The housing boom started sending things in the wrong direction and was mainly fueled by speculation. Small investors wanted a piece of the action and went way over the line by buying 2,3 or more extra homes so they could flip them for a quick buck. Banks and other lenders jumped in the fray offering loans with ridiculous terms and gave them to investors that had nothing but hope for collateral.
In Phoenix, the census gods follow housing starts to estimate population growth and told us all how many people were moving here. Retailers bought in to that and started leasing space and opening new stores wherever they could. Developers built lots of new space to hold them all and rents skyrocketed. They also built lots of new office buildings to house all the new workers that were going to fill all the new houses.
And with all the new stuff we were going to need to buy from China and elsewhere overseas we built lots of warehouses to store it in, because California was out of space to hold things, we decided to step in and save them.
Dentists and doctors by the dozens opened up new fancy practices on the city fringes waiting to take care of all the new citizens...........that never came.
Now it's obviously not as bad as the picture would indicate, but there are some lessons to be learned here and if you learn those lessons you should do just fine in the Aftermath.
Lesson One: Don't be greedy, we are all in this together; architects, engineers, owners, landlords, brokers, users, lenders and contractors. I know of an owner who recently bid a project and it came in over budget. 15% over what the bank would lend him. A friend of the owner told him that the three bids seemed high in this economy and he should easily be able to get them to come down 20%.
Well if you know anything about this industry right now you would know that there isn't a contractor in the country that has that kind of fat in a bid. What needs to happen is the owner needs to build what he can afford and not try to blame the contractors for charging too much, the bank for not lending enough or the appraiser for not valuing his collateral high enough.
Lesson Two: Understand that the Great Recession is not just a lull in the status quo. There will be permanent changes in the Aftermath. Those days of 2003-2007 are days gone bye-bye. The comeback will be a cautious one for everybody involved. There is simply too many houses unlived in, too many see-through office buildings standing as lonely reminders of this.
Foreclosures on the housing front are starting to stabilize but the commercial foreclosures are just beginning and may need several years to sort themselves out. Status quo won't cut it. What cool heads and great minds figure out will determine where we go from here. And it might just turn out better than we now imagine.
Now that picture is more like it! For us, caution, courtesy and caring is the way to go. If that sounds a little cheesy so be it. But I have found that contacting old clients and other friends in the industry and talking through our troubles together has had a great effect on our mutual attitudes. The human side is starting to resurface. One where greed and fear seem to have no future.
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