New Orleans The article in the local paper was breathless. How could it be that homes were going without buyers even though prices – and interest rates – were almost at a 40 year low point? Having drunk the Kool-Aid for so many years how was it possible that the number of American families wanting to own their own homes had fallen recently from 70% to 64% after having been over 80% as recently as 2005? Implicit in the article was the underlying question: how could people really want to rent forever?
Hmmmm…gee, let’s think about this and maybe even mine the evidence from the gold nuggets planted in the Bloomberg News article by Kathleen M. Howley. It seems homes have lost more value (32% compared to 28%) that occurred in the first 5 years of the Great Depression. It seems that we still have 11,000,000 families whose homes are underwater, meaning they owe more than the value of the home, and another 2,400,000 with “less than 5 percent equity, meaning they’ll be underwater with even slight price declines….the two categories add up to 28 percent of residences with mortgages.”
All signs also continue to point to another lame, half-assed effort to thwart foreclosures. Even holding out hope, as I had, for some relief from the deal made with loan servicers, consensus is heavy that banks got off the hook yet again. There has simply been no failure by the Obama Administration as universal or devastating as the rollover to the banks and the lack of any real assistance for homeowners trying to save their houses from foreclosures.
It’s hard for a working family not to get the message that right now you have to be crazy to buy a house.
But, it’s more complicated than that really. Not only are banks not helping families keep their homes, they are also not helping people buy new homes. The Bloomberg piece seems to forget that even if prices are dirt cheap the standards for getting loans now are steep and the down payments are large. One thing that is universally required for a loan now is a virtually a rock hard guarantee that the your jobs are stable and sure, and that’s not easy to find for many families in the current recession.
There’s nothing wrong with renting. We need a lot more of it. At the same time watching my daughter’s joy at her new home in New Orleans or visiting with the brother-in-law and his family ecstatic with their dream place after more than 25 years renting which they were fortunate to grab right before foreclosure and after the previous owners arrest for growing illegal weeds under the house, makes you wonder if any of this is really about “investment” or instead is simply a forced alienation of affection for many whose dreams have been crushed and are now finding no help and no hope in homes anymore. To turn around homeownership again the real attitude readjustment is going to have to come from government and financial institutions, not families. That’s the real deal.