From the Boston-based organization United for a Fair Economy, Foreclosed: State of the Dream 2008 a paper that strangely mixes up of cause and effect:
Homeownership is central to reaching economic equality and closing the growing divide between the wealthiest people in the US and everyone else in the country. Nearly 60 percent of the total wealth held by middle-class families resides in their home equity (the value of their home minus the amount they owe on it).4 Furthermore, homeownership is essential in acquiring other assets, including access to high-paying, good-quality jobs (with retirement plans, healthcare and other asset options), high-performing public schools, cleaner neighborhoods, and better health.
Homeownership is essential to acquiring other assets? Like what? Are there really companies out there denying high-paying, good-quality jobs to renters? I’ve never seen a "Do you own or rent your home?" question on a job application.
I, like many renters, live in a great school district and a nice, clean neighborhood. It’s true I’m getting over a cold, but my health isn’t any worse than when I was a homeowner. Is there some "Renter’s Syndrome" I haven’t heard of?
According to this paper:
For tens of millions of people in the US, owning a home is the essence of the American dream, representing as it does economic achievement and some measure of security.
Many people are walking away from their homes now as they have discovered that they have not achieved enough economically to afford their home, and discovered that there is no security in owning a home that has a mortgage that exceeds the home’s value. It is important to remember:
Home equity of a renter: $0
Home equity of an underwater homeowner: Less than that
The article quotes Martin Luther King:
I have a dream that one day right here in Detroit, Negroes will be able to buy or rent a house anywhere that their money will carry them."
That sounds like a better dream to me than "the dream of homeownership". For too many people, as the cliche now goes, the dream of homeownership has become a nightmare.
Looking at all the players who profited, I’d say it was a long drawn out home ownership sucker rally.
If people want a home in Detroit, now is the time to buy one. You can get into one for 5-10 thousand. You can’t live in it, but you could easily pay it off and start fixing it up to a livable state. Oh, but no good jobs though - darn.
But.., we live in a new America, many people don’t want to work real hard for the dream anymore, they want things to be turnkey, simple, and easy.
I think as we’ve turned more service economy and specialization, fewer people have learned how to do more with less.
The last 5-10 years have been an excellent time to build equity in a home, it’s to bad greed, selfishness, and so much stupidity dominated the era.
twist,
this article is exactly on point. you see, you are looking at it from your generations point of view. this writer is obviously speaking for my (the 20-30 something’s) generation. your generation worked hard, contributed to retirement plans, bought homes with money down and traditional mortgages. you worked your tails off your whole life to get to where you are.
we, on the other hand figure out how to do just the opposite. since we “are entitled” to life’s wealth and pleasures, we try to get it ALL by doing nothing. here’s how it works.
no money, bad credit, no problem!! you get that 250K home (say at 20-25 years old with no education)and since values only go up you wait a year or so. you then sell it for 400K. now you go and buy a 600K home (with nothing down). you use that 150K profit to live on while going to college.
POOF!!!! now you have a degree to get those great jobs with great benefits. your home has surely appreciated so you have great wealth in the form of equity. oh yeah….somehow during all of this you have EVEN got healthier!!!
it’s almost like magic. as long as home values continue to go up by 20+% you could live like this forever……oh….wait…..
Home ownership has been the key for the last 50 or so years. Tax breaks and equity building have made people better off. If 60% of the middle class wealth is in home equity, the middle class is about to disappear. Not being a conspiracy theorist, but this seems so set up. A cleansing of the economy so that the chosen few can gain more. Greed will backfire. The only problem is that may not be so good. Here comes socialism.
freemonster -
Exactly.
I’d actually figured this out about five years ago from reading Neil Stephenson’s description of the 1690s panic of the London goldsmiths in Quicksilver, but the twists and turns of the process this time around have been constantly amazing.
The “essential to acquiring assets” seems to confuse association and causality. More affluent people tend to buy houses. When the credit faucet opens all the way and less affluent people borrow 105% to buy a home, their other financial assets don’t improve, especially if they could have spent less on housing by renting.
This type of thinking scares the s*** out of me, because it implies that someone’s going to need to rescue people from foreclosure on homes they shouldn’t have bought in the first place.
“For tens of millions of people in the US, owning a home is the essence of the American dream, representing as it does economic achievement and some measure of security.”
This is an emotional factor, not a financial one. Was this report really supposed to be about people’s feelings?
[Slight edit- T]
Seamusfurr-
Feelings are a good guess, the report clearly had nothing to do with logic or real economics.
This seems to be along the line of Only rich people have yachts. If we want all Americans to be rich, we should have a national “Yacht Purchasing Assistance Program”.
Just think, demand for yachts would skyrocket as supply gets tight. Think of the jobs created as yacht manufacturers expand and hire. Think of the financing opportunities for lenders and yacht sellers. I can hear the impassioned pleas in Congress for equality in the yacht markets so all Americans can live the dream of “wealth through yacht ownership”.
Of course, lots of people wouldn’t be able to afford the upkeep or the payments, and sooner or later, demand would diminish and the market would be glutted with surplus yachts. That’s OK though- the Fed will just lower interest rates and we can blow another bubble.
twist -
I’m not laughing about yachts. Large stretches of this region depend on the lobster fishery.
John-
I’m all for lobster fisherman having boats- and anyone else who uses a boat in their line of work. [Besides, I'm a huge fan of lobster.] I’m not opposed to yachts or other pleasure craft either- for those who can afford them. It would be “A round of yachts for everyone- on the house!” that I would be opposed to.
RE: Homeownership Is Effect, Not Cause Of Prosperity
YES! Exactly. Too many talking heads have it completely backwards, a “wet sidewalks cause rain” scenario.
Gee, sounds like you’re saying that it’s not about RENTING or OWNING, it’s about HOUSING.
Sound like anyone you’ve ever read before?
By the way, your story tells you something about what liberals are like. They DON’T stand for increased individually enforceable rights–I found this out in a big way when I was researching my book. There’s very little difference between a liberal social group and such ratty police state organizations like the loathesome Scaife, Olin or Coors Foundations.
I’ve tangled with all these creepycrawlies. You’re obviously a baby when it comes to dealing with the gunslinger power elites in this country.
You would be alarmed by the product of having too few individually enforceable rights in this country:
a simple power struggle in which both right and left prey on YOUR ignorance of rights and facts in order to get you to support THEIR bid for power to manipulate the society.
Sobering, eh? Well, it should certainly sober you and your readers. Now listen up, kiddies: when I say
BAN HOUSING EVICTIONS NOW
I know EXACTLY why I am saying it. You obviously don’t. But you better learn fast!
I see right through the hyenas on both sides of this argument.
Let me put it another way which will blow your mind:
The right to housing is not an ideal or an abstraction. It is a fact.
I doubt you can cope with that, either. But you better learn fast!
John Ryskamp, The Eminent Domain Revolt, New York: Algora, 2006.
Twist,
For cryin’ out loud……………..
Oh, for Pete’s sake, must you pimp that ridiculous book in every post?
NVMike, Agnostic-
I figure every community needs its local color. : )
Besides, I don’t agree with Ryskamp on evictions, but his comments have helped solidify for me WHY I disagree with him.
No, NVMike… on every available blog.
Type his name into Google and you’ll see he’s got a full time job just going from blog to blog selling the book.
I’ve never figured out how insulting your potential customers was great for business, though.
Perhaps the good Mr. Ryskamp could elaborate on that strategy for us kiddies, babies and infants.
As for the point of the post. I love the yacht analogy. It fits perfectly!
Initially you’d have the traditional “class warfare” arguments on TV, but when everyone figured out that they were going to become “upper class” instantly with a new yacht, it should subside quickly.
Oh, and just so I can be the first to say it:
BAN YACHT EVICTIONS & REPOSSESSIONS NOW
Now go buy my book!
jryskmpr:
First off, I am not Twist. I am merely the sysadmin. This is my personal opinion, and not that of HousingDoom, it’s affiliates, or it’s sponsors.
That being said, I think that banning housing evictions is one of the most stupid, harebrained things that can possibly be done.
Housing is important. It is a fundamental need, one that can be met just as easily through renting (which I personally do, gladly) as through buying. Heck, in the current scenario, that need can be better (and cheaper) met through renting. Nobody has a “right” to more housing than they can afford, and our economy is structured around the enforceability of contracts. If I cannot do business with people, knowing that the government will enforce the terms of the agreements I make, then I cannot in good faith do business with people in this country.
Why would I ever loan money to anyone, knowing that the government can just come in and re-write the contract at will? Why would I extend terms to my customers (business runs on credit), if the government has the authority to come in and modify terms at will? Why the heck would I ever loan money or rent a house to anyone if I have no recourse should they fail to abide by the contract they read and signed?
A ban on housing evictions might help a few people out now, but those people made poor decisions - bailing them out will simply encourage more of this behavior - after all, why not? If they make a profit, they get to keep it. If it all tanks, Big Brother will be there to protect them from the natural consequences of their actions. Why is it bad to bail out banks that made stupid loans to consumers, but good to bail out stupid consumers who got bad loans from banks?
Furthermore, a ban on evictions would screw those over who weren’t yet in a place of their own, and help the system crash even faster than it is now. As an “investor” with a home, why bother renting, when you can’t evict people. As a renter, why bother paying? If legislation like this were anywhere close to passing, banks would be evicting everyone they could before it passed - right now, they have incentives to not evict.
To address some specifics:
There’s very little difference between a liberal social group and such ratty police state organizations like the loathesome Scaife, Olin or Coors Foundations.
The liberals want bailouts for the “poor homeowners” - of course, this benefits the banks more than anyone. Chris Dodd is a perfectly good (or bad) example of this. Bank of America pretty much wrote his bailout bill for him. The republicans seem to be big on direct corporate bailouts - no need to use the citizens as middlemen. One wants the Government in the bedroom - the other wants the Government everywhere else. There’s really not that much difference. Still, this has little relation to the “ban evictions” statement you make.
I’ve tangled with all these creepycrawlies. You’re obviously a baby when it comes to dealing with the gunslinger power elites in this country.
There is a lot of information out there for those who care to look. If you’re trying to make friends and influence people, calling people “babies”, making references to “creepycrawlies”, and “gunslinger power elites” is not a good way to go about it.
Yes, rich and powerful people have a vested interest in the current system. The fact that a plan (ban evictions) is bad for them doesn’t mean it’s not bad for the rest of us as well. Let’s not throw the baby out with the bathwater, shall we?
Let me put it another way which will blow your mind: The right to housing is not an ideal or an abstraction. It is a fact.
This doesn’t really “blow my mind”. People need housing. The best way to achieve this is to have affordable housing (not just easier financing) - what a novel thought. Foreclosures (and by extension, evictions) are a natural part of this process - those investors who get in over their heads get foreclosed on, and the bank sells the house at a reduced price. The house then either sells to someone who can afford it, or it sells to a flipper or someone else who can’t. The cycle repeats as long as things are out of whack. People who are foreclosed on move to a smaller place, rent, get an apartment, etc. If there are enough houses to go around (there are), evictions aren’t a bad thing. If there aren’t enough houses to go around, banning evictions still doesn’t help anything.
I doubt you can cope with that, either. But you better learn fast!
Again, derogatory comments don’t really help convince people. You also do a disservice equating “eminent domain” (a very abused legal principle that needs to be way, way scaled back) with evictions. Eminent domain places property at the whim of the government. Banning evictions places it at the whim of the occupant (who is usually not the owner - you need equity to own something).
Evictions don’t have to be a “all or nothing” thing. There is certainly a case to be made for addressing fraudulent mortgages. It is, after all, unreasonable to expect a potential buyer to know (in many cases) that their bank is lying to them. When fraud is committed, it is not a valid contract.
There is also a case to be made for requiring reasonability tests for government insurance - if a bank doesn’t follow reasonable lending guidelines, it loses government insurance, and becomes ineligible to sell it’s mortgages to the government and GSEs. Achieves correction without placing contracts at the whim of government.
Put another way: The government enabled, encouraged, and failed to prevent (through fiscal policies, tax policies, bailouts, easy credit, etc.) the massive problems we are experiencing in the economy now. Do you really want to trust them with even more power? If you are opposed to eminent domain (abusive government power over property), why are you in favor of legally banning evictions (abusive government power over property and contracts?)
AH -
We all have an individually enforceable right to repel boarders. Is that Chapter 1?
I am interested in your yacht eviction theories - there may be a few going on at Marina Del Rey, King Harbor, San Pedro, and Newport/Balboa even as I type? Maybe the Marina Del Rey evictions are allowable by the secretariat, but San Pedro evictions are forbidden because, as we all know, San Pedro is stronghold of our comrades under the flag of the taco and the Mezcal.
By the way, if I buy your bourgeois yacht tome, you are required to buy my book “What Would Joe Stalin Do?” I am working on a sequel entitled “Let Me Rent Your House (So I Can Squat In It Forever Without Paying)”. I’ll throw that in for nothing when it’s done, because, after all, my works belong to the state.
As Confucious say:
Men who get evicted from yacht go dinghy.
Does your book come with a colorful “WWJSD” rubber bracelet?
As a sequel to your sequel, may I suggest the “How to Write a Fake Lease and Get CA$H for Keys!” Complete with Sample Letters to the Lenders in the Appendix
Maybe we could go together and set up a corporation on a non existent island, like Riley in National Treasure 2. As he found out, and as we know, with all these gov’t bailouts and free homes, the taxes on $ 5 million dollars will be… $ 6 million dollars!
That tax thing is assuming that the profit motive is not completely exterminated… and that there actually remains a reason or possibility of making $ 5 million.
But hey, it’ll be OUR island, and we can make up any rules we want!!!
Not only does it come with the rubber bracelet, but a gift certificate for a free boat trip to Gitmo or a railroad trip to the Gulag, you make the call.
And if you act in the next ten minutes I’ll throw in my free pamphlet “How to Blog Mercilessly.”
And I’ll throw in a genuine replica Leon Trotsky ice pick (a 200 ruble value) for only $79.99 (there’s a currency arbitrage in there somewhere, I think). You can either use it on a bucket of ice on a 115-degree day, use it to slay enemies of the church, or use it on yourself after reading another of He-Who-Shall-Not-Be-Named’s genius posts.
Cheers.