Tuesday, 15 April 2008

Why Sympathy For The Home Owner?

We live in a Capitalist consumer society, look out your window. That's consumer capitalism out there as far as the eye can see. If it annoys you then we'll have to have a revolution, which I'm well up for.
So what has pressed my buttons this time? The constant news of house prices dropping and how it is perceived to be a bad thing, that's what.
The news has been full of miserable looking people having a moan because there property is worth less than they expected.
My heart bled for that investor on the BBC News 24 who was crestfallen that the £200,000 he paid for his house in 2003 was only worth £275,000 now five years later. I was all ready to organise a whip round for the poor fella so down on his luck. Keep your chin up pal.
As the credit crunch begins to bite the poor souls who's properties prices are not climbing as expected, are lining up to bitch and moan to anyone who listens so call me heartless, but i fail to harbour any sympathy for someone who owns there own home and are still going to make on their investment regardless albeit maybe not as much as they would like if they sold it now.
What we didn't hear when the times were good for one side of the equation was how a large majority of people couldn't even get on the property ladder because the house prices were out of their reach. It doesn't take a genius to do the maths.

Average 2 bed house £200,000
Average annual wage £22,000
Bank mortgage = Annual Wage x 3

That leaves a huge proportion of the country unable to afford to buy their own home and living in alternative accommodation so i am sorry Mr and Mrs Homeowner, you had your time revelling in other peoples misfortune and at the very least you are going to break even or make a modest profit if you really have to sell up now, but don't expect all of us to feel sorry for you.
Your reversal in fortunes is music to many other peoples ears and they are praying that your plight worsens so their home owning dream is back within reach again.

28 comments:

Miz UV said...

It's the same here. While I agree that the people whose 2M McMansion went down to 1.5M are not deserving of sympathy, I do feel for those who were hard-sold into buying more than they could afford (first home maybe) and are now upside-down.

Lucy said...

I feel for the people who's mortgages are spiralling or are having their hime repossessed because they have no control over that, but i can't have sympathy for people who are moaning because they are only making a large profit instead of a massive profit.
I don't know why we are suppossed to be happy to see prices rise and sad to see them fall because what ever way it swings their are winners and losers.

The Fez Monkey said...

Miz UV's take on things is pretty much spot on. Although, I would venture to guess that there aren't that many poor folks who were hard-sold to buy more than they could afford.

See, the lenders simply tempted people with these weirdly structured loans, but it was their own greed which made it seem like someone with an annnual salary of $50K could afford a house worth $750K.

Of course, the whole question of the obscene inflated cost of housing is another issue.

But yes, poor mom and dad homeowner who aren't making millions off their property after one year. I weep almost as much for them as the poor dotcom stock-option billionaires who suddenly found their shares were worthless after buying their porsches. Poor all of them.

Ook ook

Noah "Nog" M. said...

I've heard that one of the great things of the West Side of the Pond is the still (after nearly 400 years of evil exploiting colonists) near-endless availability of land. I'm sure in peak price times you could find a fair 2 bed house for less than $100,000.

But on prices, all other things being equal real price decreases are generally good things. Some guy will always get a bit less even when almost everyone else gets a lot more and so someone will always be grumpy up or down.

There are advantages for individuals to have valuable homes or any other properties for that matter but on a more general scale lower prices are always better.

We are definitely right in wondering why the news folks only look at half of the picture and ignore all of those newly housed folks.

Cody Bones said...

Lucy, as (hopefully) on of your favorite capitalist dogs, I have to ask what can we do so you will cut us a break. You complain that houses are not affordable, now you complain that they are affordable. The market giveth, and the market taketh away. If houses get too expensive, people build more, if they get cheap, more people buy, the market is a wonderful tool for allocating resources, much better than some sort of central committee, don't you think?

Cheezy said...

As someone who doesn't yet own a house, the current situation is still shite for me because:

(a) less people buying means that there's more demand for rental properties - so my rent has gone up, as of last month (my landlord was nice and quick off the blocks there), and...
(b) the credit crunch has ensured that the mortgage lenders are now requiring a much bigger deposit.

So Cody's right - we can't win! ;)

Cody Bones said...

"(b) the credit crunch has ensured that the mortgage lenders are now requiring a much bigger deposit."

As it should have been in the first place.

Anonymous said...

Lucy,

Geees, you sound so bitter... How were they revelling in your misfortune?

Ms UV,

Are you talking about the U.S.? If so, I agree on from one aspect - many people were expecting their home to be a "great investment" (especially in selected areas like San Diego, Los Angeles, Las Vegas, San Francisco, Phoenix, etc.) and they are whining now that value is dropping (as if the prices won't rise again... all markets fluctuate).

But, from another perspective I disagree with you about housing in the U.S. There are many thousands of homes for sale in Tulsa, San Antonio, Austin, Corpus Christi, New Orleans, Jackson, Little Rock, El Paso, Memphis, Nashville, Louisville, Ashville, Charlotte and many other cities for under $100,000. In fact, there are many thousands for under $75,000 if you are willing to live in a small town and commute to work.

Q

annie said...

the towns that are affordable to buy homes in are SHIT. which is why places like my birthplace/san francisco are so overcrowded and ridiculously priced. everyone moves here. can you sense my bitterness too, Q?

plus, to commute anymore has become a joke. ($113.00 a barrel, as of yesterday.)

The Fez Monkey said...

"There are many thousands of homes for sale in Tulsa, San Antonio, Austin, Corpus Christi, New Orleans, Jackson, Little Rock, El Paso, Memphis, Nashville, Louisville, Ashville, Charlotte and many other cities for under $100,000. In fact, there are many thousands for under $75,000 ..."

True. But then you would have to actually live in Tulsa, San Antonio, Austin, Corpus Christi, New Orleans, Jackson, Little Rock, El Paso, Memphis, Nashville, Louisville, Ashville, Charlotte ...

There's a reason some places (Honolulu, Seattle, San Francisco, Miami, Los Angeles, etc) cost so much more in which to live.

Ook ook

Lucy said...

You can't win Cody because whatever way it swings, there are going to be upset people. High prices means homeowners are happy but there are many unable who can afford to buy. Low prices means homeowners are unhappy but now many more are able to afford to buy.
What i am whinging and moaning about here is how it is perceived to be a bad thing that prices are coming down because the homeowners will not make so much if they sold now. It isn't bad, its good because it will bring many more people within the range of affording property. You don't hear this side of the story when the prices go through the roof and out of most peoples reach.

Cheezy said...

"As it should have been in the first place."

You mean the market didn't get it right first time?? :-o

For shame! ;)

Cody Bones said...
This comment has been removed by the author.
Cody Bones said...

Lucy, I should say you can't win because as prices rise and fall, there will always be someone on the wrong side of a transaction. Houses Stocks, Clothes, Food (Don't start me on this Ethanol crap), cars, etc. Nothing is perfect, but the market is the most EFFICIENT allocator of resources. The price of most everything rises over the long term, due to inflation, if nothing else, in the meantime there will be fluctuations in the price of said commodity, just due to human nature and the tendency to over react in either direction. Shorts are expensive right now by me, if I wait until October, they should be on sale, conversely, Ski equipment is rather cheap at the moment, this gives us the chance as consumers to pick when to make a purchase. Prices will rise, and prices will fall, but over the long term, like water, they find/seek their own level. It is a beautiful Adam Smith equilibrium.

Cheezy, in the short run, the market doesn't always get it right, but it wil fix it the fastest. The Banks for years were hesitant to enter the subprime market, and then with only higher rates to cushion themselves against defaults. They were scolded by government and other members of society until a balance was found to the question of sub prime home ownership. Securitization of mortgages, and the laying off of risk among larger pools of capital. This worked out very well, until an over reaction in one direction, has led to an over reaction in another. Water will find it's level. The cold truth is that home ownership is not a right, and is not in the best interest of everyone to have that enshrined in the public conscience. I have clients that make money in the long term in the stock market, but the short term is never clear, always fuzzy. Sometimes up, sometimes down. Houses for dwellings are a good idea, and having mortgages where the borrower has skin in the game (down payment)makes for less defaults. Houses for investment purposes don't elicit any sympathy for me at all when losses occur.

Cheezy said...

"Cheezy, in the short run, the market doesn't always get it right, but it wil fix it the fastest."

Nope, I can't agree with that at all. Not under all circumstances. However I found your comment an excellent summary of the laissez faire ethos. ('The Wealth of Nations' is a bit weighty for someone of my attention span!). I might bookmark it for later reference :)

Anonymous said...

Annie,

You definitely sound bitter. And why shouldn't you be. It isn't your fault. Its all those nasty neo-cons, and big business, and mean sexist men, and the KKK, and stuff like NAFTA. It just isn't fair. You really couldn't do anything to make your life better. I mean, after all, they didn't leave you with any choices did they? And, your mistakes weren't really your fault now were they? So, much baggage to carry from your childhood and all. No, you should be bitter with all that has been forced on you. Ghandi had it easy compared to you.

Oh, now I sound bitter...

Q

Cody Bones said...

Cheezy, I miss you blogging, I really do

('The Wealth of Nations' is a bit weighty for someone of my attention span!). I might bookmark it for later reference :)"

Next to Cat, Adam Smith is my Favorite Scot.

Beliefs are a funny thing, hard to prove, and even harder to pin down. I remember a great discussion I had over at your place a while back when we talked about which beliefs are "fallible, and infallible". I think that my philosophy comes from working in the markets for all these years, and getting an idea how they work. I think this about sums it up

"Conservatism, declared George Will recently, "is realism: about human nature and government's competence." It requires accepting human beings as they are, not as we wish they were, and recognizing the limited capacity of government to transform the world for the better"

I would like the world to be perfect, but I accept the fact that it can't ever be, and that some methods of trying to obtain perfection, only exacerbate the problem. We can only try to do the best that we can, and sometimes we will come up short. Remember, the road to hell is paved with good intentions. Whoever said that is a flippin genius.


Oh, and BTW, can anyone tell me how to put a link in the comments?

annie said...

rave on, Q.

on november 4th, me and mine will be dancing in the streets. party at my house!

Anonymous said...

Annie,

Hey those aren't my thoughts. Those are just the words I hear from others every day.

I hope all your dreams come true in November. Perhaps you'll be able to let go of some bitterness.

Frankly, the bozo or bozoette in the White House doesn't affect my daily life... on the other hand there is this neighbor that can't keep their dog in their yard...

Q

Lucy said...

"Houses for investment purposes don't elicit any sympathy for me at all when losses occur."

Isn't that where we came in Cody? We almost agree??

Anonymous said...

I have to say I don't really feel sorry for anyone...and housing has been a political football since Adam was a cowboy. "Housing affordability" is a meaningless, populist term, at the end of the day.

annie said...

the havoc wreaked upon this country will insure that the "bitterness" lingers on, Q...long after dumbya has retreated to his hideaway.

Anonymous said...

annie,

my day to day life hasn't changed regardless of the president or their party

q

Dismal Soyanz said...

Ruth - "housing affordability" has been overused in the media and by those who suffer from must-do-something-itis. However, in itself it has an importance in the same way as the CPI also has meaning - simply a measure of the change in cost of a certain (basket of) good(s).

Cheezy said...
This comment has been removed by the author.
Cheezy said...

Aw, thanks Cody. It's nice to be missed :)

I think you're being too modest referring to your opinion about the primacy of markets as a 'belief'... (or maybe that's just me assigning a negative connotation to that word... as it's a bit too similar to 'faith' for my liking)...

Anyway, if you're going to have a guru, Adam Smith isn't a bad one to have. Better than Jerry Falwell or David Koresh or people like that!

Anyway, I'm with you 99% of the way. Or possibly 97% or 98%. The only statement I disagreed with is that the market allocates resources in the best way and in the quickest time in every instance. Personally I think there have been times when the invisible hand of the market has required the more visible hand of (yes, I'll say it... shock horror) the government to aid and abet it, in order to best deliver to a larger number of citizens and aid social cohesion (e.g. The New Deal aiding quicker recovery from the Great Depression, the 'Dragon economies' taking off during the 1960s/70s were greatly assisted by central planning, the effect of centralised banking institutions etc, etc.).

Basically, I'm talking about the benefits of a mixed economy, which, in the real world, almost all countries (everywhere from the US to the UK to Australia, France and Cuba) tend to operate. But I'm with you that markets are an immensely important part of these systems; probably the most vital constituent part.

Absolutist ideologies may be fine for a while, but sometimes circumstances compel us to change our fixed ideas about something and go with something else for a while, something that we think will work better. Even Lenin admitted this much when he adopted his New Economic Policy in the early 1920s. He was obviously a communist by ideology, but circumstances drove him to adopt a more mixed, nuanced approach to the economy.

Anonymous said...

"There are many thousands of homes for sale in Tulsa, San Antonio, Austin, Corpus Christi, New Orleans, Jackson, Little Rock, El Paso, Memphis, Nashville, Louisville, Ashville, Charlotte and many other cities for under $100,000. In fact, there are many thousands for under $75,000 ..."

I don't know where you're getting your information, but I live in Austin and I guarantee you're not going to find a decent house anywhere within 50 miles of Austin for under $150,000. And even at that price, you're probably going to be in for a truly hellish commute every day. If you want to live in Austin proper, you'd better be prepared to fork over at least $200K-225K at a minimum.

Any house under $75,000 in Austin is either a complete wreck that will either have to be scraped or remodeled from the ground up, or in a neighborhood that's too scary to live in, or both.

annie said...

nice to know your life hasn't been impacted by the messes made, Q.

unfortunately, many others can't say the same thing. but that isn't your problem, is it?