Eleven years ago, phase one of a future giant subdivision was begun in the fields surrounding Milton, a former farming town about 50 clicks from Bay Street. If we build it, the developer said, they will come.
And they did. All 3,500 families. Suddenly Milton was the fastest growing town in Canada. The picturesque Main Street withered and campuses of Big Box stores sprung up on its flanks. Two-lane regional roads quickly rebuilt for three times the traffic became clogged. The massive 401 which drives through the municipality is now a 7 am parking lot.
It was all good. Property values leapt as phase after phase of faux gothic and Georgian homes with plastic porch pillars emerged from the earth.
In fact for most of this time so many people wanted ‘affordable’ $400,000 houses that the developer built a giant factory on the edge of town and installed a house assembly line. Every shift, one completely finished house – right down to the overhead lights and garage door motor – rolled out the end of the factory and upon a vehicle that lumbered to a foundation and plopped it.
As a result, no roofer nailed in the hot sun. No framer toiled in the rain. And no blizzard stopped the endless production of mass-produced houses.
Today, some residents tell me, the legacy of endless building with plastic, particle board and unheard-of speed is taking its toll. Some homeowners have cut off sagging porches, while others are dismayed at failing windows and endlessly-running sump pumps. It makes you wonder how whole streets of buildings made of vinyl-covered sheathing will look in twenty years. Or what those edifices will be worth.
Down the highway a couple of exits, blog dog Janet owns a home in the Mississauga excess called Erin Mills. Built on 8,000 acres as a planned community, it now houses 105,000 people and roughly $12 billion worth of real estate.
A home identical to hers was listed in May for $559,900, reduced several times to $529,900, then taken off the market. It was recently re-listed with a different real estate company, at $499,900
“This is a $60,000 drop in perceived worth to perhaps reality,” she says, “but then if they get an offer it might be for what? $475,000? It still demonstrates an almost 11% drop in perceived real world reality in the value of one’s house, and no one is biting as I send you this note…..”
It is an example, Janet notes, of the asset deflation I have been discussing here for some time.
“This is my translation,” she says. “If I make $100,000 gross income per year and the tax system grabs/gouges $50,000 all round and my house drops $50,000 in value in one month of 2010, then I’m working at a net loss! How’s that for asset deflation wiping me out? Erased, if it ever really existed!”
Exactly. As I said a day or two ago, coming to a hood near you.
But these small vignettes also highlight another festering side of the modern real estate trap. Houses that are mass-produced at breakneck speed for impatient buyers, made from composites, epoxies and “wood’ which is really glue and sawdust, may not even be standing in 50 years. And yet over that period of time, such a property may have changed hands 15 times and been remortgaged for millions. At what point does quality of construction matter? Is it already here?
Second, the burbs are full of housing comparables – streets of ‘models’ identical in design and finishing, devoid of uniqueness. In boom times when housing demand is high, consistency is a plus. In down markets when property values are fading, they all fade together. As suburban homeowners in the States have found, a single foreclosed or abandoned home can infect the value of all surrounding ones by 1% a month.
And, third, is the era of the far-flung subdivision, where it can take a litre of gas to go fetch a litre of milk, over? In a peak oil world, with soaring energy costs and an aging population, with Boomers about to bail on their Eighties McMansions, with towns like Milton goosing property taxes, freeways impassable and commuter trains jammed, why would property values hold on houses without character or quality? Because they back onto a Home Depot or Wal-Mart?
Some real estate, indeed, has a future.
Some will return to the fields from whence it sprang. Earth to earth.
