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R.T.C. .... This should make anyone over 25 shiver-n-da-boots. I remember the last great Bust. It did not matter then, everything went Bust. Oil, Money, Real Estate, Insurance. Just everything. However, what really made it was seeing the "Who's Who" on names at the Bankruptcy Court listings. Talk about a Social Register. However, this next round should be just as bad if possibly not worse, because under the new Bankruptcy Laws you cannot escape the pile of dept. This will help to compound the situation and have it extend well beyond a 4-5 year time-line.

Stand-by…in-coming!!

 Mr. Burns,
 
Your lack of responsibility in the article “Housing woes…” is mindboggling. Your use of first amendment protection to cry “fire” in a crowded theatre is criminal.
 
If there was any opportunity in your education to take an economics course then you probably got barely a passing grade.
 
Any American economy, local or national is largely based on consumer confidence. Your one sided attempt to damage Austin’s real estate consumer confidence is why I have instructed all my buyers and sellers to “cancel your newspaper subscription and turn off the TV”.
 
Comparing this market to the S&L crisis period and the oil bust of the 80’s is just plain stupid. There are no comparison’s outside of innuendo and out of context statistics (liars figure and figures lie) that exist.
 
First, while banks have unwisely taken some risk that has bitten them pales in comparison  to the Clinton era of modern day “robber barons” bilking bankers out of millions.
 
Second, comparing our present day high-tech driven local economy to the oil boom/bust demonstrates laziness only exceeded by my teenager. Getting off your duff and actually doing research used to be required before an article like yours could be printed. Obviously, journalistic standards at the Statesman are non-existent.
 
The country at large is experiencing a solid economic growth period that is contrary to the liberal mantra that this is the worst economy in 30 years. The stock market is high, unemployment is low and bumps and buffeting are being digested largely because people are working and believe that this is a short-term correction; which is clearly the case. Forecasting serious recession tells me you must be on Hilary’s payroll.
 
Austin is creating jobs weekly. There are job fairs here at least monthly; many going unfulfilled. Mean real estate values have grown but, that rate of growth is still within realistic margins.  The number of people moving to Austin remains substantial. In general, our real estate market is healthy and strong.
 
Our only problem are fools like you telling people that “the sky is falling”. Added to the Bush-haters chorus that the American economy is about to implode, it begins to wear on people. What you and the other “nattering nabobs” have succeeding in doing is creating the strongest rental market in years. Those that would normally  purchase have taken a wait and see attitude. They listen to clowns like you while ignoring those of that know the market telling them that if anything, prices will go up. The current market could not be better to buy.
 
Taking a micro view of this market with only enough evidence to compare it to past negatives makes you a candidate for an old fashion horse whipping. That was what they used to do to Carpetbaggers like you that prey on the uniformed with gloom and doom forecast to create panic.
 
If you had any integrity you would follow this article with a retraction or one that does a true comparison to economic conditions now and then.
 
In the meantime your article goes up on my “wall of shame”.
 
 
Jim

Jim,

                I wrote that column trying to get a parallel measure of what has happened in previous housing slumps. Others, also from Austin, have written to say they had wished someone would do exactly what I did--- use real data to explore the precursors. I regarded this column as an attempt at putting some reality into the hyper fear that is all too common, not to mention the predictions of doom. Most people, in my opinion, can weather a housing price slump. You might have some trouble because you appear to make your living selling it.

                You spend a lot of time blaming the messenger and even more time mis-labeling same. If you take the time to check my columns and most recent book,”The Coming Generational Storm” (MIT Press, 2004) you’ll find that I’m a rather conservative fellow. More conservative than the folks who call themselves Republicans.

                I’m delighted Austin is booming, though the increased traffic makes getting around painful. What you don’t seem to recognize is that much of the growth is due to business decisions to move out of California. Just down the road from you on Bee Cave, Dimensional Funds is building a large office building that will be their new headquarters after they officially more from Santa Monica, CA. That’s happening because a move to Texas is a good business decision, given the absurd cost of housing in California. At the Dallas Morning News we lost some reporters to San Jose but those with families came back, finding it impossible to raise a family in California.

                The same is happening on the East coast. Check around Cambridge MA and you’ll find that many fresh MIT grads (my alma mater) are electing to take jobs elsewhere because the cost of housing negates the benefits of the salaries they can command.

                If the Statesman ran the sidebar, it included some data indicating that Dallas houses had yet to keep up with inflation. I expect we’d find similar results for Houston, Austin, and San Antonio. If you didn’t see it, you can read it on my website.

Scott
 

 Scott,
 
I read your article on housing market in Austin American statesman yesterday. I wanted your advise on housing market in Georgetown, TX which is 30 mi. north of Austin. I’m in a 9 month lease, but I want to wait for the prices of housing to go down, so I can afford a 4 bedroom house, I have 3 small children. The cost of 4 bedroom in Gtown, seems to be over 180K,+ which I can’t afford.
 
Any advice is more than appreciated.
 
Thank you and love the articles.
 
Greg

 Greg,

While Texas has many of the same financing problems as the rest of the country, it is not afflicted with the high costs of housing that are making things particularly difficult in  California and New England. Much of any downturn in Texas may be offset by a flood of people moving from the expensive coastal areas to lower cost Texas.

I think your best bet is to become a very opportunistic buyer, waiting until early next year when the number of variable rate mortgage resets peaks. You will then have to be prepared to make offers on houses until one of your offers is accepted. Your realtor will not be pleased because you’ll probably have to make offers significantly below listing price.

Scott

 Loved your column.  I have personally been preaching this analogy for over three years. Started when my wife and I were looking for a new home in Austin and Houston (Woodlands). What we found were lots and lots of folks living in $700m-1.0 million houses, with no furniture to speak of and doing next to nothing in terms of maintenance. Just waiting for the next fool to buy at a higher price.

It gets worse. We were cash (good God!) buyers, and sellers demurred any cash offers because they knew Mr. Johnnie "no docs-or-down-teaser rate"
buyer would pay any price and sign any paper put in front of them. In fact we had a contract refused because of this scenario. Cash used to be King until the "Al, "the great inflater" Greenspan flew into town. Are we sure he didn't study in Argentine?

The sequel is that the mortgage company went broke, but not before the Seller let the "almost" Buyer move into the house. You guess what happened next. Too bad.

In any case, please send a bound copy of your column to Bernanke and Co.
Having lived through the Texas mess, I can vouch that real estate does not recover overnight. Worse than that, historically Texas goes to hell last and comes out last. We haven't really felt it as yet, but the resets coming next year plus the unthinkable, a collapse in oil prices, might be the next round.

The amazing part of this entire mess is the false reporting of inflation by the Fed. Interest rates should have started screaming 2 years ago, but here we sit, with the Fed continuing to destroy the value of  the dollar.
Interest rates once were used to differentiate credit worthy individuals. Not anymore. Greenspan's easy money policies created this mess. I merely view him as a financial arsonist, who like all firebugs, now returns to the conflagration to admire his handiwork and yell "Fire"!

Say it isn't so, Al!

Alan V.

Alan,

I like to think that much of Texas will avoid another severe downturn because we’ll be absorbing the hordes fleeing California and New England, but that may be wishful thinking.

Your comments on the mis-fortune of being a cash buyer reminded me of condo sales in the late 80’s in Dallas. Back then, many condos had fallen so low in value that the ONLY buyers were cash buyers because no lenders would finance them. The financing bust for condos was almost as complete as the manufactured home finance wipeout. And it’s amazing what happens to prices when payment has to be made in cash.

As I’ve long said, the fastest way to empty a room is to see who can come up with $100… or write a check for $1,000 that doesn’t bounce.

Scott
 

One year later Scott Burns sounds quite prophetic