Saturday, July 04, 2009

Witness to an Economic MegaTrend?

The theory I will put forth in this post will be highly unscientific in that its data points are truly minimal and entirely personal. But two experiences--one in 1975 and one yesterday--have made me wonder if we have not come to the end of an age.

The age I am talking about is the one where bad old times are put to rest, the value of nearly everything rises, and those who have made the right moves will have profited handsomely, especially in real estate. Moreover, the age I am talking about does not just encompass the recent bubble but goes back much, much farther than that--to a time when derelict housing was "rediscovered", brought back to life, and certain of our American downtowns resurrected from the ashes in which post-war, suburban flight had left them.

First let me digress to say that I believe the suburbs are doomed as a way of life and that this will only become apparent as gas prices permanently exceed $5.00 per gallon within the next five years. But that is another story.

In 1975 I was young and out of work in Portland, Oregon where Victorian houses could be had for a song (but more of a song than I had in my pocket). Having found work at a cunning sandwich shop run by a gay couple, I later found work helping their friends clean up hulking old relics that had been inhabited by shut-ins and old ladies for decades, that they had bought with a small portion of their savings, and would soon fix up and become the harbingers of a nationwide trend of spontaneous urban reclamation. One of them, William Jamison, was so successful that, after he died of AIDS, they put up a park to honor him in the Northwest Portland neighborhood he helped revive.

The rest of the country followed suit. Where, except for the most neglected regions, have we not seen smart people take old forgotten houses and remake them into modern success stories (and see their real-estate value quintuple or do even better than that)?

A riverside town in upstate New York--which I sometimes visit--gives me the coda to my story. I happened to notice a yard sale that looked more interesting than most, as it was in front of a Victorian-style house that had obviously been reclaimed in typical fashion. I encountered the owner, an older gay man in high-heeled cowboy boots selling everything he owned because he had lost his antique business ("no market! burn it all! a dollar a pound!"), lost his lover to AIDS and now was in foreclosure. He said that the mortgage was $360K, he cannot make the payments, is being offered $275K for the house and can't take it; and that three years ago someone offered him a million dollars for the house and he did not take it then either, believing it would continue to increase in value. He claimed he would soon be homeless. I cannot claim I did anything heroic. I bought a doorknob and left.

But I left thinking that I had seen the opposite side of the curve of a megatrend in values. Let us suggest that the last "oil crisis" and the resignation of Nixon was a former low-point for this country in terms of value (and I can prove the undervalued nature of things at that time by pointing out that I signed a Manhattan apartment lease for $150 dollars a month in 1978). And so after almost forty years of rising values for things like housing and antiques and art and stocks and bonds and automobile industries, now the same types of people who were early in the real estate market and leading the way to rediscovery of our undervalued treasures (these were, and have long been mainly gay men), now are selling off everything they own at firesale prices or worse, and being thrown into the street.

Maybe it was just a chance encounter and without much meaning. But there are an awful lot of shut-up storefronts around; in small downtowns, at megamalls, on Fifth Avenue; and I begin to wonder what is going to replace those stores, those jobs, those livelihoods in a society that had become almost fatally overavalued and overbuilt.