By David M. Kinchen
Cockeyed optimists among members of the dismal science -- economics -- say that this too shall pass, that spenders will come back to buy houses, cars, goodies of all kind and that the recession that technically ended two years ago will be just a bitter memory.

Not this writer -- call me a cockeyed pessimist -- and not David  Leonhardt, the Economic Scene columnist of The New York Times ( who wrote this weekend: "... the real culprit — or at least the main one — has been hiding in plain sight. We are living through a tremendous bust. It isn’t simply a housing bust. It’s a fizzling of the great consumer bubble that was decades in the making."

Leonardt's column is worth reading carefully because I think he's got it, identified the heart of the matter: "We are feeling the deferred pain from 25 years of excess, as people try to rebuild their depleted savings. This pattern is a classic one. The definitive book about financial crises has become “This Time Is Different: Eight Centuries of Financial Folly,” published in 2009 with exquisite timing, by Carmen M. Reinhart, now of the Peterson Institute for International Economics, and Kenneth S. Rogoff, of Harvard.

"Surveying hundreds of years of crises around the world, Ms. Reinhart and Mr. Rogoff conclude that debt is the primary cause and that the aftermath is 'deep and prolonged,' with 'profound declines in output and employment.' On average, a modern financial crisis has caused the unemployment rate to rise for more than four years and by 7 percentage points. (We’re now at almost four years and 5 percentage points.) The recovery takes many years more."

Waiting in line at the Port Lavaca TX H.E.B. supermarket (think Kroger or Safeway for those not familiar with the giant Texas supermarket chain)  I saw a story in the Sunday, July 17, 2011, Victoria (TX)  Advocate about a real estate development, a high-end one in Port O'Connor TX, about 20 miles from our home in coastal Calhoun County. 

Builder Tony Prokop, owner of Victoria's Prokop Custom Homes, has 74 lots for sale. He's built a luxury house, priced at just under $700,000,  on one lot and he's building another one on another   lot. Like all builders, he's a cockeyed optimist! With more than 70 vacant lots in a development with sweeping views of Matagorda Bay, a swimming pool, volleyball court and private canals in his Caracol waterfront development, he's waiting for the market to come back. I hate to pee in his pool, but it's gonna be a long time.

He cites stringent loan requirements for second home buyers, in the wake of the largest foreclosure crisis in the nation's history. Texas, the nation's 
 second most populous state (after California) hasn't suffered as much as California, Nevada, Arizona, Florida and Ohio, to name states in the Top Ten Foreclosure List, but it's not immune to credit pressures. And Texas lenders, like West Virginia ones,  tend to be on the conservative side, which is one reason why the foreclosure mess isn't as big a problem in the Lone Star State.
A lag in consumer confidence, a plunge in discretionary spending and tighter restrictions in second-home mortgage lending all play key roles in lackluster growth in Coastal Bend Texas, the story about Prokop said.

The market, among a handful of newer waterfront developments between Port O'Connor and Seadrift, remains saturated with empty lots. Of 1,116 lots within five such developments, 1,088 - or 97 percent - have yet to be built upon. Almost daily, I drive by a similar development on Lavaca Bay with unsold houses and lots, with an unobscured view of the bay.

In the wake of this monster housing crash, Congress is proposing stricter requirements for buyers, including larger down payments. It's called the Qualified Residential Mortgage (QRM) measure and housing trade groups like the National Association of Realtors (NAR) and the National Association of Home Builders (NAHB) hate it: “As the leading advocate for home ownership, NAR firmly believes Congress intended to create a broad QRM exemption – strong evidence shows that responsible lending standards and ensuring a borrower’s ability to repay have the greatest impact on reducing lender risk, and not high down payments,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. in a press release issued last month.

The release goes on: "NAR has forged the broad-based Coalition for Sensible Housing Policy, which includes 44 organizations focused on drawing attention to the proposed regulation’s onerous 20 percent down payment requirement. The coalition asked for and recently received an extension of the comment period until August 1, 2011. NAR and its coalition partners have also gathered the support of 44 U.S. Senators, who recently wrote to regulators expressing their intent on QRM and opposing the imposition of a sizable down payment; 282 House members signed a similar letter."

Onerous 20 percent down payment! That's what we had to come up with before the Bank of America office in Woodland Hills, CA would lend us money to buy a modest new house -- our first -- in Van Nuys CA in 1977. I didn't think 20 percent was "onerous." I thought 20 percent down was normal on a house costing $65,000.

“As written, the proposed QRM rule violates congressional intent, makes home ownership more expensive for millions of responsible consumers and jeopardizes the fragile housing recovery,” Phipps said in the press release. “We urge regulators to reconsider the proposed QRM definition to help hard-working, creditworthy Americans continue to realize their dreams of homeownership.”

On the other hand, if somebody with plenty of cash steps up to the plate, bargains are available. And Ron Burkle, a friend of Bill Clinton and a big donor to Democratic Party candidates, has plenty of money. He's a billionaire and he's just bought one of the most distinctive Frank Lloyd Wright houses in Los Angeles. The L.A. Times, where I covered real estate from 1976 to 1990, reported on Sunday, July 17 that the "....Ennis House, the 1924 hilltop mansion that is one of the master's most celebrated residential designs and one of Los Angeles' most revered architectural landmarks, has sold to billionaire Ron Burkle for about $4.5 million, 70 percent less than its original asking price."
The Times: "Ennis House Foundation chairwoman Marla Felber confirmed on Saturday the exact price: $4,458,084.58, which represents the organization's balance on a construction loan taken out to repair L.A.'s most prestigious fixer. At more than 6,000 square feet, Ennis House is the largest of Wright's four 'textile-block' houses in Southern California, so named because their patterned concrete blocks were knitted together to serve as structure and decoration, inside and out. The Maya-influenced design, which consists of more than 27,000 blocks, deteriorated over time, sustained serious damage in the 1994 Northridge earthquake and then partly collapsed during heavy rainfall in 2005. The foundation spent about $6.5 million on structural and seismic repairs to the Los Feliz landmark, and remaining repairs will cost an estimated $6 million more."
As anyone familiar with Wright's houses knows, they're money pits, designed for people with ton of money to maintain them. The roofs alway leak, because Midwesterner Wright (He was born in Richland Center, Wisconsin, in 1867 and died in 1959) stubbornly loved flat or low pitched roofs.

More from the story in my old paper: "Wright's grandson, 
Eric Lloyd Wright, announced in June 2009 that the foundation was putting Ennis House up for sale with hopes that a private owner could better finish the job and act as the property's steward. The house languished on the market even as the initial $15-million asking price tumbled. By this January, when The Times published an article on Ennis House as part of a Landmark Houses series, the price had dropped to $7,495,000."

The Times reported that the sale closed Friday, July 15, 2011. "Burkle, who could not be reached for comment, is the founder of the investment firm Yucaipa Companies and a fundraiser for the Democratic Party. He lives full-time in London but also owns Greenacres, the 1920s Beverly Hills estate built for silent film star Harold Lloyd. He is on the board of the Frank Lloyd Wright Building Conservancy, " the newspaper said.
Speaking of supermarkets, Burkle as a teen in San Bernardino County, east of L.A. in the so-called "Inland Empire," was a bag boy at a Ralphs supermarket. He ended up owning the chain. Also, The Times reported that as a teen "Burkle aspired to be an architect and traveled to see the Ennis House, a spokesman said. He left a note asking to be notified if the house ever were to open for touring; the owner later called young Burkle and invited him to see Wright's creation." So, if you're a billionaire, and love Wright's architecture (who doesn't) the sky's the limit. But note that Burkle got the deal of a lifetime on one of the Wright's masterpieces. The house was built for Charles and Mabel Ennis, proprietors of a men's clothing store and admirers of Maya art and architecture.