Tuesday, September 09, 2008

Time To Scrutinize Excesses of Home Ownership

Americans may disagree about nearly everything, but few contest the idea that owning your home is a good thing. Paeans to homeownership are a commonplace for American politicians, and, since the 1930s, public policy has been designed to make home buying cheaper and easier. Homeownership, the argument goes, has tremendous social benefits, stabilizing neighborhoods and making people more willing to invest in their communities.

But our veneration of homeowning has blinded us to the fact that, along with the benefits, it has some very real costs—costs that only get bigger as the ranks of homeowners swell. The housing boom undoubtedly helped the economy’s growth rate and made lots of first-time home buyers happy. Unfortunately, it may also end up prolonging and deepening the current downturn.

Homeownership also impedes the economy’s readjustment by tying people down. From a social point of view, it’s beneficial that homeownership encourages commitment to a given town or city. But, from an economic point of view, it’s good for people to be able to leave places where there’s less work and move to places where there’s more. Homeowners are much less likely to move than renters, especially during a downturn, when they aren’t willing (or can’t afford) to sell at market prices. As a result, they often stay in towns even after the jobs leave. And reluctance to move not only keeps unemployment high in struggling areas but makes it hard for businesses elsewhere to attract the workers they need to grow.

With the bursting of the housing bubble, though, it’s time not just to scrutinize the excesses of our home-buying process but to recognize the risks and costs inherent in owning a home. Sometimes the price—for the home buyer and for the economy as a whole—is too high to pay.

~
Home Economics by James Surowiecki in The New Yorker

4 Comments:

At 9/09/2008 9:41 PM, Blogger Jen said...

"Homeownership also impedes the economy’s readjustment by tying people down. From a social point of view, it’s beneficial that homeownership encourages commitment to a given town or city. But, from an economic point of view, it’s good for people to be able to leave places where there’s less work and move to places where there’s more".

From a social point of view? Why just social? Economically speaking (and I know nothing about economics) if everyone in a particular town just got up and moved out wouldn't this be a disaster to the soon to be non-existent town? As a homeowner I pay taxes to keep the schools running, library open, public services (water, sewer, electric)and the only way I can afford this...is the power of the community. If all my neighbors moved away I'd be left holding the bill for the private drive, HOA etc! So, I no longer can afford to stay, I move and then what happens? (OH OH OH I KNOW PICK ME!) I sell the neighborhood to a foreign entity because they are the ones that have all the money! (I'm a bit bitter about Budweiser).

Give me a break - "social aspect" - nowdays there isn't a social aspect to neighborhoods! Everyone is working too hard and too long - running kids everywhere because they are overextended there is no time to build community.

The final word "tying people down" - I think that is just another way of saying "it's a real pain to be responsible" - rent..it will set you free...(wanna bet) - been there and done that.

 
At 9/09/2008 10:06 PM, Anonymous QT said...

Who says the entire community moves? Why is it always zero sum?

When you look at home ownership, is no money down/100% leveraged a good idea for the borrower or for that matter, the taxpayer who picks up the tab on this excess of leveraging.

Take a deep breath and count to ten. Hey, babe, we've been there.
Sometimes, this stuff really starts to bite and we need some objectivity, a little distance.

Decide what you can fix and let go of what you cannot. It may not be econ but it works.

 
At 9/09/2008 10:07 PM, Anonymous BARKLEY said...

The most economical way to house people is definitely apartments.
Many more people can live on the same amount of land.
Single family homes are a very inefficient way to house the public.

why should government subsidize homeownership at all?
it benefits certain industries at the expense of all others.
Maybe if we were investing less in housing and more in health....?

 
At 9/10/2008 1:14 PM, Blogger John Thacker said...

if everyone in a particular town just got up and moved out wouldn't this be a disaster to the soon to be non-existent town?

If everyone left, Jen? Towns aren't alive. People are. If everyone in the town can be better off by living somewhere else, so be it.

 

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