The housing markets didn't end up in their current state by magic. They got here one step at a time - through government policy, corporate stupidity, and individual homeowner's greed.
Things have changed in the housing market.
Houses have gotten bigger since the 50s and 60s. More square feet. More rooms. Bigger kitchens. Less equity. No reality. But Quin says it best.
The lies we’ve been told by government, corporate America, and the media are no worse than the lies we’ve told ourselves. We have tripled the size of our houses, and reduced the sense of community in our nation. Many have perfectly manicured lawns, polished appliances, 12 spotless rooms and dysfunctional, aloof, joyless lives. A McMansion, stainless steel appliances, 6 flat screens, and granite countertops do not guarantee happiness. When all of these items are bought on credit, you have a tragedy.Did we really think the American dream was to be drowning in mortgage debt?
I have said this before, and when I say it to people in person, there is always someone to argue with me. Your primary residence should not be considered an "investment." I use quotes, because in accounting there are assets and liabilities, and while assets are usually thought of as investments, your primary residence is rarely anything but a liability. Unless you run a home-business, or generate income in other ways, it is a liability. If you lose your job, it is a millstone around your neck. (Realtors love to argue this point... I wonder why...)
But back to soulless suburbia. Most people recognize that it's soulless. (Wasn't that Leo DeCaprio/Kate Winslet movie all about that?) But we don't seem to know what else to do. Buying things is what we do. It is how we show status.
The Baby Boom Generation, as usual, has driven the Supersizing of America. The bigger and gaudier your home, the more successful you appear. Nothing tells the world you’re a winner more than living in an 11,000 square foot McMansion with a Hummer (with a save the environment license plate) and a BMW (with a yellow support the troops ribbon on the back, even though there are no troops from their exclusive neighborhood in the war) in the driveway. The Boomers have chosen a lifestyle built on luxury, gadgets, and home equity.They built a lifestyle on foundation of sand.
But this is more than just an attack on boomers. It explains pretty clearly how we got here, how we are doing the same things the Japanese did when their housing bubble burst, and what the next stage of the housing melt-down is likely to look like. (No, it isn't over yet.) How home equity was the drug of choice, how Realtors and Pundits told us comfortable lies, and why a lot of people believed them. A new home's value could only go up, in this world. Flipping houses with no experience, and no knowledge of simple home improvement techniques seemed reasonable.If you listened to the Realtors, it seemed reasonable, anyway.
Below are some of [National Association of Realtors' mouthpiece David] Lereah’s best lines. As an aside, existing home sales have plunged 30% and prices have declined 25% since he spoke these words:How many Realtors parroted these comforting reassuring lines, and how many people bought houses because the salesman said it was a good idea?
"The level of home sales activity is now at a sustainable level, and is likely to pick up a bit in the months ahead." – January 2006
"This is additional evidence that we're experiencing a soft landing." – April 2006
"We expect sales activity to pick up early next year." – October 2006
And if you weren't buying a new house you were taking money out of your home in the form of home equity loans, or refinancing or whatever, to the tune of 4 trillion dollars between 2001 and 2007. This provided an artificial boost to the GDP during those years.
Anyway, go take a look. The charts alone are worth it. And figure out what is important in life aside from owning stuff.
And don't be denial. If you own a home, its value has fallen sharply. (But that is - literally - another story.)