Exactly. so, shouldn't the question be: as the real estate bubble based economy tanks, what kind of effect will it have on the employment situation of those in industries dependent on a booming real estate market? Or, is that so negligible it won't have any sort of domino effect?
Just a casual glance around, suggests that a lot of jobs are tied to the real estate investment boom: housing construction jobs for instance. Housing construction jobs seem two-tiered from what I've observed. There are the contractors and independent professionals that have been making excellent money, but then there are folks who are employed as roofers and other assorted labor who make 10-15/hour.
One of the reasons I'm finding great deals on temporary rentals right now is the flood of condos and homes that can't be sold, but are up for month-to-month leases. In about half the cases, I'd guess that people are renting just to cover the mortgage and sometimes not managing that at all. They're just renting it to bring in 1/2 to 3/4 of it, which is better than nothing. As you've pointed out, of course, the tax break you get will make up for the loss anyway.
And I do think that, from what I've seen around here, there *was* a lot of speculative buyers in the market. These are folks who had a home before the boom, made some relatively big cash, sunk it into a bigger home in a market that hadn't yet boomed. And sunk some more in a second speculative deal when they market started to boom in the new area. The woman who I'm renting from now, for instance, is from Ethipia. She came here to get an MD. Bought a condo built buy one of those construction companies that slapped up condo developments (and I love the latest, condo homes!) like they were going out of style: poor construction, all the accroutrements of fine living but shit for quality, etc.) Three years ago, she bought at $120k. Put it on the market, at first at $250k. Poor dear had to sell at $190k. She's also paying for a condo in DC.
Seriously? I don't feel sorry for her. And if she couldn't sell? Like Max said, she'd just rent for the cost of her mortgage and the renters would get a bargain in the process. E.g., she rented her home for $1030, 130 of which were condo fees. About 1/3 less than the going rental rate. We looked at a two br, 1800 sf, 1 car garage recently which was built with quality construction, the whole nine yards in terms of kitchen, appliances, energy and water saving, skylights, loft. It was fly. Rent? $950. Asking price, $250k. Normally, a place like that would rent for $1800. We lost out on it because, dummy me, I felt obligated to keep appointments with other folks that day. By the time I called that night, it was gone. It was on craiglist for the first time the day before. arrrgh.
I take the point about discrimination in the market, and it's serious. But as max points out, there's some diversity in terms of income and wealth there, too. Where I'm living: it's majority people of color. Whites are 1/4 to 1/3 of the market. If you don't sell or rent to people of color, you don't sell or rent. Not to mention: the person from whom you're renting or selling is probably a person of color -- the owners, the real estate agents, the bankers, etc.
Thus, I'm living in one of the "most sought after" suburbs just outside of a small urban employment center, and the minority of owners and renters are white. YOu have to seek out a hair salon that cuts white hair. :) (I really can't understand why I don't find more research on this area; why not write about the established and prosperous middle class who aren't white. The black people who live on golf courses in what was once a plantation but who don't think a thing of the fact that it was once a plantation. When you mention it, "Oh. Huh. hadn't thought about that." It wouldn't have to be a rah rah racism is dead thing; just honor the fact that there is a middle class that isn't white and is so, largely because affirmative action does work. They are relatively prosperous because they are military and government employees, one sector of the employment market that, for all its problems, has opened up employment.)
There are some terrible pockets of poverty and distress around here. And when you go to the suburban beach town near here, the demographic ratio is flipped and some of the people are total assholes -- racists. But, then again, it's still 35% people of color, which is a hell of a lot higher than most suburban areas. Even all the places we looked at in that part of town were *owned* by people of color. They owned two properties: one a home and one a rental bought on speculation or rented when they got married and moved into another home.
None of this is to say that I don't see the discrimination and it isn't real.
The other thing that goes on, of course, is the huge speculative market and a different type of suburban slum lord. These are people who bring in speculative money from others, claim to be investing in housing, particularly in lower income areas, rent it while they are "flipping it" and treat their renters horribly in the process. Because, when times were good, they could snatch up houses for $50k a piece, sell 'em to another speculator for $75k, to another $100k, and so on. The local paper did a piece on the house sale prices of a company that did this, following the numbers as the house was sold to one speculative company after another. Meanwhile, the places just went to hell and were even condemned by the city. No one cared what condition they were in. They bought anyway because they believed that the house would be quickly renovated with cheap materials. Never happened. Still, all they had to do was count on more speculators to keep coming along to buy at ever higher prices. No one balked at the condition of the homes -- not like someone might do in the old days where real estate was never hot and the only way to build equity was with sweat equity. As for this new breed, the last one holding the bag? Well, how can you feel sorry for them? They aren't and didn't buy in order to live there. They bought in order to sell it to the next guy/gal in line and if s/he turned out to be a chump -- oh well.
Bitch | Lab http://blog.pulpculture.org (NSFW)