Wednesday, January 19, 2011

Telling Stories

How does one go about valuing development sites and selecting local economies (in which to invest) when some economists have made the dire, dismal predictions that some regions in California or Florida, for example, may not recover until 2030?

Where is true sustainable growth occurring or likely to occur in the US? And what places were never meant to be? The state of housing in the US is indicative of the true, sorry story about the economy and ultimately the sad financial state of the US Household:

“A new study released by the Mortgage Bankers Association's Research Institute for Housing America says the most recent recession may make many regions around the country -- especially in the South and West -- the Rust Belts of the 21st century. The burst housing bubble may mean the economy in those places never fully recovers."

(Will The Housing Bust Create New Rust Belts? by KAREN GRIGSBY BATES January 12, 2011 National Public Radio)


“Celia Chen, a housing economist with Moody's, predicts that a full recovery in parts of California, Nevada, Arizona and Florida won't occur until 2030.

"The housing boom elevated home prices in a number of areas far, far above what can be supported by the economic fundamentals, and so prices have fallen significantly, and they will remain below their previous peaks easily for a decade, or even two decades," Chen said.

Some experts contend that foreclosures, which have pierced neighborhoods of all income levels throughout the country, are quickly turning developments on the outskirts of metropolitan areas into the nation's newest slums. Complicating any recovery for these beaten-down areas is the difficulty in predicting which neighborhoods will fare worst. That uncertainty could lead to increasing skepticism by buyers and lenders looking to make loans on homes in these areas.”

Investors sift through assets looking for signs of life in communities that have withstood the financial firestorm. Some continue to grow (and even boom) benefiting from “Coastal Wealth” effects or "Global Resource Demand".

The search for positive indicators leads us to find healthier “community organisms”, signs or proxies of the US’ generally strong economic backbone and conversely in search of the economic medicine needed to heal damaged, salvageable places.