Home Ownership

Relevant Article for Today

I saw this article on CNN Money today, and I have to admit it set me off (just like this topic always does).

The whole issue of home ownership in America is ridiculous.  Since the 1950's there has been a push to put every single human being in America into their own home. This viewpoint is not just unrealistic, it is dangerous. These decades of foaming-at-the-mouth pursuit of private home ownership collapsed in the late 2000's, and we aren't likely to see the end of the fallout any time soon.

From the very beginning of the nation, we have been focused on land.  Voting was dependent on land ownership at the outset, and this legacy has colored our view ever since.  Westward expansion was fueled by free land grants, which engendered a feeling that Americans had a "Right" to own land.

In the frontier days, this worked.  If you were able and ambitious enough to start your own homestead, you were most likely fully equipped to own your own home.  In modern America however, homes do no exist in a vacuum.  With municipal services or septic tank and well, electricity, gas or oil heat, and television and internet, maintaining a home is no longer merely a matter of keeping the walls from letting the snow in.  Rising complexity in the home, as well as the high population density in most places where people want to live, has increased the responsibility involved with home ownership.  Additionally, many communities have minimum standards that they require of an owner as far as upkeep and visual appeal.  We do not merely have to maintain the house in working order, we have to ensure it is kept to a certain standard of aesthetic appeal.

Now, on top of the additional work and responsibilities involved with maintaining a home, there has come a constant pressure to be "moving up".  It is no longer standard to buy a home and stay in it for decades.  Ask around, and you'll hear very few people who aren't at least considering buying a nicer house eventually.  As a result, we are buying real estate on credit far more than at any other point in our history.

Put all of these factors together, and there are millions of people in the United States (and around the world, but  I am even less qualified to speak on the housing market in Sri Lanka than I am for the U.S.) who are buying a house they don't need, aren't able to maintain, are unsatisfied with, and can't afford.  When the market kept spiraling upward, this was no issue, you could get out if you needed and still come out ahead.  Once the lending tightened up, and people started asking "Can you really afford this house?" people stopped buying.  All of a sudden the people who had watched HGTV and become convinced they were real estate experts ended up hopelessly underwater.

This bill is designed to bail them out of houses they have no business being in.  That is a good thing, I suppose.  The problem is, everyone who made good decisions, bought within their budget, and have been making payments ends up holding the bag.

(Full disclosure:  We bought a house we can afford, put a decent amount of money down on it, and have been making payments regularly, I am not a neutral observer.)

These home bailout programs are flawed.  It is very important for the country that people get out from under these house payments that they cannot afford, and we normalize the real estate market.  However, once again the responsible people who made the right decisions have been left behind.  The real issue I have with these programs is that they are rewarding poor decision making.  There needs to be more incentive to do the right thing.  It is ridiculous that the people coming out worst in this process are the ones doing everything the right way.

What can we do?

The only reasonable outcome is to widen the program.  I cannot reasonably state that we should stop this altogether, we absolutely need to help get these bad mortgages out of the system so that the normal real estate cycle can restart.  The corollary is that these bailouts must be as available to responsible homeowners as they are to the irresponsible ones (and the unfortunate, I understand that some people have lost their homes due to dishonest lending practices or plain bad luck.)

Let's all take a look and realize that not everyone should own a home.  Many people have no interest or capability to maintain and pay for a home,  let's get rid of any stigma attached to renting, it is a very viable option for large portions of America.  Let's all acknowledge that we sometimes make bad decisions, and realize that those decisions have consequences.  Most importantly, let's get back to rewarding the people who are doing things the right way, not making them shoulder the load for the people who got it wrong.