The Cul-de-Sac Syndrome: Turning
Around the Unsustainable American Dream
By John Wasik
Bloomberg June 2009; 170 Pages
Available Now: $17.00 for Hardback
Cross posted at The Examiner
When I first received a review copy of Cul-de-Sac, I wasn’t sure if it was the kind of book a science fanatic like myself would normally be interested in reviewing. But I quickly discovered, much to my surprise, that the housing boom and bust is science and engineering writ large. And veteran author John Wasik had me hooked with his brilliant writing from the very first page. Wasik weaves macro-economics, history, green technology, the environment, the American dream of home ownership and the ensuing bubble that snared so many intelligent people, into a seamless narrative so thoroughly compelling that it was a page turning joy to read. That he manages to pack all that and more into 170 short pages, generously illustrated with real life anecdotes of homeowners in search of that American dream only to find themselves helplessly caught in a real life modern nightmare, is testimony to his skill as a writer, researcher, and grand master of too many interlocking topics to mention in full.
Wasik starts and builds much of the book around the cliché, planted like a seed in the American psyche since the days of Thomas Jefferson: real estate prices fluctuate like any other asset, but everyman’s home is his castle, and over time home values always go up. So buy the most expensive home you can (Or cannot) finance, build it bigger, build it better, frame it with eye catching landscaping and a manicured lawn, encircle it with decks, drop a pool in the backyard, drape the walls with premium paint and floor the place with polished wood, tile, and marble. Price is no object, keep up with the Joneses -- better yet put them to shame - and over time that investment will turn into real estate gold.
Hordes of baby boomers, beset with dwindling 401-Ks, took that advice to heart. Empty nesters from all over the country, many with extensive and successful track records in the rental and residential market, flocked to Florida, Arizona, and California to build their nest eggs in anticipation of a comfortable retirement. Instead, they bought a time share penthouse at the top of an investment pyramid. Between sprawling property taxes, plummeting rental demand, rising energy bills and homeowner insurance premiums, long commutes from the spurbs to work, and drowning in exotic mortgages now resetting at crippling rates, many are barely hanging on. Many more had no choice but to face foreclosure and bankruptcy.
Wasik spares no one for this unsettling turn of events. But chief among the worst culprits are mortgage products allowing buyers to enter into agreements they would have never qualified for in years past. Wall Street financiers are also skewered for turning mortgages into an investment commodity traded like a share of Intel providing easy money and, for a while, high investor returns, all of which greased the gears of greed from institutions that should have known better all the way down to first time, poorly informed buyers.
As home prices skyrocketed in the first few years of the new millennium, homeowners were repeatedly encouraged to take our home equity loans to blow on deluxe flat screen TVs and home entertainment centers, consolidate credit card balances and other debt, or to cover the ever rising cost of college tuition. Individuals who hadn’t even owned their own home just the year before were inundated with rags to riches stories of neighbors who invested in rental properties.
The impact of this building splurge turned medium sized developers and home builders into millionaires. But in the midst of the greatest housing boom in history, local infrastructure was strained to the breaking point. Increased demand for roads, schools, energy, fuel consumption, trash pick up, and especially water -- used in homes by the barrel and in power plants by the truckload -- threatened to exhaust existing resources and county budgets alike. Inner cities were left almost deserted, tax revenues dropped like a stone. Crime and vandalism became rampant just when municipalities needed income the most. When interest rates finally awoke from their slumber, investment banks and insurance companies -- assisted by Credit Default Swaps and other derivatives gone mad -- fell like dominoes, the layoffs began, and the boom burst with the power of an economic atomic bomb. City planners and panicked homeowners were left with no options. The devastation was universal across the nation.
After reviewing the events that got us here, the author devotes considerable time, traveling from coast to coast, documenting the myriad side effects and chronicling a series of appallingly neglected solutions: sustainable dwellings that could be built quickly and efficiently, as opposed to the horrifically inefficient construction methods widely used by traditional builders. He notes that modern technology offers innovative but vastly under utilized methods of home building that would alleviate costly, time consuming construction techniques, long gas guzzling commutes, and exorbitant energy bills. A number of hopeful examples of community revitalization and energy efficient, smart homes are presented so that readers can fully appreciate that we need never travel down this dark road again.
Cul-de-Sac is an absolute must read for anyone who wants to know how the housing boom went awry, get a sneak peek at solutions for the future, and especially anyone considering buying their first home, or their tenth. Its one of those rare books that is so enjoyable to read that you won't be aware its teaching you more about history, science, economics, and real estate than you would ever learn in a semester long college course or from hours of listening to overpriced talking heads on CNBC.
John Wasik has written 12 books and appeared in every media. As an award-winning journalist, he has won 18 awards for his writing. His books include The Merchant of Power, The Bear-Proof Investor, and Retire Early, just to name a few. For more about the author, click his picture to the left or this link. John is available, time permitting, to respond in comments below.