Just this week, financial officers were wondering if some "accident" could pop the USA housing bubble. I said, "It will either be the West Coast or Florida, earthquakes or hurricanes (or any combination of these)."
Well, today there was a small earthquake on the ocean just off of Northridge and this small shake shook multimillion dollars of houses down upon each other. The soil upon which these houses precariously sit slips easily after heavy rains or even very small earthquakes. The hills in Laguna Beach are made of loess dirt blown over from China during the Great Ice Ages and as California slips and slides alongside the American continental plate, this loose soil slithers to the ocean. It is remarkably unstable and to make money, people build remarkably unstable houses upon this delicate landscape.
We all know there will be a devastating earthquake in due time. It can happen tomorrow. Today. All we know is it will happen. The damage caused by these sliding houses is already in the $30 to $50 million range and this is from a few rainstorms. Not even a flood. Just ordinary but slightly excessive rain. Not even heavy rain, just ordinary but often rain. And a gentle shake.
Insurance companies don't like Florida or California. Both states suck up hundreds of millions of dollars at the slightest cause and both have multiple causes to inflict upon themselves. In the Northeast, we have heroic blizzards, for example. The worst that happens is someone's roof caves in and this is only on very old housing that is falling apart because it is empty. Some modern buildings have collapsed like stadiums that are covered but those are insane to begin with and should never be built in snow regions in the first place.
But Florida and California: any and even all buildings can be suddenly destroyed with little or no warning. And since the building codes in both states stink, the damage is often acute if not total. There is little excuse for this. If sane building codes existed, homes that are earthquake/mudslide and fireproof can be built! Why aren't they? Obviously, people can afford the building materials, look at how they bid up the price of these things! But of course, this is where they chintz it up. Everyone wants to do the least for the most so the money is spent on flash, not foundations.
I built a significant house, three stories tall, on a steep mountainside. It has considerable drainage around the perimeter, the foundation reaches deep and is heavily rebared, the floor is a foot thick with three layers of rebar interlaced with mesh. I spent half of my time and money on the foundations and the superstructure to insure it can take very high winds and deep snow and other hazards in the mountains. All the individual framing members are cross tied by steel braces and straps. All corners are triangulated rather than just whacked together vertically. Virtually no houses in America are built with triangulation in any corners.
This should be required in all houses in both Florida, due to high winds and tidal surges, and California, home of the earthquake and landslide. But neither have this. Bermuda and other island nations do require this in upper class housing.
It is painfully obvious.
Today's collapse won't pop the present bubble. The government will shower money upon these people who are probably not very well insured, and all will roll onwards. Until even Uncle Sam can't fix things over and over again.