The latest New Yorker has an article about Southwest Florida real estate by George Packer entitle “The Ponzi State.” I had to post it here as a follow up to my 2005 post My Experience with the Southwest Florida Real Estate Bubble.
In “The Ponzi State” (p. 80), George Packer traces the development of the foreclosure crisis in southwest Florida, and looks at how it has affected people at all levels of society. Florida’s economy, Packer notes, “depends almost entirely on growth—that is, on new arrivals and the wealth they generate in construction and real estate.” Gary Mormino, a professor of history at the University of South Florida, in St. Petersburg, tells Packer, “Florida, in some ways, resembles a modern Ponzi scheme. Everything is fine for me if a thousand newcomers come tomorrow. The problem is, except for a few road bumps . . . no one knew what would happen if they stopped coming.” “By 2005, the housing market in Florida was hotter than it had ever been . . . Home values around Tampa rose twenty-eight per cent that year,” Packer writes. “Flipping houses and condominiums turned into an amateur middle-class pursuit.” Alex Sink, the state’s chief financial officer, says, “Florida has always been susceptible to the Wild West mentality. If it’s too good to be true, we’re going to be involved in it.” The combination of underqualified buyers (“Anybody could qualify—I mean anybody,” Marc Joseph, a Fort Myers Realtor, tells Packer), insufficient regulation of mortgages by the state, and the failure of banks to do due diligence on properties and buyers set up Florida for a particularly hard fall. “Anyone buying and selling property in Florida in the middle of the decade must have known that the system was essentially a confidence game, that everyone involved was both being taken and taking someone else,” Packer writes.
Packer notes, “in a place like Lehigh Acres, near Fort Myers, where half the driveways are sprouting weeds, and where garbage piles up in the bushes along the outer streets, it’s already possible to see the slums of the future.” As Doug Bennett, chief of the Riverview bureau of the St. Petersburg Times, tells Packer, “Too many houses, not enough water, the economy’s terrible, no tourists. This is the capital of the low-wage jobs, and when things go bad people just have no safety net. It’s very unfortunate. This is the epicenter of everything that’s bad in America.”