Riotous Real Estate

[chlamor]

Riotous Real Estate
By Mike Davis

Last February the sirens howled in Hollywood as the LAPD rushed reinforcements to the 5600 block of La Mirada Avenue. While a police captain barked orders through a bullhorn, an angry crowd of 3000 people shouted back expletives. A passerby might have mistaken the confrontation for a major movie shoot, or perhaps the beginning of the next great L.A. riot.

<snip>

The bread-riot allusion was apt, although the crowd was in fact clamoring for the last crumbs of affordable housing in a city where rents and mortgages have been soaring through the stratosphere. At stake were 56 unfinished apartments being built by a non-profit agency. The developers had expected a turnout of, at most, several hundred. When thousands of desperate applicants showed up instead, the scene quickly turned ugly and the police intervened.

<snip>

The great American housing bubble, like its obese counterparts in the UK, Ireland, the Netherlands, Spain, and Australia, is a classical zero-sum game. Without generating an atom of new wealth, land inflation ruthlessly redistributes wealth from asset-seekers to asset-holders, reinforcing divisions within as well as between social classes. A young schoolteacher in San Diego who rents an apartment, for example, now faces an annual housing cost ($24,000 for a two-bedroom in a central area) equivalent to two-thirds of her income. Conversely, an older school bus-driver who owns a modest home in the same neighborhood may have "earned" almost as much from housing inflation as from his unionized job.

<snip>

The business press, as always, reassures passengers that they are headed for a "soft landing," a slowdown rather than a crash, but even a mild jolt may be sufficient to end the current anemic recovery and throw all the dollar-pegged economies into recession. More ominously, some eminently respectable Wall Street economists, like Stephen Roach of Morgan Stanley, have been warning of a dangerous negative-feedback loop between the foreign-subsidized housing bubble and the huge U.S. trade and budget deficits. ("The funding of America," he has written, "is an accident waiting to happen.")

http://www.tomdispatch.com/index.mhtml?pid=2329

[bemildred]

1. Yep, the magic hand of the market is crazy as a loon. nt

[barb162]

2. reminds me of Tokyo real estate a while back.