbia began with a migration of the rich. Throughout the entire migration period, ending with the recession of 1958, new suburbanites tended to have higher incomes than those left behind within the city boundaries.

Souce: The Great Reckoning (1992 - James Dale Davidson & William Rees-Mogg)

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The more I see the more I become convinced that another Big One is here. 1929 revisited but this time far more global in its impact. Take what you see happening in the US now and prepare for the same here very soon. IIRC there was a story in our press recently to the effect that over 80% of our new builds are substandard. Typical of boom periods as people just want to get on the ladder and don't think about quality issues.

Anyone starting to think that the Big One will take house prioces down more than 60%?

I don''t see how new builds will ever be quality made in the UK - if they are put up cheaply in a boom what on earth are they like when they go up in a recession and they aren't being snapped up?

Having said that, I am renting a new build at the moment and it is much nicer than my knackered 100 year old Edwardian terrace that I left 6 months ago. It is warmer, cheaper to heat, easier to clean and much much quieter... but then I did have student HMOs on either side of me previously.

Bill Bonner in Moneyweek wrote an interesting article, it must be up on their site, about how new builds in the US are basically all front and show with little substance to them. Apparently realtors have to clinch the sale in 10 minutes of you walking in so they make the front of the houses look fab but then skimpt on everything else.

Again, I think this is a sign of how rotten Capitalism is in the US and UK - Joe public is treated like a mug and ends up buying a badly build house for a fortune because building regs are so weak. Quite the opposite in places like Germany and Holland - we are decades behind them in terms of build quality, sound insulation, heat insulation and 'green' aspects.

Ah, here's an except from Bill Bonner's article. If you don't already subscribe to Moneyweek I suggest you do. Well worth the money IMPO.

Driving down route 4 in Southern Maryland, we passed a sign advertising a new housing development.

So plentiful are the new houses weeding up in the greater Washington, DC, area that one hardly notices another one. But the sign caught our attention:

“The Wow Factor” it said, in large red letters. We looked beyond the sign to see what the wow was all about. The houses were just like all the others built in the last ten years – with large, fraudulent fronts, laid up in brick, some with tall Tara-like columns and front windows so large you bend down to look for a stone.

You think they might be substantial, handsome houses. And then you see the vinyl siding and small, plastic windows on the side. They only look good from the front. And then only if you don’t look too hard. Charmless, soulless, hasty, slick – they are stacked hard up one against another like Chinese TVs in a discount mall.

“The ‘wow’ has to come at the very beginning,” explained a real-estate developer from Miami. “You bring someone to a house... he’s got to say ‘wow’ in the very first two minutes… or you won’t make the sale.”

A couple of years ago, he was building $4m houses on a golf course in the Boca Raton area. What did you get for $4m in America in those days? A lot more than you got in the UK, but still nothing anyone with a sense of dignity would want. The houses were crowded together and then covered in tropical plants so you couldn’t notice how tiny the lots were.

Just as with the houses in Maryland, the fronts appeared to have substance they mostly lacked. They were built of stone and marble. Then, you opened the door and the entryway took your breath away. Wow. You felt as though you were in a Florentine palace – or an abandoned bank. The place had so much marble we thought we were inside a quarry. And the ceiling was a good 24 feet in the air, with wide, curved stairs winding to the upper deck. Still there was something cheap about it – it was the kind of staircase up which Rhett Butler might have carried a check-out girl.

“Wow,” we said. We had never seen a place so extravagantly hideous. “Yeah – it’s all in the first impression. But so what? That’s what people want. And then it goes up in price. Or at least it used to. I made money. The buyer made money. It was a win-win situation.”

Behind the first impression was a pathetic if extraordinary house, the kind a sports star might build. The master bedroom had a bathroom as big as Charing Cross station. We looked up to see if there were mirrors over the bed (no, the owner would have to put those in himself). To the left was a practical feature, a balcony; as the housing crisis deepens, a mortgage-stretched owner could throw himself off – and drown himself near the 18th hole. “Are these places still selling?” we wanted to know. “Nah,” he said. “Nobody can get financing…” In the heyday of the credit bubble, financing houses became as fraudulent as the façades. A recent Fitch’s study found hanky panky in almost every one of 45 subprime files it examined. Between 2000 and 2006, the FBI’s suspicious mortgage reports rose nearly 800%. The gumshoes estimate that mortgage fraud cost lenders as much as $4.3bn last year alone.

The homeowner lied about how much he earned or how much he had; the appraiser lied about the value of the collateral; or the mortgage company lied about the terms of the loan. Sometimes they all lied to each other. Then along came the Wall Street packagers who told more whoppers. Bundling up thousands of fraudulent mortgage contracts they somehow managed to get the stuff rated “investable” grade, a lie so spectacularly in-your-face it practically knocked your nose off.

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  • 295 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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