Real estate crash, hot off the presses: it's the newspapers' fault! by gimleteye

The Miami Herald real estate advertising section is filled with hyperbole and wishful thinking by production homebuilders whose scattered, platted subdivisions look like the remainder bin at a bargain basement sale.

While governments thrash about the tasks of “doing something” to prevent the millions of foreclosures, there is no discussion—either in Congress or by any candidate to be the next president of the United States—how to rectify the fact that suburban sprawl is a failed fiscal model supported by failed financial engineering of Wall Street.

Allowing leapfrog development in ever-widening concentric circles around urban areas—using the existing tax base to fund needed services at the edges and relying on derivatives crafted from lowly mortgages—is an uneconomic activity imposing huge liability on workers and families in the fastest growing regions of the nation.

Even today in Miami-Dade County, the largest and most politically influential in Florida, lobbyists have encircled County Hall with new plans to move the Urban Development Boundary, closer and closer to the Everglades. “We need a new school.” Or, “We need a new Lowes.” “We’re only straightening a line here or there.” However it was done in the past--that is to say, screwing taxpayers--is how development will happen in the future. That is, until the whole system comes crashing down.

The sing-a-long is incessant and timed to the metronome of campaign finance activities: the economic shakedown that wraps up local zoning decisions in the tens of thousands and Wall Street machinations in the trillions of dollars is the reality that fits between the lines of the mainstream newsprint and why readers are rarely educated to the reasons why infrastructure deficits, declining quality of life, and environmental degradation are so commonplace as have been rendered indistinguishable from daily life, itself.

During the late, great housing boom now in cinders, erasing the distinction between standard of living and quality of life turned into the highest accomplishment of local government, through zoning decisions and permitting processes and the rabid imprimatur of property rights. Call it the race to the bottom, the lowest common denominator, or just plain and simple "what the market wants": cookie-cutter platted subdivisions and the costs of sprawl could not have been imposed without industrial quality financial engineering by Wall Street, on the one hand, and the willful acts of local and state legislative delegations, supported by lobbyists and the revolving door of industry and public office, to keep protesters and citizens at bay.

Never mind the deformation of democracy that facilitated the late, great housing boom: to the extent that the mainstream media reported the story at all, it was through editorial comics, like the Herald's Jim Morin, but not the editorial page.

For its own economic reasons, the editorial page never sought to lay out the idiocy of ethically challenged politicians waltzing the public hand-in-hand to tune of builders as billions of dollars of infrastructure deficits piled up behind them. There is no mystery, why.

Coincident with the housing boom, profits of newspapers and their stock prices fell further and further behind electronic media. This reality delivered its own cold medicine: print newspaper executives fell back into hidebound ways, relying on cash flow from existing revenue sources to plan exit strategies that made most sense from a shareholder (or optionholder, as the case may be) point of view.

That meant retaining real estate advertising, at all costs. No negative editorials on real estate. No negative editorials on banking.

In its silence leading up to the housing crash, the mainstream media spoke volumes: that all economic growth is good, that all expanded tax base benefits people, and last but not least: that the customer is always right.

And with this perspective in view, it is just good old hilarity that accompanies one paid advertisement in the real estate section of today’s Miami Herald, “Real estate market is fine, Zamora Homes president says.”

Here is the closing paragraph: “We notice that while many customers loved our floor plans and thought the homes were beautiful, they were on the fence about buying—mostly due to dreary real estate predictions in the papers.”

Yes, that’s right: production homebuilders report the real estate crash is the newspaper’s fault!

This is a point of view shared by many real estate professionals and homebuilders and bankers: that the media is only deepening the industry woes.

What separates the late, great housing boom from anything in US history is the role of financial derivatives based on mortgages and used to manufacture liquidity, allowing banks to loan more and more to speculative ventures by homebuilders, turning mania for profit into virtue, building sprawl upon sprawl, and piling costs on hapless, unwitting taxpayers.

Spinning fees and commissions through financial derivatives based on the lowly home mortgage was like pouring gasoline on the fire of land speculation and sprawl—gobbling up wetlands, panther habitat, and in Florida, places like the Everglades.

That is the story that needs to be reported and taken up by Congress and the candidates to be the next president of the United States. Instead, the Republican-led Florida legislature is trying to cut taxes as falling real estate-based revenues are blowing up government budgets.

The story of this fine mess needs to be told.