Wednesday, March 21, 2007

The Case For Not Keeping Up With the Joneses

You can count me as one homeowner/investor who is not terribly upset about the drop in real estate prices. Everyone has already weighed in on the downsides to this development but I really can see an upside here.

For starters, I'll be the first to admit I really don't care if it's perceived as a "conservative" viewpoint....I believe in home ownership. I see it as being nearly as important as food and medical care. Yup, that important.

Where I differ from the "conservatives" is in believing that it's important for everyone, not just those of us lucky enough to have decent incomes and sterling credit. People need their own space that is truly their own and not some set of rooms they are allowed to inhabit at "the pleasure of" a landlord or an anonymous property management company or even some well-intentioned governmental agency.

It's really a no-brainer...people who do not own their homes, no matter how expensive or inexpensive, do not have a vested interest in their communities. We can't even begin to address social and economic inequities in this country when nearly half of our citizens don't have a prayer of ever owning their own space.

Thanks to various governmental programs and the boom in "creative" financing the latest figures indicate home ownership in the US is at record levels. I'll leave that alone though in truth I'd dispute that figure. The trouble is we got there not by having available, affordable housing but by creating unrealistic terms and conditions which rather than providing a "leg up" to the most vulnerable buyers instead provided a cash cow to speculative buyers.

Real estate is an investment but we've done what we always do, we got greedy. We stopped living in our homes and started viewing them as ATM machines and temporary quarters to inhabit until we could double our investment and move on to the next better thing, always counting on the people behind us to continue pushing prices higher. So we've finally hit the wall and there is no longer anyone behind us. It was bound to happen and anyone surprised at this turn of events has been living in a state of extreme denial.

What part of a nation filled to overflowing with service sector employees making barely above an already substandard and unrealistic minimum wage cannot afford to purchase even a $150k home are we not getting? Particularly not going to happen in the very communities that most need the labor and services provided by those same workers where their sheer numbers have pushed the cost of rentals through the roof.

So now prices are dropping. GOOD. They need to drop, I doubt they will drop anywhere close to where they need to and most likely the cycle will continue. Hopefully, much as I was able to in the California housing crash of the '80's, some people will be able to take advantage of the situation. Unfortunately it won't help those on the very bottom of the wage scale. They'd still have to give up little things like eating, medical care and child care to be able to save enough to make a down payment...even assuming they could afford the monthly payment on the simplest of homes.

As much as I'd like to sell and relocate I would really be far more pleased if home prices dropped to half or less than what they currently are because it would put nearly everyone into a home of their own and put the investor classes straight out of the real estate market, as they should be. Homes are an investment but not just in a dollars and cents kind of way. They're an investment in people and communities in ways far more important to us as a nation than people like me being able to "flip" and make bank.

For the record, yes, I've put my money where my mouth is and sold (to people I hand-picked, not random lucky investors) twice for prices that convinced everyone I was psychotic. Maybe I am but hey, I'm doing just fine, not missing any meals and I feel no guilt whatsoever, I'm officially NOT a part of the problem. Besides, if I believe in anything it's that "what goes around, comes around" if for no other reason than the way you live your life will determine the results you get. Just something to consider when deciding whether to go for the big profit or instead to take an opportunity to walk the walk and possibly do your bit to make a difference just because you can.


Flimsy Sanity said...

Yes, I agree. How can someone with low wages ever afford shelter that is their own? Another sad thing about renting is that one can't have pets.

I don't feel that sorry for speculators but I do sympathize with poor folks stuck with an overpriced hovel. Too many people never learned anything from the dot com bubble.

I am in the process of selling my house in a HOT market (oil trade) and looking to buy in a depressed market so for a very selfish reason, I like the current situation - I can finally get something with a garage.

Not Your Mama said...

I had a 3-car garage in Calif, it was nothing but a junk collector. I can understand the need in colder/wetter climates but usually a waste out this way.

Looking more like we're going to hang here till retirement so we have a few years to keep re-ranking possible destinations.

ryk said...

Thanks to various governmental programs and the boom in "creative" financing the latest figures indicate home ownership in the US is at record levels.

The problem is that a lot of these "homeowners" don't actually own their homes and never will. Far too many of them have little or no equity or have taken equity loans to pay off credit card debt. There's a reckoning coming.