Saturday, March 28, 2009

Conversation With A Bank-Owned Property Salesman

This afternoon as I was coming home from the store, I noticed that the foreclosed house at the corner of my block was open. Outside were large signs advertising the auction of this “bank-owned” property. I had never been inside the house before and was curious to see who the selling agent was, so I stopped by.

The agent is a nice, personable guy who specializes in selling repossessed properties for banks and other creditors. He let me poke around the place, a rather small Korean War-vintage house with three small bedrooms, one bathroom and a garage that had been converted into a bonus room. While the front yard is decently sized, the backyard is vestigial at best.

I asked him what the price range of the auction would be. He told me that the seller would probably set a floor price of around $140,000, and that he expected it to sell for around $160,000. When I asked him what would happen if all the offers came in below the floor price, he said that the seller would simply pull the house off the market and wait a bit longer before advertising it again. But my question had aroused his curiosity, so he asked me what I thought the house would sell for (a dangerous question, if he wanted to get a good night's sleep tonight). I told him that I thought the seller would probably not get even $100,000. His eyes widened perceptibly at that answer, as he protested that he thought the economy might just pick up and that things might get better. But then he added a caveat about how no one really knew how things would turn out (although he was interested in hearing what I thought).

I told him, “I believe I know.”

“Really?” he said in a voice both curious and unsettled, his full attention focused on me. I proceeded to tell him about how an expanding economy requires an expanding resource base, and that when that resource base begins to contract, so must the economy it supplies. I told him about how the production of one key resource – oil – had peaked in 2005, declining afterward and causing spikes in prices for food and energy. I told him also about how these price spikes destroyed the ability of many Americans to maintain their large debts, and how this contributed to the present worldwide economic collapse.

This news, though distrubing, was partly familiar to him. He began telling me that yes, he had heard about the role of bad loans in causing the present economic crisis. But he asserted that the downturn had not affected Oregon to the extent that many other parts of the country had been affected. Oregon, he claimed, was more “resilient” because of its diversified manufacturing base and because its houses had maintained their value to a much greater extent than houses in places like Phoenix, Las Vegas, Florida and Michigan. He called Detroit in particular a “black hole” as far as house prices and resale value.

I told him that I thought Detroit had hidden potential. “Really?” he asked, startled again. I explained that economically depressed areas of the country have potential, not as places for “investment” properties, but as places to live for people who want to decouple themselves from the faltering “official” global economy. These places are ideal because since ownership is cheap in such places, those who choose to live there don't have to take on a large debt. Therefore they don't have to enslave themselves to the official economy, and they have time and resources for learning how to live frugally and sustainably.

I could tell by the look on his face that he still didn't quite get what I was talking about. So I said, “The term that best sums up what I'm describing is 'urban ecovillage.'”

“Whoa, you're talking about a social revolution!” he replied. “Are you sure that most Americans are even ready for that?” I told him that the times now upon us would force Americans to make new arrangements, and that we were nowhere near the bottom yet as far as economic collapse. I casually dropped the names of a few authors, such as Dmitri Orlov and James Howard Kunstler, and mentioned that he might be interested in reading what these authors have to say.

In an attempt to change the subject, he asked me what I did for a living. When I told him that I am an engineer, he began to praise the value of the house we were in, and its potential as a rental property. I laughed a little and told him that I live just down the street, and am not interested in buying another house or going into debt. I explained my fear of indebtness in view of our present economic troubles.

He said again that he thought the local economy was relatively robust. I told him about the slowdowns and layoffs at my company's local office, and mentioned that the official unemployment rate in Oregon is over ten percent. This was news to him. “If all the things you tell me are true, I'm really worried about my children,” he said. I can sympathize with such a worry.

“Well, listen,” he said, trying to end on a less worrisome note. “Let's get together in a couple of years and see who's guesses were right about the future.” “Sounds great,” I replied, “although I don't think we'll have to wait more than a few months.”

By the way, for those who want a broader picture of how our state is doing, here are two recent news articles: www.nytimes.com/2009/03/27/business/economy/27portland.html?pagewanted=1&_r=3&ref=business, and www.washingtonpost.com/wp-dyn/content/article/2009/03/27/AR2009032700979.html. The New York Times article is interesting because it mentions the fall-off in shipping traffic at the Port of Portland. I often ride my bike over the Steel Bridge on the way to work. While I still see bulkers loading or unloading at the dock next to the bridge, I think they may not be coming as frequently as usual.

1 comment:

Kiashu said...

You're such a party pooper.