This is a very interesting article regarding the potential future of over-speculated areas. There are a couple of things that come to mind when reading this article:
1. This kind of thing has been predicted for some time. While land speculation has been going on for as long as people had money to invest in land, the boom/bust cycle of housing speculation has taken on a new and interesting twist. Until the early 1980s, it seemed that real estate was one of the more safe places to put one's money - that land values were relatively stable and secure and generally moved higher in value. That all changed when people became interested in finding alternative places to invest. The oil industry was in recession, successive energy crises lead people to move away from manufacturing and other more stable industrial-type investments, and the government was getting out of the housing sector, moving to public/private partnerships to allow for affordable housing. The idea was simple - make government subsidies available for housing rather than make housing available. This encourages lending and speculation, knowing that the government would help cover debts and hedges. There were hiccups in the mid-80s and 90s, but nothing on the scale we are seeing now. It demonstrates what some think of as a fundamental flaw in the policy of excessive government spending and speculation by developers who are subsidized by that spending. In short, it was hubris for us to think that the bubble would never pop.
We here in Texas could learn from this lesson. Relatively immune from the recession and depressed home market elsewhere, we also rose on less of a bubble. This does not mean it could not happen here - it can and may. Steps taken now to proactively ensure the continued steady (not excessive) growth will help alleviate the kinds of ups and downs that have plagued other parts of the country. These steps include appropriate regulation, diversity of housing type (increases housing choice), and architectural guidelines. Further, the improvement of the business environment helps with the residential side as well.
2. The problems associated with inner-city slums are becoming the problems of the suburb and exurb areas as well. Gangs, violence, boarded-up homes and businesses, and attracting higher-rent businesses are problems that inner-cities have faced for decades. These problems are shifting to the outskirts as the property values decrease. It is also a result of gentrification in the inner-city areas of most metropolitan areas - as property values in these areas increases those with less ability to meet these challenges are pushed to the fringes (figuratively and literally). This is a problem because not only do they face displacement and social-network issues, they also face longer commute times where there is less public transportation option availability. It also places burdens on infrastructure - lower property values mean less tax revenue to address road, water, and sewer maintenance. These things are not as big of a concern in the inner-city areas, where infrastructure has less distance to travel.
As we look to the future (as we must) we are wise to learn from the past. Let's learn from these kinds of things so we can make our community better. Let's put appropriate regulation in place now to help alleviate pressures from similar bubbles.
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