‘Underwater’ and the New Small College Town Housing Bubble

The dream and nightmare of homeownership.

August 18, 2020

Underwater: How Our American Dream of Homeownership Became a Nightmare by Ryan Dezember

Published in July 2020

The Valley News, our local newspaper, ran a story this past weekend headlined "Area Home Sales Spike as the Pandemic Pushes People into the Upper Valley."

Not since almost 19 years ago, when traumatized New Yorkers swept into northern New England seeking safety in the wake of the 9/11 attacks, has there been such a pressing demand for homes in the Upper Valley, according to area real estate brokers.

Although the Upper Valley has had a housing shortage for years, making it difficult for both local and out-of-state residents to find a home to buy or apartment to rent, the pandemic has pulled the supply of homes even tighter.

I read this article in the Sunday Valley News on the same morning that I finished Ryan Dezember’s new book, Underwater: How Our American Dream of Homeownership Became a Nightmare. Dezember, a reporter for The Wall Street Journal, offers a useful and engaging analysis of the housing crash of 2008. The book goes beyond the bursting of the housing bubble to explain the causes and consequences of decades of federal policy that attempted to drive up homeownership rates.

Subsequent to the last housing crash, the rates of renting have dramatically increased. This trend is driven, at least partly, by the growth of corporate-owned and -rented single-family homes. Many people burned by the last housing bubble have no desire to buy. A larger number of people at every age can’t afford the down payment necessary for ownership.

In Underwater, Dezember wonders what will happen when a growing proportion of Americans no longer build their long-term wealth by building equity in their homes. Will renters take the money that they save in not paying for home repairs and property taxes and invest those dollars in retirement funds? Moreover, if renting a home becomes as popular as leasing a car, who will buy all those houses that the baby boomers (born 1946-1964) will eventually want to sell?

Initially, I hesitated to read Underwater, as I thought I knew what’s to know about the housing crash. I needn’t have been concerned.

Reading Underwater both deepened and personalized my understanding of the inflation and collapse of the last housing bubble. Dezember personalizes the story of the nation’s housing trauma by building the book around his own story of owning a coastal Alabama starter home that he couldn’t sell. At one point, his house dropped in value to less than half of what he paid.

Much of Underwater is about the condo speculators of coastal Alabama, who, like their counterparts in Florida and Phoenix and Vegas, are the real culprits of the housing insanity of the early to mid-2000s. There is an active debate about if the U.S. is in a higher ed bubble, one that will dwarf the housing bubble of the last decade. Understanding the roots of the housing crash may help us to figure out if we are destined for a similar fate in our industry.

In analyzing what caused the housing crash, Dezember interviews Stefania Albanesi, an economics professor at the University of Pittsburgh.

Underwater is enjoyable to read in equal measures for what you learn from the book (Dezember synthesizes lots of academic research on housing), and the reporter’s eye for detail that Dezember brings to the story. Here is a passage describing the author’s visit to the office of Professor Albanesi:

Albanesi, a native of northern Italy, kept a small, sparse office in a tower at the downtown campus. One of my two seating options when I arrived was a beanbag chair. She was working on a follow-up to the 2017 paper that challenged the notion that subprime borrowers were to blame for the crash.

Reading those sentences, I could picture a faculty office with a beanbag chair. Makes me miss campus offices.

Is COVID-19 driving a housing boom across the nation’s small college towns?

Will more and more academics want to build their careers and raise their families in a low-density rural location?


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