“Underwater: How Our American Dream of Homeownership Became a Nightmare”
Author: Ryan Dezember
Publisher: Thomas Dunne Books
Price: $28.99 (Hardcover)
Ryan Dezember’s study of home buying and selling in America, especially in South Alabama, is frightening, enlightening, and infuriating. Fresh out of college in 2005, Dezember got a job with the “Mobile Press-Register,” covering real estate at the coast, so, he bought a house, not yet ten years old, on Audubon Place in Foley for $137,000, just in his price range.
Values peaked the next year.
The financial collapse of 2007-2008 caused the value of his house to drop, a lot, but he was OK. He continued to live in it and make his payments. Then the paper wanted him to report events in Mobile, too far to commute.
He could have walked away from his mortgage, but, as he tells us later, most Americans, out of stubbornness or pride or a sense of honor, try to pay their debts, keep their promises. (Corporations, banks and so on, by the way, are amoral. They walk away.)
Dezember became an absentee landlord, at a loss, for years, with accompanying horror stories.
One renter stopped sending checks; she was in jail, her extended family arrested on drug charges.
Another renter asked to leave early. Dezember agreed as long as she left the place clean. She did. She took his microwave, washer, dryer, yard tools, even the hard-wired smoke detectors.
The author is in a sense telling three stories, his own, the tale of condo building mania at Orange Beach and Gulf Shores and third, a sketch of the national picture as it relates to home buying, building and renting.
His reporting on real estate at the beach, extraordinary stories of ambition and greed, defies credulity.
The market HAD crashed in ’82 and ’87 with disastrous results, but no one remembered. In 2001-2003 condo developers were on a tear. The king of them all was realtor Bob Shallow. One morning he sold 66 units worth between $350,000 and $440,000 apiece. Dezember estimates that Shallow one day made $1.6 million in commissions in an hour.
The units existed only on paper and would not be built to occupy for 16 months. No matter. No one planned to live there. Beachfront property rose in value to absurd heights: $126,000 per foot in 2010. Older, smaller and beloved motels, The Lighthouse, the Holiday Inn, were torn down to construct skyscrapers which obliterated all views of the ocean.
The game was condo flipping. Buyers bought in the morning and sold, at once if possible. Some condos sold four or five times during construction. Some prices doubled. One condo went from $399,000 to $735,000.
Of course, there was corruption; the mayor of Orange Beach and a few others were arrested.
As we commoners say, what goes up may come down. We had hurricanes Ivan and Frederick and the BP oil spill. Each time some were caught and ruined. In this game of musical chairs ALL the chairs disappeared. Many reneged or otherwise weaseled out of their contracts.
Some took losses, of course, but no one seems very chastened.
Nationally, Dezember tells us, a relatively new phenomenon was developing. With thousands of single-family houses foreclosed, large real estate companies bought by them up by the thousands, to rent to middle- and even upper-middle-class families—families who would normally buy homes.
Perhaps it was smarter to rent a three bedroom/two bath for $1600 or $1800 a month in a good school zone, avoid a mortgage, and preserve mobility if a job elsewhere should come up.
The 200-year-old American dream was undergoing a tectonic shift. Home ownership by percentage is going down. In the short run this is not too important, but since the rising value of the house is Americans’ primary way of accumulating wealth, will renters put money into savings for their old age, or are we looking at a crisis some years from now?
Meanwhile, the speculation at the beach goes on. There are only thirty-some miles of Alabama coast between Fort Morgan and the Florida line and the betting is it will all get more and more valuable.
Dezember, now at the “Wall Street Journal,” a master explainer, covers many of the intricacies of financing, subprime mortgages, interest rates, the bundling of mortgages into securities.
These tales of tear-downs, speculation, brick and mortar and human greed make the reader angry and sad, but wiser for all that.
Don Noble’s newest book is Alabama Noir, a collection of original stories by Winston Groom, Ace Atkins, Carolyn Haines, Brad Watson, and eleven other Alabama authors.