How Our American Dream of Homeownership Became a Nightmare
By Ryan Dezember
Back in the mid- to late 2000s, there was a housing boom followed by a housing bust. You probably remember it. It was a terrible time that cost millions of Americans their homes. Some couldn’t afford their mortgages. Many others walked away when the value of their home dropped below the amount of the mortgage they had borrowed just a couple of years earlier. Those homes were “underwater.”
This is a subject that has been picked over a lot since housing prices crashed in late 2008. So it’s worth asking what Ryan Dezember, a Wall Street Journal reporter, can possibly add that’s new? I admit I was skeptical.
One of the tales Dezember tells in “Underwater: How Our American Dream of Homeownership Became a Nightmare” is his own. As a young reporter with The Press-Register in Mobile, Ala., Dezember found himself caught in the bubble he was chronicling: He had bought a house on the Alabama Gulf Coast during the boom and then spent the next decade unable to get rid of it as its value sank and his neighborhood went to seed.
But even that angle has been done before, by the former New York Times economics reporter Edmund L. Andrews, who wrote about his own travails in his 2009 book “Busted: Life Inside the Great Mortgage Meltdown.”
What Dezember does have working for him are some wonderfully flamboyant characters and a knack for telling a good story. The housing bubble on the Alabama Gulf Coast was less about single-family homes than about real estate developers with visions of transforming Alabama’s shoreline into a mini-Miami Beach.
Thus does the author meet Bob Shallow, a real estate broker who in the space of an hour in 2003 sold all 66 units in an unbuilt condo tower. This feat merited three sentences in The Press-Register, Dezember writes, “as if selling $28 million worth of nonexistent vacation properties in the time it takes to do a load of laundry was no big deal.”
For a while, it wasn’t a big deal. A small bank fueled the bubble by underwriting big loans to developers with big dreams. (There’s always one of those.) There are the flippers — people who buy a condo hoping to sell it as quickly as possible.
Then comes the bust. Many of the developers file for bankruptcy. The small bank is sold to a bigger bank. And homeowners like Dezember are stuck with homes that aren’t worth anywhere near the size of their mortgages. At which point, they have to make a decision: Should they walk away, or should they keep paying off their loans? Even though he was no longer living in Alabama, Dezember couldn’t bring himself to walk away — even as several experts told him there was no shame in backing out of a mortgage that no longer made sense.
As I say, all of this is well told but well trod. Then the market recovered, and something new happened. Dezember met people who were trying to buy homes but couldn’t. They were outbid by “a formidable new competitor for houses in many of the most attractive suburban neighborhoods.” Those competitors were large companies that were scooping up houses with the goal not of reselling them but of renting them. They paid full price, all cash. People hoping to buy had to rent instead. They had no choice.
This has to be the most remarkable unintended consequence of the housing bubble — and one of the most troubling. For most Americans, a home is not only a place to live but also the primary means of building wealth — selling or refinancing a home is often how Americans have funded their retirement. Homeownership is also at the heart of the American dream.
It is certainly worth debating whether homeownership should be something every American strives for. But it’s not a change that should be imposed by companies that see profit in forcing this dramatic change on people who would otherwise be able to buy their own homes. As Dezember notes, “If homeownership falls out of fashion for even a generation, there could be dire economic consequences unless renters become diligent savers and prudent investors.” In other words, bring on the retirement crisis.