PrintFebruary 10, 2009
Who caused the housing bubble?
Fannie and Freddie and the Community Reinvestment Act certainly did their part, but I know where the blame really lies for the housing bubble.
Forget about Obama spreading doom and gloom. I'll be more likely to believe the economy is truly sunk when Jeff Lewis and Ryan Brown of Flipping Out start talking about the fine attributes of FORMICA® and Kendra Todd of My House is Worth WHAT? starts advising homeowners on how to reface laminate kitchen cabinets. It's well known that Joseph Kennedy would tell how he knew to cash out his stock portfolio before the stock market crash of 1929.
Taxi drivers told you what to buy. The shoeshine boy could give you a summary of the day's financial news as he worked with rag and polish. An old beggar who regularly patrolled the street in front of my office now gave me tips and, I suppose, spent the money I and others gave him in the market. My cook had a brokerage account and followed the ticker closely. Her paper profits were quickly blown away in the gale of 1929.
There was a similar warning system in place with the current crash of the real estate market for those who were paying attention.
The real villains here, the truly bad seeds at the heart of this crisis, have gone unpunished thus far and are still in operation. They are Jeff Lewis and Ryan Brown of Bravo's Flipping Out, Armando and Veronica Montelongo of TLC's Flip This House, Kristen Kemp of TLC's The Property Ladder, Kendra Todd of HGTV's My House Is Worth WHAT?, and the TLC, Bravo, HGTV, and Fine Living networks in general. All of them encouraged people to take out massive loans in order to buy and renovate homes and sell them at a profit when, really, most people have terrible taste, and furthermore, are bad at laying tile.
These shows are still on! Why?
You can add A&E and MTV to the list of networks that were running shows that encouraged viewers to go increasingly in debt in order to encumber themselves with ever more elaborate homes. The influence of these shows helped make items once reserved for top end homes such as granite countertops, hardwood floors and landscapes with water features, begin to seem mandatory for the middle market. It got to the point where the small cabin being built near me for use as a deer hunting reserve was specked out for imported hardwood floors, granite countertops, a custom stone fireplace and a waterfall because the resale market would expect such amenities. The height of absurdity came last year when Better Homes and Gardens, a traditional middle marker publication, sent me some ideas for an inexpensive way to brighten my bath. I was expecting advice perhaps on a faux finish for the walls. What I found was an insert of custom four inch Italian tiles at $100 a pop for a ceramic tile wall and a waterfall faucet that cost more than all my kitchen appliances put together.
While I've noticed that BH&G has come back down to earth of late with some advice on genuine budget conscious facelifts and that the e-mails from Lowes and Home Depot are suggesting their DIY customers might apply a fresh layer of paint instead of laying out on outdoor kitchens complete with stainless steel sinks and refrigerators, these TV shows continue to air each day.
And what about the timelessness of those hardwood floors and granite countertops now spread far and wide across America and the resale market? My guess is that in ten to fifteen years the new buyers in the market will consider them terribly outdated. I remember when I was a little girl and we moved into a house that had been built around 1910. The first thing my mother did was to slap two coats of white enamel over the elaborate carved oak moldings and cover up the oak plank floor with wall to wall carpet to make the place look modern. For the next forty years Mom fretted about that simply awful six foot long farm house kitchen sink with the built in porcelain drain boards. The rest of the hours was modern, but that darn sink was located directly on top of an equally long radiator that heated the entire kitchen. The configuration made it almost impossible to put in a modern sink, disposal and dishwasher without a major reworking of the entire hot water heating system.
When the time came for Mom to move out a few years back guess what the realtor listed as the prominent selling point?
When the time came for Mom to move out a few years back guess what the realtor listed as the prominent selling point?
