Great Depression Online Archive Issue:

The Shakeout

Great Depression Online
Long Beach, CA
February 26, 2008

Inside This Issue You Will Discover…

*** What Happened to West Adams?
*** The Current Housing Market Shakeout
*** A Rebound or a Dead Cat Bounce
*** And More

What Happened to West Adams?

We made the short drive up the freeway to the The Original Farmers Market at Fairfax Ave. and 3rd Street in Los Angeles last Saturday. 

It’s a fun place to get out…walk around…and have a chocolate covered frozen banana on a stick.  Plus our 14-month old son can cause ruckus there and it doesn’t matter.

Driving east along the 10-Freeway toward downtown LA on our way home, we always notice the old Victorian mansions to the south that are in need of some fresh paint and some fresh care.

This is the West Adams area and it’s one of the oldest neighborhoods in LA.  It was also once the wealthiest district in the city.  But that was before many of its residents moved to the then newly developed West Side and Hollywood in the 1920’s. 

The West Adams area subsequently deteriorated and has yet to recover.

Will it ever?

How come over time some nice areas remain nice while others turn over like ripe tomatoes to rotting tomatoes?

West Long Beach was once an affluent area.  But that was before the nearby port became a post apocalypse industrial nightmare zone.  Now it’s overrun by gangs. 

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The Current Housing Market Shakeout

“One-tenth of U.S. homeowners hold mortgages that are larger than the worth of their homes, Moody's Economy.com said on Friday,” so begins a story we came across on Reuters on February 22nd.

“Nearly 8.8 million homeowners, or 10.3 percent, are in over their heads, its chief economist, Mark Zandi, estimates.

“As a result, millions of U.S. homeowners have the incentive to abandon their properties.”

We know a flood of abandoned properties are never good for the character of an area.  How will the current housing bust shakeout in different areas?

“Zandi earlier this week told Reuters he expects home prices to drop by 20 percent from their peak in 2006.

“He expects home sales to hit bottom this spring, housing starts to reach a nadir this summer and house prices to trough in the spring of 2009.”

A Rebound or a Dead Cat Bounce

Maybe prices will trough and then rebound.  But in some places they won’t.  There’ll be a dead cat bounce.  People will buy because they think the worst has come, but rather it’ll only be just the beginning of a larger decline.

What’ll be the longer term ramifications for those areas?

In the Los Altos area of Long Beach you can now buy a 1,200 sq ft, 3-bedroom 2-bath, single family house built in the 1950’s for $500,000.  A year ago, it would’ve cost you $600,000.  Does that mean now’s a good time to buy?  Seems like it’s still pricey to us.

And what about the guy that bought a house in LA’s West Adams area in 1928?  Maybe the price had dropped about 20 percent from its high a few years earlier.  We imagine he thought he was getting a good deal.

‘It’ll bounce back’ he must have thought.  ‘You can’t go wrong with a Victorian mansion, they’ll always be in demand.’

Little did he know the country was on the cusp of the Great Depression.  By the time it was over the area had taken a dive…never to resurface.

A shakeouts going down…just look around.  And while some areas will rebound…others will wither away and die.

Sincerely,

M.N. Gordon
Great Depression Online

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