If you’re in the mood for one of those stories that makes you shake your head and ask how people could possibly be so stupid, take a look at this NYT story. It’s about the excess condo development in Miami and focuses on one project in particular.
This sort of stuff is standard fodder these days and frankly it’s a bit unfair. Certainly with the advantage of hindsight much of what has been built in the last ten years, particularly in the residential sector, appears to have been a foolish adventure. But if you look at it from the perspective of the developer and the system you can discern a different picture.
Putting up a condo project of five hundred or a thousand or more units is not something that you decide to do one day. It’s a process that can take anywhere from five to ten years to bring to conclusion and along the way money, lots of it, has to be spent. You may make projections of what the market is going to look like over the development period but you also know that those projections can and sometimes do turn to dust. The risks are enormous yet there is no way to build without assuming them.
From the beginning of the Republic men and women have been stepping forward and taking those risks. That’s how the concrete canyons of Manhattan and Los Angeles were created. In many cases, spectacular fortunes were made and in many other cases spectacular losses occurred. Along the way banks that financed the projects made foolish loans and investors that bankrolled the developers lost everything. Of course, the reverse happened as well.
What we’re witnessing today is just another chapter. In that vein, I would like to recommend a wonderful little book to you. I came across it a couple of years ago. It’s called “The Last Harvest” and is written by Witold Rybczynski. It tells the story of how a cornfield in Pennsylvania (farmers refer to the sale of their land to developers as the last harvest) becomes a subdivision.
Mr. Rybczynski’s book traces the development of New Daleville from the acquisition of the land, through the planning process and finally to the construction and sale of the homes. Along the way he provides insight into the economics of home building, the history of development in America (our Founding Fathers including George Washington were land speculators and developers) and some fascinating cultural asides about houses and why we live in them. He also challenges some of the commonly held misconceptions about subdivisions, sprawl and suburban development.
You might well come away from this book with a different perspective on the development process and perhaps a better understanding as to how the housing market went so bad this time around. At the very least you may wonder, as I did, after you finish why in the world anyone would get into this business let alone how anything ever manages to be built.
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