This is the heart of the residential district. Every lot is a stone's throw from the station. As soon as they throw enough rocks, we're gonna build a station. 800 wonderful residences will be built right here. Why, they're as good as up. Better! You can have any kind of home you want. You can even get stucco. Oh, how you can get stuck-o!
- Groucho Marx as the land developer Mr. Hammer, The Cocoanuts (1929)
File this one under "For Every Action There's an Equal and Opposite Reaction."
The Daily Bulletin's Robert Rogers has an article today on the rising number of mega housing auctions in the Inland Empire. According to the article, the banks are trying to reduce the surplus of homes on the market:
Twenty-, 30- and 40-percent drops from peak prices have working-class renters searching for their first home, and savvy, deep-pocketed investors trying to expand their real estate empires.
The housing auction, that Wild West of free-market economics relegated to afterthought status during the housing boom, is back in a big way in the Inland Empire and nationwide, predominantly in states bordering oceans.
Recent months have seen a handful of mega-auctions in San Bernardino and Riverside counties, where millions of dollars worth of homes have been taken off the hands of lenders and builders who found themselves suddenly saddled with devalued properties as the boom went bust.The next auction is Saturday in Palm Springs. Another is set for Sunday at the Doubletree Hotel in Ontario, where banks are looking to draw buyers for about 120 houses spanning the county, many now listed at prices that would have been laughable just 12 months ago.
As we observed a week ago, even affluent neighborhoods in Claremont are beginning to suffer from the effects of the housing crisis. James Surowiecki in the March 10th edition of the New Yorker wrote that the current problems facing many home buyers are the result of a serious underestimation of the risk of homeownership and the shift away from looking at homes as forced savings plans.
According to Surowiecki, lax credit standards coupled with property owners tapping into the value of their homes through home equity loans have resulted in a large number of homeowners across the country who are stuck with homes worth less than they owe. And, as Surowiecki notes, a correction in the housing market moves much slower than a stock market correction, so we may be a while before we even begin to touch bottom.
How bad will it get? Not very many people are predicting a reprise of the Great Depression, but things may be worse than the last big downturn in early 1990's. At least, if things turn really bad, we might see a little more introspection and public involvement once people realize the party's over.
If they turn really, really, bad, maybe we can at least look forward to some good screwball comedies to help us escape:
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