What Matters

Oh boy. The “housing sector” has been both receiving and delivering really bad news for the past few weeks. Every day seems to bring yet another body blow. One our economy’s usually strongest pullers is now beaten to a bloody pulp and just can’t get up. In this NYT report, we are told that homes will possibly no longer be a source of wealth creation, which is quite a problem because homes have been a fountain of cash, sprinkling life to a myriad other economic sectors.

Home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg.

The wealth generated by housing … did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.

More than likely, that era is gone for good.

The dire implication is that homes will just be homes and there will be great suffering if they will never again be useful as ATM’s.

In a Monthly Review article, Rick Wolff suggests that the whole “homeownership religion” was always a bit of a sham because it was propped up with subsidies and encouraged very long term debt that had not historically been a part of the American economic system until very recently.

To see the systemic problems of the US housing industry, consider its basic economics. The “American dream” of owning one’s home was never affordable to the vast majority of US families because the wages or salaries paid by their employers were never enough. To realize the dream therefore required borrowing. However, because working families had insufficient wages and salaries and no accumulated wealth,.. private banks rarely lent to them. The vast majority of them,not merely the poorest among them, were too risky as borrowers

(A) …”solution” was found… The government would subsidize and guarantee private banks’ loans to millions of homebuyers. This solution boosted profits in private banks’ mortgage loan business. It indirectly subsidized all the industries producing for private homes. Yet it did not raise wages and salaries (something capitalists opposed).Many US workers became homeowners with large, long-term mortgages, making them more dependent on keeping jobs, not offending employers, etc. That experience also prepared workers to accept credit card, student loan, and other consumer debts. Expanding debt became the way most Americans bridged the gap between their incomes and the “good life”relentlessly advertised by capitalists needing buyers

The US housing industry’s basic problem is the system in which it is embedded… Over the last 75 years, US capitalism has bridged that gap by means of private credit guaranteed and/or subsidized by the government. This system provides incentives as well as opportunities for excessive home prices, diminished wages and salaries, and excessive quantities, risks, and costs of housing credit. The last 30 years have seen all three phenomena converge into a systemic crisis.

Like the changing of seasons, and night following day, housing has long been propped up on the unquestioned belief that homes will always increase in value. When the props fell out of that particular structure of shared belief, a tidal wave swept in and took away zillions of dollars that only existed because we told each other so.

Props gone; faith gone; money gone.

What’s left? The house. Even as people are absorbing their losses and the economy searches for some other kind of savior, it is dawning on homeowners that they still have something that’s pretty important, as David Streitfeld reports in a NYT article about July’s terrible housing sales figures:

His house, (homeowner Jimmy Penz) knows, is “an illiquid asset, a long-term asset, something I won’t be able to tap in for cash. But we chose a place we’ll be able to stay for a long time, to ride out any trouble.”

Once upon a time, before everyone from the banks to the buyers to the sellers got greedy, that was how everyone thought about the housing market. And however bumpy the path, that is once again the market’s future, said Mr. Kelman of Redfin.

“It’s not the apocalypse,” he said. “People will buy homes when they need to move or want the house, not when they want to make money. There will be winners and losers — not just, as in years past, winners and bigger winners.”

While everyone seems to be searching for a silver lining, including me, these articles are peppered with phrases like, “truly gut wrenching,” “gruesome,” “even more breathtaking,” “unprecedented,” and many foreboding indications that it could get worse, such as: “If unemployment goes higher than 10 percent, then the housing market is really looking at trouble.”

Joe Nocera, in hisTalking Business blog, even mocked the spokesperson for the National Association of Realtors, Lawrence Yun, for trying to put a positive spin on a very negative situation. He wondered “what they’re smoking over there.” All Mr. Yun said was that “Given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly..” Still,Nocera picked that comment apart and did his best to explain why our situation is really, really bad and may never get better.

For millions of homeowners stuck “underwater,” for millions more who have foreclosed, and for people who are suffering everywhere because this housing situation has drained all vitality out of our economy, Mr. Nocera’s analysis has the depressive ring of truth. There’s no way to make this picture pretty.

I’d have ended this post that way, but my day and attitude was just brightened. I just had a chat with prospective clients who want to add on to their small home. Their upbeat attitude was infectious. Their two young sleeping boys are beautiful and heartwarming. They hope we can build a good quality house they can afford. I looked at this family and I could feel their excitement. I couldn’t help but hope for their dream right along with them.

They tell their story of rehabbing a rough, small cabin into a more-finished small home. They’re proud of their work and the result. It works, but it’s very small for their growing family.

They would like us to build an addition that would provide an open living area on one level and several bedrooms on the upper level. It’s a simple concept, and they say several times that what they are after is a home that is well-built, well-insulated and functional. “Nothing fancy,” they say, “We just want a good quality home for our family. And we definitely don’t want it big. We don’t want to have to call people to dinner with a cell phone. It would be better just to be able to say ‘dinner’s ready.'” All I do is smile. I’m sold.

I didn’t stay in the room long. I was just there to introduce myself. Bill Holtz, one of our architects, was there to work through some design ideas with them.

But in the space of a few minutes, they made me happy. I can’t fix the decades-long misguided and greedy machinations to pull money down from housing every which-way from Sunday. And I can’t fix the rotten economy that resulted from all of that. What I can do is help our team continue our efforts to make our homes better and more affordable. This lovely couple and their two boys were a refreshing reminder that homes matter in the lives of people and that we can make a difference.

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