I'm sorry, homeowners, but I am not joining the ranks of those screaming for home prices to return to pre-bubble levels.
My reasons:
1. I don't think this would magically transport us back to pre-recession. The cat is out of the bag re the economy. Those of you who were conned into believing that as long as you were willing to suffer the effects of the Stealth Wealth Transfer (the one no one talks about...) that the economy would keep rolling along like Old Man River were: duped, ripped off, lied to, manipulated, taken for a ride. You should be angry. But not at "liberals" or "taxes" or "welfare scum" or even "9/11" or anyone or anything except the greedheads who took the money and are doing their best to run (and maybe also the people who let them do it.)
2. Betting the farm on housing prices that were out of the reach of salaries was...well...stupid. I don't mean the homeowners were stupid. Most of them were just trying to own their own shelter. Shelter, we seem to have forgotten, was once considered a necessity of life. No, I mean the folks who bought the loans and sliced and diced and packaged and repackaged and then sprinkled derivatives all over the place, assuming that somehow people whose wages had been flat-lined for years could pay for housing prices going up, up, and away...common sense deserted them completely. What is totally unfair is how we are all having to end up paying for it.
Housing prices need to end up being reflective of the incomes of people in the area where the housing is located. Obviously if this means a big drop in prices slow going is far more safe than a big crash. But the absolute long-term goal shouldn't be for them to end up where they were, unless someone is planning to talk to the Wage Fairy and get folks a better deal.
Found this gem via Alice's blog. How'd I miss this blog? :-)
ReplyDeleteThe last time there was a bubble and a burst (late 80's/early 90's) I had just bought my apartment. Everyone said, "Good investment! You can flip that for more money later!" I firmly corrected them by saying it was my home, not an investment. I took up no loans beyond my means and, being aware that interest rates could rise, starting paying the mortgage off right away ("oh, just pay the interest for five years. You'll have flipped it by then," said others) , and I rode that last burst without trouble. The key is to not gamble with the roof over your head.
Interestingly, this time in both Norway and the US, the problem isn't just mortgage rates going too high, but credit card debt. People's spending habits have changed since the last crunch.
PS: Your Stealth wealth-link has a http:// too many.
ReplyDeletePlease excuse the extra http :)
ReplyDeleteI am wondering why this comment did not appear until now.
I have learned not to make judgements on people's credit card bills now that I have to live on credit so often myself (hoping that maybe My Prince Will Come or I'll find a way to sneak into a country with national health care or something else will happen to get rid of medical costs my insurance did not cover.) I've had to use the card to keep the car running, too. When you are choosing between necessities sometimes it is hard to pick. Electricity...or medicine? So I guess it depends on what people are using those cards for.