The ownership society which is highly touted by the Bush Administration is becoming the 'debtship' society. "Where's the pride in "ownership"? Buyers today own nothing. When you take out an I/O loan---over 70% now in my county in Calif---you own nothing. (post on the Housing Bubble 2)" It is a lease with a contract to buy. If the price drops, you still have that contract to buy you can't just get out (walk away). You will be under and it won't be pretty.
This country is becoming a nation of debtors. The situation is entirely unsustainable. The sooner the housing bubble pops the sooner we can begin to readjust our economy to bring sustainable economic growth.
Wednesday, June 15, 2005
The Ownership Society?
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It's the "debtship" society not because of Bush, but because of an irresponsible psychobable socialist culture which teaches that self-gratification is the greatest good, and that things like "restraint", "self-discipline", and "moderation" are relics of the facist, racist, homophobic, blah blah blah past. That's why there are so many bankruptcies every year, because people do not exercise self-restraint, not because Bush or the "evil credit card companies" or anyone has forced them to make bad choices. The bankruptcy bill that was just passed, that the whiny Dems opposed, is the first step in the right direction of making people take responsibility for their debts if they have the resources. The way to get out of the "debtship" society and towards the ownership is exactly how Bush proposes: help low and middle-income americans learn the values of responsibility and ownership by being able to manage some of their own retirement savings, rather than be at the mercy of politicians. Of course, many of the politicians want the people to have no assets, so that they are dependent on washington. And these politicians are just waiting for the housing bubble to find one more thing they can blame on Bush & Co. and say that more $$/government bailouts/subsidies are necessary. Rubbish!
ReplyDeleteIn a much earlier post I layed blame on the housing bubble on many different players.
ReplyDeleteHere is a copy and past version from earlier in my blog
"One of the big questions is who is to blame for the housing bubble.
Here is my list:
Greenspan & The Feds for the cheap money supply (low interest rates)
Parts of the Real Estate Industry
Irresponsible Lenders for lending to people who really can't afford it.
Fannie Mae & Freddie Mac for bundling up risky loans from
Asian Central Banks & GSE for buying all these bundled loans
Speculators & Flippers ( for being greedy and fueling this mania)
Some HomeBuyers for buying beyond thier means and being ill informed.
Parts of the Media for not informing the public about this issue sooner (finally they are commiunicating this)
Others ( yet to be determined, please discuss)
So, basically, the whole power structure is really responsible and merely "some" homebuyers bear responsibility, for buying beyond their means and "being ill informed". Sounds like even when blaming the party that's actually responsible, they should be let off the hook because nobody informed them otherwise.
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So, basically, the whole power structure is really responsible and merely "some" homebuyers bear responsibility, for buying beyond their means and "being ill informed". Sounds like even when blaming the party that's actually responsible, they should be let off the hook because nobody informed them otherwise.
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This has become one of my favorite blogs.
ReplyDeleteMy husband just graduated from college this year and landed a great job back in Tucson AZ. We were excited to return to a market that was more one income family friendly. That soon changed. Homes appreciated by 20% in four months. Dishonest investors, and real estate agents alike have turned us off from the housing market. We have been lucky enough to find a great rental for below market value we will be calling home until the market gets a grip. There is still alot of building to be had in Arizona. In the past home developers have released few lots at a time and increased the price of homes at a steady pace, thus helping to drive the market. Can the market back track when so much building is still taking place? Arizona is not Nevada, California or NY, but even little ole'
Tucson AZ is feeling the effects.
I ran a check on Lexis US Newspapers and Wire Stories database for the last few years, looking for the term "housing bubble". In 2001, there were practically no entries, then in 2002 and 2003, there were about 50-100 per quarter. In 2004 there was about 100-150 per quarter. And in 2005, there were about 250 the first quarter and over 400 in the second quarter (which isn't even over). This is not scientific, and may be affected by the fact that as time goes on, more stuff gets put on the electronic databases. But the trend seems valid. Has anyone done a more scientific study of this phenomenon?
ReplyDeleteThere was indeed a similiar study using a Lexis Nexis search done by economist Robert Shiller [sp?] done. He found simliar results. Thanks for sharing the valuable information. :-)
ReplyDeleteThe media attention that the housing bubble has garnered in the past month or so has been incredible. The media attention is already having an impart on the public's perception of RE.
What was once referred to as "The American Dream" is now all about greed. Speculators driving up home prices to make a quick buck make "the dream" a "nightmare" for anyone just looking for a first home.
ReplyDelete"What was once referred to as "The American Dream" is now all about greed. Speculators driving up home prices to make a quick buck make "the dream" a "nightmare" for anyone just looking for a first home."
ReplyDeleteBut we are about to trade nightmare with them.
I agree with the sentiments... but what's the solution?
ReplyDeleteLow interest rates and asian willingness to subsidize the incredible amounts of debt are not the root cause of our problems.
Personable accountability is the problem.
We live in a culture where the acceptable risk/benefit ratio is much too high, and regular people feel that it's OK far too often to gamble their futures for short term gain. Just today the AP reported that "we" have given up $900 million to casino gambling on native American reservations alone... Yet we'll all yell at the gov. for letting us kill ourselves.
I propose a different attack:
Reverse the trend that the Fed's Community Affairs Department has been pursuing to broaden access to capitol and advocate restricting access to "risky consumers" without affecting the access for commercial businesses.
But that's not the important part... Begin educating people about credit earlier (read: high school and community colleges). The biggest problem that I have noticed (anecdotally) is that most people enter adulthood without an idea how any of this works. Many (usually in college) become enmeshed in the credit cycle and never recover, getting deeper and deeper into debt over time.
Nigel,
ReplyDeleteI do agree that education is part of the solution. Also, personal responibility is also key. However, those in power and in the know also have a responsibility to not take advantage of people and not to create bubble conditions.
Blame is not an either or propistion. There is plenty of blame to go around. That is why in an earlier comment and blog post I have layed blamed on many entities.
The bubble will be popping soon. Blame will be thrown around. As usual in our society people will blame others and not take responsibility.
With all due respect, real "bubbles" do not occur when the NYT is warning about them.
ReplyDeleteIn case you forgot, the dot.com bubble occured when the NYT was talking about the "new paradigm" of the 90's. And the crash of 1929 occurred when (according to Joe Kennedy) even shoe-shine boys were touting hot stocks.
The truth is that, with high-leverage, low interest rates and a chance at a $500,000 TAX-FREE gain, owning real estate is a great investment. Plus, you can live in it!
I wonder what percentage of the "ain't it awful" posters here are sour-grapes renters...
Anon 7:25,
ReplyDeletePlease don't be an idiot. Owning RE (if you can even call it that) is not a great investment. RE is the one asset class notorious for it's lack of underlying cash-flow.
In fact, almost all RE is cash-flow negative right now, and in some areas, highly negative. Purchasing an over-priced asset with the belief that it will only go up in value and you will be able to make "a $500,000 TAX-FREE gain" isn't an investment - it's speculation.
BTW: I've made a lot of money in RE and I've gotten out (now renting.) Therefore, I'm not a sour-grapes renter. I'm just concerned that a collapsing RE market can wipe out the whole economy, and thinking like yours (assuming your not a troll) isn't helpful or constructive to the problem.
Anon 7:25
ReplyDeleteI've heard the point of view about contrarian indicators (can't be a bubble if everyone talks about it.) Luckily, YOY appreciation is going flat in several of the most bubbly areas, so it won't be long before we'll be able to test the contrarian indicator theory.
I'd say that by October when YOY is negative for San Diego, and speculators are rushing for the exits, most people will smell blood in the water and no amount of "talking down" the bubble from the NYT or the Fed will be able to stop it.
Ultimately, asset bubbles collapse due to sheer exhaustion and for no other reason, and this one is about over.
"In case you forgot, the dot.com bubble occured when the NYT was talking about the "new paradigm" of the 90's. "
ReplyDeleteWhat is your point?
"And the crash of 1929 occurred when (according to Joe Kennedy) even shoe-shine boys were touting hot stocks."
That sounds about right for RE now. Lots of people with similiar low paying low education jobs are touting RE. Time for a popping.
I think a lot of this is caused by the fact that Home Economics classes aren't taught as much as they used to be in HS..
ReplyDeleteJoe Kennedy used shoeshine boys as an indicator of a bubble and got out. There *were* warnings in the late nineties and they continued. In that case the bubble continued so that people disbelieved the warnings, but to use the algorithm, "bubble doesn't end until normally conservative believe 'this time is different'" is a risky tool. You may speculate on it, but you could lose.
ReplyDeleteReal estate bubbles are especially agonizing because when they start to collapse the equity is often illiquid. Unlike stocks property can be difficult to sell. Draw out the psychological torture, cut prices below market but the serious players take that as an indicator of more to come...