StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Homeownership

Posted by Stan Collender

Other than Andrew and Pete, it's not often that I disagree publicly with an economic icon, especially when it's Martin Feldstein.

But Feldstein's article from The Wall Street Journal about homeowner's who are underwater, that is, whose mortgage is greater than the value of their home, has troubled me greatly since it was published last Tuesday.

The article is based on the premise that homeowners who who are underwater have a strong incentive to walk away from their home and instead rent a place to live.  That only makes sense if the homeowner bought the home to sell it and make a profit and now wants to cut his or her losses by getting out from what was a very bad investment.

Posted by Stan Collender

Tyler Cowen took all of the emotion out of the current economic situation in a brilliant piece in yesterday's New York Times and in so doing set up the discussion in a way that few others have done.

For me, this was the money quote:

The fundamental problem in the American economy is that, for years, people treated rising asset prices as a substitute for personal savings. The thinking went something like this: As long as your home’s value rose every year, you didn’t have to set aside so much from your paycheck. If your stocks went up, too, so much the better; don’t forget that the Dow Jones industrial average stood in the 800 range in 1982 and seemed to rise almost nonstop for many years.

Posted by Stan Collender

Every American supposedly dreams about living in/owning their own home. 

That's a romantic formulation: we all dream about a home where we can provide for our families and everyone wants to have the equivalent of picket fences, front yards, and two-car garages.  That's why being able to buy a home is the goal and federal policy has been devoted to making that easier.

But as I've watched the issue unfold over the past few months, I've started to wonder whether this romantic version of the American Dream is really nothing more than a myth. Would homeownership be as desirable to most people if they thought they would break even or lose money when they sold the house, condo, or co-op?  Would renting then grow in popularity

In other words, is owning a home more one about investing and making money?  Rather than owning their own home, does everyone actually dream about selling it?

I'm rapidly coming to this conclusion because it's one of the only ways I know to explain the emotions that seem to be so much a part of the current issue. 



Recent comments


Advertising


Order from Amazon


Copyright

Creative Commons LicenseThe content of CapitalGainsandGames.com is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 United States License. Need permissions beyond the scope of this license? Please submit a request here.