More evidence of a housing bubble

As the reporting of a housing bubble escalates, I thought I’d go back and find the post we did October 11 last year on how it could affect our work.

(I suspect we may need to revisit this again in the near future)
Economic disaster: environmental aspects of surviving a housing bubble
(The following is a “thought-piece” originally intended to be part of an article in the forthcoming newsletter, but we decided it didn’t quite fit. We hope it’s an interesting read here. More good stuff to come in the Fall 2004 newsletter…


No one has difficulty identifying a speculative financial bubble – with hindsight. Dot-com businesses and Japanese real estate were valued not for their actual worth but for the belief that others would consistently pay more for the same thing. In each case, the sky-high prices had to collapse. Identifying a bubble before it bursts is much harder. Economic experts are split over whether the constant rise in real estate values in the Bay Area or elsewhere constitute a speculative bubble. Not being economic experts, we cannot make any firm conclusions except that it is possible that a housing bubble exists, and that we should be prepared for the possibility that real estate prices could collapse.

Imagine a drastic scenario – what would a fifty-percent collapse in housing prices do the environment and to our work in the Bay Area? As to the environment, the price collapse would certainly reduce much of the pressure to build sprawling hillside housing, pressure that results from the tremendous profits developers can make at current prices. On the other hand, we can expect developers to argue that environmental regulations that were affordable for high-priced markets are no longer affordable, and should therefore be dropped. We should oppose any effort to allow permanent sprawl on the basis of a temporary drop in prices.

While the environment may not be harmed, our own work in protecting the environment could be drastically affected by a collapse in housing prices. As a local nonprofit, we depend on local donors, who in turn fund us based on their own financial situations. If people see the market value of their homes cut in half, they will feel much less able to give generously. A widespread collapse in housing prices could even trigger a recession, further constricting financial donations. This situation will require tremendous effort by environmental organizations and by their supporters to make their way through the financial difficulties, and continue to do their work.

Preparation and improvisation combine to form the basis of any response to disasters. Preparing for this and other disasters, is part of the work we will continue to do in order to protect the environment.

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