It may be difficult for anyone impacted by the deflated housing bubble to see the light at the end of the tunnel. But the author of the new book, "Pop! Why Bubbles Are Good for the Economy," says that if home owners, buyers, sellers, builders, lenders and real estate can hold on, there are good times ahead.
"Bubbles have always been good in the past, and historically, we recover from them quickly," business columnist Daniel Gross said at the Urban Land Institute's annual fall meeting last week in Las Vegas.
ULI is a non-profit education and research institute dedicated to responsible use of land and creating sustainable communities. A record 6,700 real estate and related professionals attended the four-day conference at the Venetian Hotel.
Not everybody agreed that the end of the mortgage mess and housing collapse will come sooner rather than later. One naysayer was Michael Fascitelli, president of Vornado Realty Trust, the nation's second largest real estate investment trust and a major owner of commercial real estate.
Fascitelli predicted it will take some time before the housing and lending sectors right themselves. "It's too early (in the cycle) to tell when we've hit bottom," he said, suggesting that the bottom might be shallower and longer than most people think.
But Gross, who writes for Newsweek and the on-line magazine, Slate, said that for all their problems -- the notion that risk could be ironed out of lending, the excess capacity that led to ruinous competition, the flip this, flip that mentality -- the mortgage and housing businesses will recover and thrive.
The hard part, he added, is that collapsed bubbles are unpredictable.
While Gross said his crystal ball was "hazy" as to when the sectors will stop their downward spiral, the economic trend spotter said businesses injured in previous bubbles have always recovered "in a useful way." And he believes the same will hold true for housing.
One factor that cannot be discounted is that the physical and intellectual infrastructure that is created when the bubble is inflating doesn't just go away when the bubble pops, he pointed out. Rather, they remain and become the foundation of new business models that weren't even imagined when the market was growing.
When the telegraph business was in its heyday, for example, lines were run hither and yon across the entire country. But it wasn't until the business went belly up that someone came up with the idea that money could be transferred by wire across great distances. And that business still thrives today.
Mr. Gross said the same will hold true for real estate. "All the houses that were built during the height of the housing boom won't be torn down," he told the conference. "Instead, new ownership will come in with a lower cost basis."
He also pointed out that home owners learned a thing or too about housing finance when the high-flying mortgage market was offering all sorts of products, including some very toxic ones. "The notion that refinancing may be beneficial is now part of everyone's mindset," he explained.
Quoting Winston Churchill, the business writer said housing and lending is not at the end of an era but at "the end of the beginning" of a new one. "Yes, we want to get all this behind us, and we will. But we're still in the clean-up phase," he said.
Mr. Gross is so sure that the current bubble will end well that he is already looking ahead to the next business busts, and he has a few questionable business models in mind. One is the rush to luxury, another is the trend toward globalization and a third is the switch to green.
Not everybody is a luxury consumer, he told the meeting, noting that many consumers are trading down from SUVs to compact cars and scaling back on the size of the homes they purchase. And as far as green being the new "in" color, at least when it comes to real estate, he warned that the movement right now is more flash than substance. If consumers can see a net tangible benefit, he said, the green movement will catch on. But if not, he warned, the air may go out of that trend, too.
