Cross-posted to MichiganLiberal.com
For the last 19 years, I've lived in Canton Township, Michigan, which has been near the top of the list of Michigan's fastest growing communities for most of that time. A running joke around here is that our municipal bird ought to be the construction crane. Since moving here, I've seen acres of farmland turned into subdivisions, dirt roads get paved, two-lane roads grow to four and even six lanes, and strip malls spread like kudzu.
Canton's growth reminds me of a board game I used to play as a kid. It was called "Square Mile," and the object was to develop as much of the board as possible. Perhaps our township officials--all of them Republican, by the way--played the game as well.
But it might be "game over" here.
There's evidence that the building bubble here has burst.
The lead story in Sunday's
Canton Observer, headlined "Bombshell," is about looming personnel cuts in the building and inspections department. The reason?
The staff reduction is in response to a sudden slowdown in new construction permits. The reduction in the number of permits has meant a $1.7 million reduction in the township's revenue.
How much of a slowdown are we talking about?
The building and inspection department is staffed to accommodate as many as 1,200 new units in a year, according to Township Supervisor Tom Yack. If projections are correct, this year the department will have just 240 [new units], far fewer than the 805 the department performed in 2005.
Revenue projections for inspections and permits in 2006 were estimated at $2.8 million. They have been readjusted to reflect the decrease in activity and now are projected to be just $1.2 million...
In other words, Canton had planned for 50 percent more growth than we saw last year. Instead, it's facing the prospect of 70 percent less growth. To say that's quite a difference is an understatement. My question is this: were our local officials guilty of "irrational exuberance," a hallmark of every bubble throughout history?
If the bubble has burst, the impact certainly won't stop at Township Hall. Think for a moment about who else has been, or is about to be, affected by the building slowdown? This is certainly bad news for local financial institutions, suppliers of building materials and appliances, Realtors, construction companies, and utilities. And if these businesses are forced to cut back, like our township government, the ripple effects will reach the shops, restaurants, and other businesses their owners and employees patronize. And so on.
It can be argued that much of the impact of America losing its industrial base has been offset by wealth--much of it artificial--created by housing and construction. Easy credit, decreed by the Fed after the stock market bubble burst in 2000, combined with a get-rich quick attitude on the part of many Americans, has created a real estate bubble. And all bubbles eventually deflate.
It's too early to tell whether the bubble has burst here in Canton. But if it has, how soon until the same thing happens in other communities?