Washington Post series on "Dashed Dreams: The Plight of the Black Middle Class"
The Post ran a series of articles ("The American Dream shatters in Prince George's County") concluding today on the impact of the decline of the housing market on the Black middle class, focusing on an 1,800 house subdivision, Fairwood, in Prince George's County, that was built in the early part of the last decade. With the housing crash, 1/3 of the houses tumbled into foreclosure and housing values declined precipitously, with problems abetted by various personal circumstances.
I was prepared to think, "wow, what a great series" especially because the first story led with a great graphic illustrating the vast differences between the average financial worth of white and black households.
Graphic from the Washington Post.
But the examples featured in each of the articles are about people who made incredibly bad financial decisions. Therefore, it is difficult to draw useful conclusions from the series, and they don't raise any of the issues I would have mentioned:
- Lousy financial terms make you more vulnerable financially (the articles sort of make this point, but indirectly)
- refinancing mortgages to take out cash because of higher values can go awry if housing values decline
- buying way more house than you need is expensive and can be impossible to pay if your personal economic circumstances change
- houses in what Christopher Leinberger calls "walkable urban places" tend to maintain their value more when macroeconomic circumstances change and the Fairlawn subdivision featured in the series is a conventional automobile-centric subdivision
- when you have too much house, you can take in roomers to help generate money to pay the mortgage, but it can be hard to attract roomers to auto-dependent places
But this ended up not being a resilient strategy and the county today is paying for it in terms of the crash in housing values and the high rate of foreclosures.
While you don't have the same level of price escalation in DC that you did at the height of the market before the 2008 crash, most DC neighborhoods (except East of the River) have recovered much of their pre-crash value (even if some households are still underwater mortgage-wise because of cashing out gains during the housing bubble).
These neighborhoods are mostly walkable, but not always, with increasingly vibrant neighborhood centers.
Prince George's County has some communities somewhat similar to DC in urban form although typically with significant less density, mostly along the Route 1 corridor in the western county, along the border of DC and Montgomery County.
Those neighborhoods too crashed in terms of housing values, and still are way off their peak pre-crash values, but they have recovered more compared to the conventional automobile-dependent suburbs further east.
This image shows houses for sale in eastern DC's Woodridge neighborhood, and across the city-county line, houses in Mount Rainer and Hyattsville. The prices are higher in DC, even for smaller houses and lots. Source: Zillow.
We won't ever really know if Prince George's County had taken a different course towards development, and extended "urbanism" rather than conventional suburbanism, whether or not the county would today be in a different place economically.
Interesting, the biggest lesson may be that density builds value and resilience in many situations, rather than reducing it, which is the common but incorrect belief.
Yes, PG County has other issues. Traditional decline of "inner ring suburbs," is an issue. So is poverty in some areas. Like DC, PG County shoulders a disproportionate number of the region's poorest.
-- Foreclosure data webpage, Prince George's County
But maybe the biggest issue is the way that they develop land isn't the best method for building and maintaining property values over long periods of time.
Interestingly, in many of the examples featured in the Post, if the households hadn't refinanced in the lead up to the crash, also on adjustable mortgages to take money out, they wouldn't be in financial predicament.
For example, one household, instead of selling a house and taking out a $200,000+ profit, which they could have used to pay towards the even newer $600,000 they bought, kept both houses. With the crash, both declined in value, the renter in the original house stopped paying rent, and their job circumstances changed, depressing their household income.