CBS’s “60 Minutes” had a story yesterday about the subprime mortgage debacle. Morley Safer used the words “corruption, greed, and negligence” to describe the predatory practices that caused it. I was looking at the houses shown in the story and had similar unkind thoughts about other players in the game.
The subprime problem is not only exposing the sleazy, amoral tactics of mortgage lenders, but also reveals that housing value often cannot be justified by the real, inherent assets of the buildings themselves. Just as the dot.com bubble of the late 1990s demonstrated that much of stock value was hyped illusion, the recent housing bubble similarly demonstrates that the frenzy of buying and selling in real estate was by no means a reflection of the actual “bricks and mortar” value of the buildings themselves.
Dot.com stocks and bubble-era homes were both hot potato investments: things you intended to flip quickly for short-term gain and certainly would not like to own as a long-term asset. To quote Gertrude Stein’s comment about Oakland, the reality in both cases is that “there is no there there.” When you are aware of that, and still promote the delusion, it’s called a scam. We know now that many of the high-tech stock inflations were a lie made credible by fast-changing money. The average American house is the same. What you see looks substantial, but the image is generated by an industry-wide sleight of hand that uses fake facades, false roof-lines, flimsy materials, and numerous amenities to make homes look and feel like the real deal.
What’s underneath all of that is an assembly of sticks that’s about the same as an 1890’s miner’s shack, put together by an unskilled, untrained, and poorly paid labor force. It’s a building method that hasn’t changed substantially since the middle 1800s, leaving modern homeowners with some nice amenities and equipment wrapped in an antiquated construction process that uses poorly adapted building systems and unskilled workers to make defect-riddled things otherwise known as the “American Dream.”
For many years, the potential deficiencies of conventional building systems were mostly overcome by carpenters and tradesmen who were proud and skilled, but there are few of those guys left today, and most of them would not deign to work in tract developments where the vast majority of American homes are built each year.
It is sad to say that the average American home no longer benefits from the proud building craft tradition. In addition, the homebuilding process has missed the benefits of the modern manufacturing advances of the last fifty years. In most industries, the quality movement, especially as defined by Lean production methods, has driven waste and
defects down to minute, fractional levels, and therefore improved quality and simultaneously lowered cost.
No such thing has happened in homebuilding. The pride of this industry is in being merrily independent and stubbornly resistant to change. But not to worry: there’s plenty of cool stuff to cover up the sticks and errors.