Would someone from Dubai or China please come to Miami and buy my home?
This seems a reasonable plea, given this morning’s news that the big private equity firm, (in which President George HW Bush made his fortune after leaving the White House)-the Carlyle Group–sold 7.5 percent of itself to the United Arab Emirates. 19.9 percent of NASDAQ is being sold to Dubai, that couldn’t get our ports but getting the platform on which US equities trade. China, discontent with the value of its foreign currency investments, has set up its own fund to invest directly, not just in US debt, the value of which is declining to record lows against other currencies.
Since no one else is going to buy my house, I invite foreign economic ministers to spend a few nights with me in Miami -we’ll put you up, give you the keys to the Toyota hybrid so you can drive around and see the value we’ve created from the sunshine state.
The national rate for home foreclosures has doubled in the past year: in Miami, it has doubled beyond that, according to the desultory vultures at county mortgage auctions, crossing off one property after another on the thick list of foreclosures because the banks aren’t quite ready to let them go.
The Miami Herald reported today a crowd of more than three hundred people who packed a Marriott hotel ballroom to bid on 20 units at Platinum Condominiums. “In May a one-bedroom on the 14th floor closed for $360,000. But Thursday night, two one-bedroom condos on the tower’s 16th and 18th floors couldn’t crack $220,000.”
Of the auction, real estate advisor Lew Goodkin said “better bargains should come in 2008 when the market is even softer.”
It’s a creepy fun-house hall of mirrors economy that is unfolding in the aftermath of serial financial bubbles: first the dot.com stocks and now housing. Combine these with the decadal loss of American manufacturing capacity through role reversals in the global economy, the only way political leaders could massage the impacts was to deny, literally, meaning.
In the paid advertisement real estate section of The Miami Herald, it’s put another way by homebuilder, Pride Homes, announcing another blowout inventory sale: “The builder has listened to what home buyers want in today’s marketplace, and are responding to their needs.”
It is line that if you say often enough, becomes even less true.
Today, it doesn’t matter if real value is created when subdivisions are pressed into landscapes like Florida’s in the shape of cookies cut from a sheet of pre-mixed dough. What matters is the notion of value.
In the late stage of the building boom, Florida’s homebuilders were building into a vacuum, caused by a massive proliferation of liquidity.
No one cared. Glad-handing local politicians acted as zoning authorities and petty despots at the bidding of campaign contributors who must be right because, well, they made so much money. That worked for a while, first as homeowners threw used their home as a piggy bank for personal consumption, and later, as American suburbs became self-fulfilling sumps for over-stressed workers who reversed Tim Leary’s admonition to “turn on, tune in, and drop out” to simply tune out.
Here are the people whose needs were being responded to, by over-building: Wall Street investment bankers who figured out how to take a construction loan, ordinary mortgage, whatever-bundle them like campaign contributions and then take bonuses as a percentage of underwriting fees after they multiplied the value of the underlying asset 10X, 20X, 100X.
This was called diversification of risk, a net benefit to the world economy.
In Miami today, local politicians and builders and lobbyists are testing each other’s handshakes with shrugs, persuaded that their hangovers from the housing bubble will go away and everything will return to normal good times, just put a little more of yesterday’s vodka into this morning’s orange juice, pass just one more zoning measure, approve one more lane widening or rail link into farmland, another interchange where insiders own property, another platted subdivision or strip mall where the only local business doing well is the one printing “for sale” signs.
It is happening again in Miami, where the periodic assault against an urban development boundary (intended to protect the Everglades and taxpayers from the costs of suburban sprawl) has been joined once again by a chorus of lobbyists and land speculators-many of whom paid outlandish prices, tens of millions of dollars, for property that has no intrinsic value absent a zoning change today and a market revival tomorrow.
There’s the rock mining industry, in Miami Dade, owned by corporations in Australia and Mexico-sending trucks and employees and lawyers and lobbyists to protest a federal judge’s decision to stop the billionaires from ruining the water supply that millions of South Floridians depend on.
Is it really so unreasonable to want to sell my Miami house to the Chinese?
“We’re out to make deals and sales at all cost, no matter what,” says the spokesperson for Pride Homes.
“No matter what” is driving Florida Power and Light, one of the nation’s largest power producers, to seek permitting for two new nuclear power reactors with a couple of thousand megawatts at sea-level and a stone’s throw from Pride’s homes starting at $200K, to accommodate Florida’s growth that a Miami Herald editorial actually wrote yesterday, “shows few signs of abating”.
For such “responding to the needs of people”, sea level rise from global warming looks like a future to bank on.
ALAN FARAGO of Coral Gables, who writes about the environment and the politics of South Florida, can be reached at firstname.lastname@example.org.