A disturbingly accurate housing forecast?

Years ago, when fellow Hummer reporter Erik Ustin would visit my "veal pen" (otherwise known as a cubicle - thanks DW) at our former employer early in the morning before any of the other calves arrived at work, we would ruminate on the fate of the housing market.

Back around 2004, when millions of doe-eyed real estate "investors" were talking about flipping condos or snatching up that dreamy vacation home, we were far ahead of our time as we pondered the fate of the raw materials then being used to construct residential housing that the proud new homeowners clearly would not have been able to afford during any other era and stood little chance of holding onto for more than a couple years during the current one.

Already attuned to rising commodity prices and always in search of new and different business opportunities, we wondered whether it would ever be profitable to strip homes of their raw materials and sell them for scrap before the owners were booted out the door for failing to make their monthly mortgage payment and one more house joined the ranks of "Bank Owned Real Estate".

There's a lot of copper in a typical single family residence - almost 500 pounds according to some statistics, twice that for a McMansion - and at between $3 and $4 per pound, a blow torch and a little hard work could result in a healthy cash flow for an ambitious businessman seizing an opportunity that few others even knew existed.

Former homeowners about to re-join the ranks of renters would surely see no downside in accepting a couple hundred dollars for leaving the door open on their final exit, allowing the blow-torch crew to quickly enter for the purpose of extracting the base metal that has become increasingly precious.

After all, with house prices plummeting, whatever money they did put down on the house (if any at all) is long gone and their credit will be impaired for a few years regardless of the condition in which they left the house.

Why not get a little extra "walking around money"?

For an ambitious businessman, the copper haul would probably just be the base level of extraction - the guaranteed return on a meager investment - since nearly all homes have copper pipes and wiring. The bonus would lie in those other things with resale value that are still attached to the house when the former homeowner heads out the front door for the last time.

Light fixtures, sinks, toilets, built-in appliances - even if you sold the stuff for pennies on the dollar, you could probably still remove enough in a single afternoon to make it worthwhile - maybe net $500-$1,000 when all was said and done.

Multiply this by a thousand or tens of thousands and it's easy to see how American ingenuity could make lemonade out of lemons one more time as the once-great housing boom continues to go bust.

Down Under

Erik is in New Zealand now, the former engineer purportedly eying a new career as either a shepherd, coffee importer, or tourist guide but seemingly in no hurry to return to work as he too took profits in California real estate while the takin' was good a few years back.

He does keep up on the housing news in the U.S. however, and found time to forward the article excepted below, an early indication that perhaps the entrepreneurial spirit may still be alive and well in the Rust Belt.

Foreclosures: Hardest hit ZIP codes

In the Rust Belt, it was the ripple effects of a dying industrial economy instead of rampant speculation that crushed the finances of many borrowers in states like Michigan, Ohio and Indiana.
...
According to Cleveland city councilman, Tony Branchatelli, who represents the district, more than 600 homes in the neighborhood are vacant and boarded up. Many have little value because the rehabilitation costs would exceed their selling prices. Some have had their plumbing, wiring and other hardware stripped.

Erik's comment:

Well, it happened! Wow we were good.

Yes, and we still are.