Independence from the Myth of Homeownership

It is Independence Day and I have been contemplating whether it is time for us to collectively say we don't buy the myth of homeownership anymore and declare our independence from the fallacy.  Will we do this?  Of course not.

The government likes homeowners and for good reason.  Homeownership provides stability, a tax base, and makes people far less mobile than they otherwise might be.  All of this allows for easier governance and more far reaching impacts.  This isn't just a goal at the Federal level, municipal governments enjoy these benefits as well and are incredibly reliant upon homeowners as a means of survival.  This is why the government promotes homeownership and creates the propaganda we know as the "American Dream."

In 2001, I was invited to dinner at a small business owner's home.  The evening was pleasant at first, but when I made what I thought was an innocuous and indisputable observation, they turned on me.  The hideousness that came out of my mouth was, "Housing isn't always a good investment, the stock market outperforms housing over time.  People would be better off renting and investing their money in the market."  What had been a pleasant evening with food and wine turned into an absolute shitfest.  The couple, twice my age, looked at me like I had just declared that I was going to eat them with fava beans and chug a nice Chianti.  Actually, it was worse than that.  In heated voices, they provided me anecdotal evidence of how if they didn't own homes they never could have started their business.  I cried Bullshit.  At one point, the wife rolled her eyes at me and called me a naive child.  Then when I provided economic evidence for my argument, they called me Un-American.  Apparently providing statistical data supporting the fact the return on investment of the stock market is greater than that for housing is unpatriotic, who knew?  I lack the ability to back down from an argument and because I was so convinced I was right, I didn't shut my yapper and was never invited back to their home.  Their final argument as they shoved me out the door was that the dot-com bust proved me wrong.  Is there nowhere that I can hide from foreshadowing and irony?

So how did I go from arguing against homeownership to becoming a homeowner and then profiting from shoving other people into the same situation?  The answer is complicated but I think it was the combination of the propaganda post September 11th along with the recognition that the market was about to boom.  I bought my first house with the expectation that I would make a lot of money on the investment plus, I needed somewhere to live.  I never thought I would become a salesperson for the American Dream and there was no way I could have anticipated how good I would be at it.  I guess I'm saying that I sold out.

When you stop and think about what happened after September 11th it is hard to not realize how fragile our economy is.  I don't think we ever recovered from the 2001 recession, certainly not in terms of incomes and real wealth.  We had a fake recovery, fueled by an illusion.  The housing boom made people feel wealthier, and on paper they actually were.  That is why we had the rapid increase in household wealth and the record consumer spending expansion.  The price we paid was the ensuing decline in household wealth, the single greatest decline in modern history and nearly tenfold what we experienced during the OPEC crisis in the 1970's.  Without the government fueled housing boom we would still be in the recession of 2001.  Reread that statement because I don't think it gets enough play in the media.

It seems ironic that people get up in arms about government spending to get out of this recession when they didn't bat an eye while government incentives "got us out" of the last one.  The sad and scary fact is that this recession is really the double dip of the last one and since we aren't recovering, we might get a triple serving of economic smackdown.

Perhaps, I'm wrong, but I don't think so.  Here is a basic fact about our housing boom recovery that supports what I am arguing:  We really didn't have inflation during the recovery according to government measures.  Inflation is not always a bad thing, in fact, in a true period of economic growth we should have inflation due to rising wages which increases demand and puts upward pressure on prices.  We actually had stagnant wages during this time and by some measures, we experienced wage erosion.  That is the opposite of economic growth, that is economic decline.  

The booming economic years of  2003-2007 were a myth, just like homeownership.  The government stimulated us into recovery through less transparent measures than it is using now.  Incentivizing homeownership through legislation, expansion of the GSEs and arbitrarily low interest rates was our stimulus and ultimately has proven more costly than we can even comprehend.

Am I saying the housing crisis is the fault of the government?  Hell yes.  I recognize that greedy bastards on Wall Street and Main Street played a role, but, they were merely responding like rational economic actors to the incentives the government was providing.  I almost feel sorry for the poor bastards on Wall Street who are being demonized by indignant politicians for causing the crisis.  Hi Pot, have you met Kettle?



So, Happy Independence Day.  Enjoy your potato salad and beer, it is as American as dogs in bandannas.  In the spirit of the holiday, I offer this from the Declaration of Independence:

."..that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness."

Notice that homeownership isn't a fundamental right.  Let's remember that the next time we hear about the American Dream.  Don't even get me started on the liberty part....