Deleveraging the Dream

Welcome to the day after. And the weeks after. And all the months and years yet to come here in the “after-life.”

What died?  Apparently, real estate did.  When a huge wave of statistical evidence washed over the country recently,  reflecting just how poorly the market was really doing, plenty of pundits took the opportunity to surf it. They hopped on their editorial boards, declared the market “dead on revival” and added quick post-mortems on the twin notions of home ownership and the American Dream.

The meme that tsunamied  across the nation, in bold font, was: “Sales Plunge 27% in July.”
Those numbers weren’t surprising to many of us working in the business. When you live it, there’s a gut-level of knowing that doesn’t require trailing statistics for validation.

But those numbers came as a shock to almost everyone else. Specially those sleepwalking through the elaborate smoke and mirrors game created to convince us that all was vaguely going according to plan. A trick of misdirection designed to buy time to build a façade.  An illusion the truth could get stuffed behind.

Fingers have been busy plugging holes in that imaginary dike.  Band-aids of spin and obfuscation plastering over cracks as they appeared. But with the new news, that damn dam seems to be crumbling. Fingers are twisting in the wind.  Pointing in the wrong direction in light of the whole.

Now that this particular dream bubble is bursting, I’m happy and wide awake.  In the odd, contrarian way my real estate of mind works, I’m suddenly feeling much more positive about the future of homes and our relationship to them than I have felt in a long time.  This is an auspicious moment.

That which shall not be named has been said out loud, We can toss out our false recovery and get busy having a real one.  We don’t have to be chickens with our hearts cut off anymore running around in our heads trying to prove what is happening isn’t happening.

We’ve put incredible amounts of precious energy and resources into not saying what we were really seeing.  But we can stop holding up the blue sky now..  We can let it go. It’s ok. In fact it’s more than ok. It’s just what the acupuncturist ordered.  Start treating the causes rather than flogging the symptoms to death endlessly up and down the torturous rack of the ladder of success.

Our real estate recovery has been a fragile house of cards.  It makes sense in a sick kind of way.  Try to recover from the house of cards that fell by putting  together another house of cards in its place. It’s the fragmented language  real estate speaks in.   Leverage is the mortar that holds it all together.  Leverage is the key to astronomical heights.  We can leverage recovery together from the pieces left on the ground.  And leverage works for a while.  Until the tipping point is reached and gravity eventually intervenes.

Expecting the market to return quickly to normal isn’t realistic.  In part, because we’ve been using 2004-2005 as the yardstick for what’s real.  And that normal wasn’t ever normal. It was madness.. It made no sense then. And it makes even less sense now. Unless you are an unhappy seller with blinders on trying to regroup and recoup. Or a buyer still hoping to cash in on the flippant greed of buy-gone days with a myopic vision of what home ownership ought to be about.

Part of deleveraging the old dream is going to mean giving up our manifest destiny to make every single person on the planet a homeowner. That dream was manufactured.  Give everyone free, no-strings-attached money in the form of subprime loans or exotic hybrids. Enlist them on the debt rolls. Everyone becomes an indentured servant.   And debt is a commodity that can be sold and repackaged and resold again.  When that’s exhausted, money can be wagered against it all, betting on the short with credit default swaps.

Just because owning a home isn’t for everyone doesn’t mean it isn’t for anyone. And it doesn’t mean we can’t have a robust market full of happy, well-balanced, ready, willing and able buyers and sellers.  There’s a dream for you.  The one that says that this doesn’t have to be just another circuitous orbit of the real estate market.  Instead of one more cycle of binge and purge this could be fundamental change.  The end of history as we know it.  A new door opening on the future.


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