No Direction Home

October 17, 2005
       When the Museum of Bad Ideas is built by Steve Wynn in Las Vegas (designed by Frank Gehry), surely one of its remote galleries will contain this week's cover story in the New York Times Sunday Magazine about the suburban homebuilding racket titled "Chasing Ground." The story focuses on one of the nation's leading large production builders, the Toll Brothers, based in Philadelphia, and "ground" is their own cute phrase for the parcels of meadow and cornfield that they magically convert into suburban housing subdivisions all over the nation.

        The Times brings its usual magisterial lack of critical thinking to the subject. Among the conclusions: that the suburban sprawl housing bubble will continue indefinitely into the future, and that the price of houses will continue to rise, probably forever, too.

"Indeed , Toll seemed certain that firms like his -- with an expertise at finding and developing land -- would become increasingly successful. The company expects to grow by 20 percent for the next two years and 15 percent annually after that."

     Philosophically, the story is grounded in Times columnist David Brooks's concept that suburbia is a good thing because people seem to like it. But it's the Times's ignorance of practical matters that's really breathtaking. The nation's oil predicament is barely mentioned (and obviously only as an editorial afterthought, since the story was no doubt filed before Katrina and Rita shredded production in the Gulf of Mexico). Anyway, the issue is cavalierly dismissed.  Missing altogether is America's even more dire predicament over natural gas, which is used to heat half the houses in America and 99 percent of the brand new ones. Since the story focuses on large luxury houses over 3500 square feet, featuring cathedral ceilings and yawning lawyer foyers, you'd think the question of heating these behemoths might arise, but no. The price of natural gas has quadrupled since 2002 and is still going up.

      But it's the story's willingness to embrace uncritically the Toll Brothers' credo of reckless and destructive greed that is most amazing

"What happens when New Jersey reaches build-out? 'We've been trying to build it out, but we can't get our hands on it,' [Toll] said. 'We could sell every square foot that we could build on. I mean, anything within 15 minutes of Interstate 78 could be built and sold. Allentown, Bethlehem, Easton, all the way to New York City. And it's all sitting there."

    The assumption, clearly, is that America will be a happily car-crazed society forever and that nothing might interfere with that. The interstates will keep humming along. The consumer sector will keep generating high-paying management jobs. The "boomburbs" of Arizona and Nevada, in particular, will continue to expand and thrive.

      Here's the real dope on the situation. The big corporate production home builders, including the Toll Brothers, are selling their own stock like mad lately because they realize that the game is over, that they are in a twilight industry. (The Times left this out.) Home heating costs are going to crush the public this winter, and even the supposedly well-off in big new houses are going to feel the pain, because the truth is that many of them are leveraged up to their eyeballs to be where they are, and supernatural utility bills will push them over the edge just when the national bankruptcy laws have been revised to make wiggling out of debt much more difficult and punitive. The price of gasoline will keep ratcheting upward from where it is now like a medieval torture device, and will combine with home heating costs to make the public's collective head pop like a winter melon.

       Meanwhile, the mortgage industry, a mutant monster organism of lapsed lending standards and arrant grift on the grand scale, is going to implode like a death star under the weight of these non-performing loans and drag every tradable instrument known to man into the quantum vacuum of finance that it creates.

       And is there anything to be said on behalf of the mutilated American rural landscape itself? Such as: might we actually need it to feed ourselves when the great Cheez Doodle sector of the economy craps out from a shortage of cheap fossil fuel "inputs?"

       It's sad to see a once-great newspaper go through the motions of pretending to be intelligent.

__________________________________________________________________________

        I recommend this excellent essay by my correspondent Dmitry Podborits:

ON DANGERS OF BEING AN INSECT WITH WINGS AND A MYSTERIOUS INSTANCE OF MASS MAILING

Comments

[Weaseldog]

It is a fact that most Americans are levereged to the hilt. The bubble is well aknowledged to be a bubble, or a frothy latte if you're the Fed Chairman. House payments are attempting to reach escape velocity and far outpacing rents.

The logical outcome is a real estate depression worse than the one we had in the 80s.

To go with that, it's estimated that over one million Californians work in the real estate industry. Add to that an unknown number of people that work in finance, maintaing home loans.

Soon, the real growth industry will be in collections. It's lower pay, longer hours and sucks... But for many it will almost, but not quite pay the bills. The irony is that a lot of collection agents will be going home and hearing collection calls on their answering machines.

The new bankruptcy laws and I'm sure, a whole new set of legislation is designed to keep the pressure hard and heavy on folks trying to survive a debt ridden and declining economy.

In the physical world, when you attempt to contain something that is steadily increasing in pressure, you eventually get a rapid and dangerous pressure release. Often such a release can cause extensive damage. In fact it's a principle used very often to blow stuff up.

So what happens when the financial analogue occurs?

[Andy R]

I don't get the NY Times, but it sounds like the companies that normally support the puffery of the Real Estate section have invaded the rest of the paper.

Our own Baltimore Sun has a Sunday Real Estate section that reads exactly like the Times article, week after week, which is OK because you expect it there - the industry pays to advertise and they expect no less. But to put such stories in legitimate news sections without a casting a critical eye on those being interviewed - the Times allows itself to be used to propagandize on behalf of companies like Toll Bros.
Just another step towards total irrelevance for a once great paper.

[Weaseldog]

The New York Times, like most other papers, first and foremost. meant to make money. Secondly to entertain in the pursuit of money.

Accurate news and it's reputation are important, as long they do not interfere with #1.

[AK]

It's worth noting explicitly that this kind of dialogue is taking place everywhere, not just at the Times, but the BBC, CNN, and countless other 'news' sources.

What's never questioned are the underlying assumptions: what is necessary to allow anything within 15 minutes of interstate 78 to get developed? The answer is endless natural resources in the form of lumber for building, petroleum for roads and cars, and natural gas for heating. These underlying assumptions are the myths of our day. We've entered an era where we know the answer to every question is development and growth, but we've, very unfortunately forgotton what the question was.

I hope that as a society, we will eventually remember.

[Weaseldog]

Informal survey on my blog:

Even Dangerbird and DCB are welcome to comment, so long as you don't use words that can't be said on television.

http://weaseldog.blogspot.com/

[Weaseldog]

Sounds like one of the morals in The Hitchhiker's Guide to the Galaxy. We've become so focused on the quick and easy answers, that we don't stop and consider the value of the questions that we are asking.

That's a good point AK.

[Edgar Cave Urbanus]

I think it is quite clear that we have elected politicians that tell us what we want to hear. It seems the NY Times is in the same business. Telling the truth will get you shouted down, and called a traitor.

[dangerbird]

Weaseldog
You are magnanimous, and a gentleman and a scholar for allowing me to speak. My mother thanks you, and my dog thanks you. As do I.

[Weaseldog]

You are very welcome Dangerbird. My wife, my dog and five chickens all welcome you. My two cats don't seem to care on way or another. But they're like that with everyone.

[speedbird]

Good points, Edgar & AK.

Of course, "A politician is someone who lies to the press and then believes what he or she reads in the papers..."

(Wish I could remember who said that ;-D)

[karlwithak]

just one more time because it was so much fun:

"Meanwhile, the mortgage industry, a mutant monster organism of lapsed lending standards and arrant grift on the grand scale, is going to implode like a death star under the weight of these non-performing loans and drag every tradable instrument known to man into the quantum vacuum of finance that it creates."

Jim, the excitement of your rhetoric makes reality seem so mundane sometimes.

[Barry]

Wonder if this will indicate the start of a 'purge' of 'dissidents' in other branches?
http://www.dailytimes.com.pk/default.asp?page=2005%5C10%5C17%5Cstory_17-10-2005_pg4_13

[speedbird]

The thing (actually, one of many) I don't get about economics is this: it seems that 'bubbles' are sustained by confidence alone - so if confidence remains high, what's to pop a bubble? I can imagine a situation where civilisation slides back into the primordial goo with the economists still certain of future profits. It's like services with 'added value': if I want a telephone line now, can I get a telephone line? Can I heck. I can get a payment plan for a package which includes family and friends and a handy device for picking my nose while I'm on the phone. What I can't get is a cheap reliable line and good customer service. Business as a whole is turning into the continual repackaging of old ideas, which, like tenth-generation photocopies, are losing clarity and worth. And they call it 'added value'. Crazy, I say.

[cyclonaut]

"so if confidence remains high, what's to pop a bubble?"

reality. there is a point at which the diminishing returns of present practised economics will not allow for actual expansion and growth. pricing points for housing will reach a point where not enough of the population will be able to afford to keep trading up. couple that with the likelyhood that the number of people unable to keep up with payments on that last trade up falling prey to the draconian new bankruptcy code.

those forces will trump any confidence.

[Edgar Cave Urbanus]

(Fill in the blank) credo of reckless and destructive greed..."

"Many there are who openly and almost professedly regulate all their conduct by their love of money: who have no reason for action or forbearance, for compliance or refusal, than that they hope to gain more by one than by the other. These are indeed the meanest and cruelest of human beings, a race with whom, as with some pestiferous animals, the whole creation seems to be at war; but who, however detested or scorned, long continue to add heap upon heap, and when they have reduced one to beggary, are still permitted to fasten on another."

Samuel Johnson 1750

[Loveandlight]

"and will combine with home heating costs to make the public's collective head pop like a winter melon."

I would have used the following similie: "to make the public's collective head to pop like a huge pusy whitehead-zit on a teenager's face."

[Mike Church]

Good post, as always. It amazes me how badly the American public refuses to understand the gravity of Peak Oil, though it's become trendy to string the words together. After PO hits, most Americans still won't get Peak Oil.

Just as most non-historians believe that the Great Depression was caused by the stock market crash, they'll blame the 200x-2025 pwnage on the housing bust. This event that will turn right as the shadow of crisis awareness draws past the early adopters and into the early and late majority.

Most Americans are completely unaware of the changes going on in the credit industry right now, but the industry has become a lot more conservative in the past 12 months; lenders were too lenient in the past and they're preparing for a crash. It will happen.

Stay warm over the winter.

-MC

[Don in Colorado]

This may be a first -- our regional electric co-op is planning public showings of "The End of Suburbia."

They've gotten the message, it appears.

[Deb]

http://debfrisch.com/archives/2005/10/kunstler_re_ger.html

[ross]

I am left with a few thoughts after JHK's latest and Weaseldog's response.

In light of the increasingly parlous state of the average U.S. citizen, particualrly with respect to their financial state, the prison industry will continue to be a place of real growth. Thought number two is what a sad sight it is to see the N.Y. Times (along with the rest of the major media from paper to radio to T.V.) function as little more than corporate shills.
I realize this isn't a new development, but the effort to shill may be more refined than before.

I couldn't help but get the sense that the article in question functioned as little more than a puff piece, an advertisement for the R.E. industry in general and Toll Bros in particular. If indeed insiders are dumping stock,then the article will serve well the need to to create demand for the not so secretly reviled shares.

And now a final thought. It appears it is left to the internet to act as the real watchdog of public affairs in the form of blogs like the one here, where, the reportage, such as it is, is arguably more savvy and honest than what one routinely finds in mainstream media.

[Lisa]

Cyclonaut: "so if confidence remains high, what's to pop a bubble? "

well, for one thing, the Chinese calling in their debts so they can keep building up their military, and converting those pesky bicycling peasants into proper auto drivers!

[Beth]

Gawd, what the hell is a " yawning lawyer foyer"? How can I tell if I have one? Or, is this just something you made up for us to worry about?

[cyclonaut]

"so if confidence remains high, what's to pop a bubble? "

lisa,

not my supposition. i quoted speedbird, and then posited my view on what could pop it...

[Lisa]

woopsie; scanning too fast

[jbag]

lawyer foyer...one of the characteristics of a 'McMansion.'
http://en.wikipedia.org/wiki/McMansion