Philadelphia Inquirer
“The Economy”column
November 16, 2005

By ANDREW CASSEL

That whooshing noise you hear isn’t just the autumn leaves blowing by. It’s also the sound of the air coming out of the real-estate bubble.

Indeed, as the temperature drops and the leaves fall, it seems clearer and clearer that we’re nearing the end of an era — or at least a turn in the market.

Last week, Toll Bros. forecast that it would sell fewer of its signature luxury houses next year than expected — sending shares of the Horsham homebuilder plunging as much as 14 percent on Wall Street.

Toll was hardly sending out a distress signal; the company said its revenues rose 39 percent in the latest quarter, to $ 2.01 billion.

But by simply warning that demand was “softening” in many parts of the country, it underscored what economists have been warning about for more than a year:

Real estate, as Cole Porter might have put it, is too hot not to cool down.

Of course, the best-known analysis of the American real-estate market to have been set to verse in our time remains the tune “Little Boxes”, by the late Malvina Reynolds.

But I was humming this recently to myself on a drive through the suburbs, when it hit me that Reynolds’ lyric needed updating. Today’s boxes are anything but little, after all.

So here is, ahem a modest rewrite.

(If you don’t know the melody, you can either ask an old folkie to sing it, or go to Google and type in “little boxes mp3”. Click the first entry that comes up.)

‘THE MORTGAGE BLUES’ or, ‘Rates Gonna’ Rise Someday’

Giant boxes,
on the hillside,
giant boxes,
in the neighborhood.
Giant boxes,
great big boxes,
monster boxes, all around.
There's McMansions,
and there's townhomes,
and luxury condominiums.
And they all have
lots of equity
and they all cost quite a lot.

And they've all got
big Jacuzzis
and front hall
cathedral ceilings
and broadband cable Internet
and hardwood kitchen floors.
They've got workrooms,
and fitness rooms,
and closets the size
of living rooms.
And of course,
three-car garages
for to park the SUVs.

And the people in the houses
all made their loans adjustable.
And they tapped
into their equity
with a cash-out refinance;
And they all hope
Alan Greenspan
won't keep hiking up
those interest rates
so their houses
will keep appreciating
and they'll still cost quite a lot.

But if Greenspan
raises interest rates
then the payments
on their adjustables
will go through those
cathedral ceilings
and they won't like that at all;
'Cause the market
for their real estate
won't be able
to appreciate
and they won't have
any equity
to tap into for the cash.

Giant boxes,
on the hillside
giant boxes,
with no equity
giant boxes
in foreclosure
giant boxes all for sale;
There's McMansions,
and there's townhomes
and lux-ury condominiums,
and they've all got
big 'For Sale' signs.
You can have one for a song.

—–

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