WSJ: After the Bubble, Ghost Towns Across America

Our continuing saga, courtesy of the Wall Street Journal

• Dennis Pflueger and his wife won a rent-free year in a nice new house in an expensive subdivision not far from the headquarters of Wal-Mart Stores Inc. As part of the prize, they then have the option to buy the four-bedroom home for $452,000.
• Mr. Pflueger, a telephone-cable installer who describes himself as an "old redneck," is in the middle of his free year. But the Pfluegers are a bit lonely. Just one other family lives in any of the 28 new or unfinished houses on Foxboro Court. Up the street, a sign announcing "Elegant Homes" sits on a lot choked with weeds. The block is as quiet as an old ghost town.
• When their 12 months end, the Pfluegers will move on too -- perhaps to that trailer on their daughter's property. Mr. Pflueger recently found a job but still can't afford to buy the house. "That's way out of my league," Mr. Pflueger says.
• Since real-estate tanked, many new planned communities across the country are half-empty, with for-sale signs outnumbering residents by a large margin.
• Some of the projects abandoned by bankrupt developers are in places that were hotbeds of new housing construction: Southern California, Atlanta, Las Vegas, Phoenix. As of July, the percentage of vacant housing stock available for sale or rent stood at 4.8% nationally, the highest figure in at least 33 years, according to Zelman & Associates, a real-estate research firm.
• Daily life in these developments seems a bit post-cataclysmic. Children play on elaborate but empty playgrounds. They walk their dogs past rows of shiny houses that have never been lived in. Voices echo up and down the block. Unfinished houses and vacant lots strewn with construction debris clutter the horizon.
• In the past year, roughly 15% to 20% of residential developers have gone out of business, suspended operations or changed their line of work, according to an estimate by the National Association of Home Builders.
• The people who bought into these subdivisions encounter all sorts of other unexpected problems, including burglars looking to steal toilets, appliances and copper wiring. And blight.
• Her subdivision, Woodbridge Crossing in Smyrna, 15 miles from downtown Atlanta, was supposed to consist of several hundred garden-style houses. Instead, she lives on a street where most of the roughly 30 units have never been lived in. It's the only inhabited street. Paved roads surround acres of empty lots. At night, she says, Woodbridge Crossing can feel a bit like "a cemetery." One plus: She usually has the community swimming pool to herself. (always a silver lining)

Anti-regulation folks are getting their wish - the free market will truly work in the end. But it simply did not have to be like this with some basic, common sense regulation (the evil "r" word).

On the bright side, home values fell less last month than the month before for 7 of 20 major housing markets so quite clearly (for the 48th time) the housing market is "about to turn" and "this is clearly the bottom". Eventually these squirrels will find their nut. But not until home prices are allowed by the government to fall to a natural state that is in line with median wages. [Dec 6: What Should Median Housing Prices be Today?] The same government that decided the "free market" will self regulate mortgage brokers... and self regulate investment banks... and self regulate commercial banks... and self regulate... well you get the idea. (some of this authority lies in the hands of the Federal Reserve so they are not quite so innocent either - yet now we want to give them much much more power to regulate?) It's funny how on the way up, hands "off" approach is everyone's favorite but on the way down, hands "in" approach is the "best course of action" in our newly socialistic mindset.

Never preventative; always reactive - your leadership.