With much mud slinging about the causes of the downturn in the economy, it has been convenient to blame the sub-prime mortgage industry as the Grinch who stole Christmas.   However, this is what that policy is, convenient.  Convenient in that, much like the RTC debacle, politicians, think-tanks and consumers have largely glanced over the much bigger issues that led to and largely contributed to the most recent economic downturn.  The most obvious being that of the imbalance of supply and demand.  The exponential appreciation of housing is no exception, and may certainly be the rule.  The price of housing appreciated so rapidly in direct relation to the lack of supply in face of tremendous demand.  As now, prices are dropping rapidly due to more houses being available than there are buyers.  And the paradox is  that with the decreased demand, production of buildable lots will scale back, almost to a stand still, essentially creating a new in-balance of supply and demand of having more buyers than homes available, when the proverbial bells rings saying that it is okay to buy again.  And by time that this bell rings, offering validation to the consumer that all is well, the market will have worked through all of the standing inventory and finished lots, thus requiring builders and developers to once again go through the process of entitling land with the necessary approvals and making the required improvements to ready the land for development.  A process that easily takes 24 months, even in “growth friendly” communities like the Victor Valley.    So during the 24 months that it takes to deliver a home, the backlog o buyers builds up, competing for the limited number of homes, thus driving up the price of  the limited supply.  New builders seeing the price appreciation, jump in the game and start to process more lots to meet this demand, again, needing 24 months to bring lots to a ready to build condition.  In the mean time,  frustrated buyers look at the re-sale market, which at first, is  priced substantially below that of new homes.  Seeing a convenient transition, trying to get kids into school, and settle in before the end of summer, buyers start to gobble up the re-sales, in many cases, bidding higher than the asking price, to ensure that they get the deal.  And as re-sales begin to move a rapid pace,  those aspiring go –getters who always wanted to get their real estate license and make the big bucks, do so.  They get their license, hang it with a local broker, who pats them on the behind and says “go get -em tiger” setting loose a wave of new licensees,  overly ambitious to make their first deal.  The number of licensed agents working in the Victor Valley increased four-fold from 2001 to 2005.  More than a coincidence when you compare this to the appreciation of the sales price of existing homes.  A local columnist for the Daily Press, towards the end of the cycle, would write admonishing sellers for pricing their homes too high.  But in fact, her finger pointing should have been at the agents who were competing for the business by telling the biggest lie, bidding for listings.  And what else is a seller to do than take the advice of a licensed agent  who says they can get the price?   So the rapid increase in the number of real estate agents, competing for a fixed amount of business, drive re-sale values higher, faster than that of the new home sales values.  The issue with this is that sellers of resale homes were using the money to buy new homes.

Back to new homes sales.  So it takes 24 months, best case scenario to bring raw land to a ready to build state, creating a back log, that inspires entrepreneurs to make a mad dash to process thousand s of lots to meet this voracious demand, but as opposed to being met with enthusiasm, these land developers are put on an obstacle course of navigating numerous hurdles and impediments that slow the process down even further.  Issues such as Mojave Ground squirrel habitat,  the lack of a master drainage plan,  lack of street dedications, and of course, the proverbial “engineering backlog”.   And then add to these issues with the cities wide eyed jealousy of the builders profit, and new fee increases to pay for the impact these new homes bring,  as reliable as the backlogged traffic congested high desert roads, homes sales die –

So as opposed to displacing blame onto those lenders and American Capitalists responding to the voracious consumer demand, who provided the money to the most willing and demanding  borrowers,  buying homes twice the size that they ever imagined they would ever own,   borrowers who took seconds out to buy new cars, RV’s, boats and live a life style way beyond their means,  perhaps their could be a brave enough politician to look in the mirror and fix the problem-

W Daniel Tate

Victorville

964-4976