Real Estate Glut — But Not For You
Have Small Real Estate Developers Been Priced Out, The American Work Ethic Be Damned
An individual home builder commented on my first Real Estate Glut story. I wrote it as thought piece, but he took it literally. After some back and forth he blocked me.
I’m ashamed to say, I wrote this as one of my replies:
I thought people in the South were polite. “not sure what I’m smoking”? I don’t smoke.
There is data I pulled and graphed in the “glut article”. It’s an economic reality. How you interpret that data is up to you. I make my living analyzing data. People don’t want data on Medium; they want interpretation, even if it is highly speculative.
You remind me of a Yankee whiner who blames others because he can’t get land at whatever low-ball offer he made or anything priced at what his dad paid 20 years ago.
Everything is priced fairly. You don’t want to pay it, don’t pay it. What are you smoking?
They’re, we’re even! :)
I admire that you build houses yourself!
I knew I hit below the belt. I thought I saved it at the end. I didn’t.
Although it saddens me, I don’t blame him for blocking me. The real estate market is dangerously distorted, ruining countless lives (I’ll get to that) and threatening violence from our imploding social contract (hard work building homes, not inherited wealth, should be rewarded). I need to make it clear that I don’t really believe what I said above, that “everything is priced fairly.” I was playing devil’s advocate.
He explained that there was plenty of demand but he couldn’t buy land or materials at a cost where he could build a home for a reasonable price. (I’ve written another annoying article about our new concept of housing rights: There’s No Housing Shortage.)
I pointed out his hypocrisy in wanting his costs to be low enough for him to profit while discounting an investors rights to profits by taking out risky loans for homes. Don’t real estate speculators have as much a right to a profit as a home builder?
When I was young the answer was ‘no’. Real productivity mattered. Wall Street was considered an evil, albeit a necessary one.
Today our economy continually cleaves the rich from the poor and our politics show it. It must feel to many small business people that the Fed it literally trying to put every last one of them out of business.
How did we get here?
When the real estate market was brought down between 2007–2010 real estate speculators morally, so to speak, earned their previous profits (through their losses) and paved the way to justify future profits (because of the risk they took), if they re-invested. “Risk” became as real a labor as carpentry.
After 2008, real estate speculation became a socially accepted form of business.
That might be fine, if the game wasn’t rigged to favor creditors over debtors.
During the Great Financial Crisis there was obvious mortgage fraud but instead of the government putting the perpetrators in jail they were given a pass. That lead to the election of Trump. The irony that Trump is a wet dream for all creditors didn’t, and doesn’t, make a difference.
Trump was a middle-finger to all college educated people talking about free markets and capitalism. Electoral rage against all manner of justifications why big city homes were doubling in value while middle Americans were escorted from their homes with garbage bags in their hands.
Trump losing the election in 2010 doesn’t change the continuing and widening gap between creditors (wealth) and debtors (wage earners).
The home builder critical of my story doesn’t build homes through credit but debt. I know, that isn’t what you usually read and seems counter-intuitive. But think about it. He takes out loans, buys the necessary things, sells the home, pays back the loan and moves onto the next project.
Instead a balance between creditors and debtors wealthy people with access to large amounts of near zero-cost credit buy an existing home, wait for demand to outstrip supply, then sell the home at a profit. Why can’t the home builder do that? The reason is laughable. He takes pride in building affordable homes! He physically gets up at 5 am, hauls material around and builds.
America, we have a problem.
It’s frighteningly possible that creditors will use the now increasing violence of debtors to move Western governments into a stiffer authoritarian posture. They’ll say we must “protect free markets”.
All hell might break loose.