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Sunday, August 06, 2006


The New 'Dead Zone'

Saw this great article from London's Guardian newspaper.

Not too long, so I'm re-posting the whole thing here.

'Dead zone' threat to US suburban dream

Petrol price rises may cause the housing bubble to burst, triggering global recession and the fall of America's Eden, writes Paul Harris in New York

Sunday August 6, 2006
The Observer

Levitown is a bus ride beyond the aptly named Hicksville in the outer suburbs of New York. Its lawns are neat and its houses boxy. From many gardens fly American flags and yellow ribbons: typical displays of suburban patriotism.
It was here, almost 60 years ago, that modern American suburbia was born. Work began on the town in 1947 and Long Island potato fields were soon covered with a radical new form of housing: single, similar, purpose-built houses designed for car-owners and aimed at families. At the time it was a shock. Social scientists scoffed at Levittown. But within decades the suburban experiment had come to define US life and what began in Levittown now covers the country in urban sprawl, strip malls and a way of life revolving around the car.

Now there are fears it is coming to an end. For the past five years America has been gripped by a housing price bubble. It has funded a huge expansion of suburbia as Americans poured their wealth into their homes. Yet many think that bubble may be about to burst. That would send shock waves through the US economy and into the rest of the world. Nor is that the only threat. The rising price of oil is squeezing suburbanites. It threatens a way of life where pavements are rare and everyone moves by car.

'We have invested all our wealth in a living arrangement with no future,' said James Howard Kunstler, author of the Long Emergency which postulates the end of suburbia. 'In building suburbia we embarked on the greatest misallocation of wealth in the history of the world.'

Not that it looked that way in Levittown last week. Kids were driven to school, fathers and mothers drove off to work, the retired sheltered indoors from the heat. Most had an obvious pride in where they lived. 'It's quiet and its peaceful. It's great here. I know it's the suburbs but it is where you want to live to raise a family,' said resident Sherri Smith.

Yet there are real signs America's long and profitable love affair with the suburbs may be over. The past five years have seen an unprecedented rise in house prices, which in turn has triggered a massive building boom. But the pace of house sales in America has now declined nine months in a row after setting a record last summer. Across the US once booming markets are stagnant or prices slipping. One recent survey showed home builders have started offering free add-ons, like pools or garages, in order to sell their houses. Home builder confidence is at its lowest level in 14 years. Fortune magazine recently headlined a piece on the housing bubble with the words: 'Welcome to the Dead Zone'.

It is a far cry from the mania of the past five years when Americans queued up - sometimes literally - to buy homes in new developments, often doubling their investment in 12 months. Not surprisingly the construction industry responded by a binge of development that saw 75 per cent of new building taking place in the suburbs. That has left the economy deeply reliant on housing. Between 2001 and 2005 housing created 43 per cent of all new jobs in America. If the bubble bursts, the economy could plunge into recession. So tied up is the average American that a 20 per cent drop in prices is seen as equivalent in effect to a 40 per cent drop in the stock market.

Though a price collapse would be devastating, trapping homeowners in negative equity and wiping out savings, the fallout cannot be underestimated. Soaring oil prices have threatened suburbia as petrol has risen above $3 a gallon. At the same time heating costs have risen and the so-called McMansions of the 1990s are expensive to keep warm.

'We have these terrible perfect storm conditions. The real estate market in America has gone south. We will get a death spiral,' said Kunstler.

Those warning of a coming crisis believe suburbia's economic collapse would force a rethink of the fundamentals of the American way of life. The cultural and political force of suburbia is vast. It is where most Americans live. From The Graduate to American Beauty to Desperate Housewives, the suburbs pervade culture. Their bonhomie and good living have been celebrated in iconic TV shows such as Father Knows Best. Their dark side has also been explored in everything from David Lynch's surreal films to The Simpsons. 'The great American story has ultimately been told in the suburbs,' said Professor Robert Thompson of Syracuse University.

Thompson has charted how popular portrayals of the suburbs have changed. In the 1950s it was a celebration of their Edenic qualities as a place to raise a family. By the 1980s cynicism had set in. But most Americans have still chosen to live there, which leads some to believe predictions of a crisis are overblown.

Professor Robert Bruegmann of the University of Illinois in Chicago sees the suburban model as the future. In his book, Sprawl, Bruegmann launched a passionate defence of modern urban development that, he argues, has been a great democratic leveller: allowing ordinary working families access to a standard of living previously only available to the wealthy. And the idea of suburbia as a homogeneous, mainly white, cultural desert is a myth. 'They have always been more diverse and interesting than people ever thought,' he said.

Suburbia is home to 38 per cent of black Americans, 58 per cent of Asian Americans and more than half of Hispanics. It is also where most new immigrants choose to live. Bruegmann says the model has been closely copied in Europe and thus: 'High oil prices have no impact on suburbs. We have already had that experiment. It is called Europe.'

He believes antipathy towards the suburbs lies in the snobbishness of elite culture - Victorian styles were ridiculed right up until the 1950s. Now the first suburban houses in Levittown are sought after as historical monuments. Bruegmann thinks tastes will change as suburban living becomes ingrained in the American psyche. 'That Wal-Mart store that everyone now reviles will be seen as quaint. People will say what wonderful construction methods we had back then,' he said. There may be some truth in that. When Levittown was first built, the houses were derided by architectural critics. Now the Smithsonian Institution in Washington wants to buy one.

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