Main Street

Too Hot, Too Cold — Is it Ever Just Right?

How’s this for two sides of the American real estate coin?

In Montana, rich people are moving in, and existing residents are being told that since the land they’ve lived on all their lives, or even for generations, is suddenly worth millions of dollars, they suddenly owe thousands or tens of thousands more in property tax.

“There’s no relationship between these tax bills and your ability to pay. It’s just that we’re the beginning of the food chain,” said Abell one recent afternoon, sitting in work shirt and suspenders. “They tell us, ‘You’re sitting on a couple million dollars; why don’t you sell it?’ But this is where I raised my children. It’s not for sale. It’s my home.”

What is happening in northwest Montana, along with other newly tony areas of the state like Bozeman and the Paradise Valley, has transformed the country since frontier days: New money moves in, older homes get bulldozed.

Meanwhile, Florida continues to be filled with vacant and foreclosed homes that aren’t selling even at a fraction of the prices they brought just a few years ago.

THE MESS is the product of The Story, the fable that waterfront living beyond winter’s reach exerts such a powerful pull that it justifies almost any price for housing. The Story propelled the orgy of borrowing, investing and flipping that dominated life here and in other places where January doesn’t include a snow blower.

The Story lost its magic amid the realization that speculators had simply been selling to other speculators, making the real estate market look like a Ponzi scheme. The ensuing crash was breathtaking. By the winter of 2007, median housing prices in Cape Coral and the rest of Lee County had fallen to about $215,000, down from a high of $278,000 in 2005. By October 2009, they had fallen to near $92,000.

Now, I’m sure the economics of these cases have their differences. But does it strike anyone that we’re looking at the collapse of a massive bubble in Florida, a place people were supposed to be willing to pay any amount to live, and at the inflation of another bubble in Montana? At people being priced out of their homes not because their homes are any better than they used to be, but because some really rich people decided it was worth paying a lot to live there? What happens to the people who get priced out? And what happens when the rich people move on to another vacation destination?

This is not a rational market, to say the least.

Tags: Housing