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We caused the housing crisis
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What caused the housing crisis? The answer is simple. Us. And our avarice. Not just the avarice of mortgage brokers and depraved hedge-fund managers. But the avarice of the American homeowner, who worships his home like the Temple of Baal. We worship our fabulous and modern and spacious and ultra-convenient new homes. We worship, especially in cities like the beautiful and historic city of Savannah (where I live), historic homes and preserved homes and the history and faux family legacies they connote.
House worship, encouraged by lifestyle publications like Southern Living, has long been a cult and a vice among more fortunate Southerners, not least in my hometown of Hillsborough, North Carolina, where tours of historic homes attract herds of orderly, often elderly tourists with guidebooks and maps.
Whether our homes are historic and magnificent or modern and magnificent, we want them to identify us and define us.
Way beyond comfort or any aesthetic considerations, the great houses tower and sprawl because, as Thomas Sutpen grasped, “How else would they know how much money I have, how far I’ve come?” […] I’m old enough to remember when the boss’s house on the hill, valued in an awed whisper at a hundred thousand dollars, occupied the pinnacle of envy. Now a hundred grand won’t buy a goat barn in most markets, and I’ve seen a private home listed at fifty-five million dollars, which I’m sure is no record. McMansions have become McVersailles and McBlenheims, McTaj Mahals. On the lovely beach west of Panama City, Florida, part of what was once known as the Redneck Riviera and recently as the Emerald Coast, a fifteen-mile hell of reckless development and architectural psychosis is crowned by a stadium-size beach house (built, I was told, by an heir to one of America’s famous fortunes) that looks like an alien spaceship crash-landed on the dunes. If its architect didn’t subsequently take his own life, he must have been one of the aliens.
You may not live in a giant, climate-controlled alien spaceship that crashlanded on the dunes of the Gulf Coast, but do you really need everything you have?
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Soul searching
Do I need everything I have? No, of course not. But I bought the next-to-cheapest house I looked at, after doing a lot of research to find the inexpensive houses. (Yes, I went under $100,000, just five years ago, in a large city.) I’m glad God doesn’t limit us to only what we “need,” personally, but I’m also glad that I was raised simply and can live pretty simply now.
I worked for years to get into the house I currently (almost) own. I’ve got a few months and the bank won’t have a darn thing to do with it…
Yeah, perhaps I don’t need my shop, but there’s actually very little surplus at my house. Just this weekend, we had to discuss whether we were going to buy a second vehicle, or replace the ratty linoleum in the kitchen. There was no question whether we could do both….
My wife and I, when I am home, live in the same 2,500 SF house we bought 21 years ago when we got married. My wife did some remodeling last year for the first time. As an Architect and a contractor I realize that your private home is not part of your net worth nor does it appreciate in value nearly as fast as other investments unless you live in California or New York City. We don’t need McStatus headaches and nightmares.
My wife was tempted but she couldn’t make up her mind and then after she thought she had mdae up her mind for a new house she changed it.
My daughter is the only one that is upset we haven’t moved to a new house several times but she is young and still pretty ignorant of the the important things in life that money can never buy.
While we have more junk than we need, don’t blame me for a crisis I did not help create. We bought a far cheaper house than we could afford because we did not have enough to put down. There are things we would like to do with our 100+ year old house that will have to wait until finances are available.
A well-timed post, HSK. We’ve been discussing how the current market makes it tempting to move up. With another one going to college in the fall, our actual needs are decreasing. But, what I wouldn’t give for some acreage…
No, I don’t need most of the things I have. I think I hold them in a fairly open hand. Neither do I need my reputation, although I’d kill for it….
While an interesting take on today’s rampant consumerism, I’ll have to take issue with his class warfare. It’s all classes that have been seduced by the siren song of free debt and pretty things. Blame can be placed everywhere. The federal government and the federal reserve have done their share to promote consumerism and low cost debt. Politicians have claimed that it is every American’s right to have a piece of the “American Dream”; home ownership. There’s some Keynesian ideology for you. What do you think you’re supposed to do with your “stimulus” package? Spend, spend, spend!
Woe is me! How do I keep from falling into such sin? Maybe storing a junk car on my front lawn will help the Jones’s repress their temptation to one upsmanship. But alas, the community covenants won’t allow that.
Good grief. Can’t people find more traditional vices to fixate on? The day is coming when government will regulate house sizes, simply because the green-eyed eco-terrorists say they make too big a footprint.
CCC made the point well. We have more house than we need. We have air conditioning in the summer and heat in the winter. I have more grass than I want to cut. What we did, we did with out own money. No case can me made at all that we contributed to the housing crisis. As for the footprint; the weeds in my lawn and garden make enough carbon credits for me and some of my neighbors.
Do I detect a bit of jealousy, HSK? Otherwise, why rant that someone else is building a huge house?
Oh, maybe you’re worried about your “carbon footprint”! What nonsense.
The government definitely tries to keep the money flowing so people will buy bigger houses or whatever to keep the economy from collapsing, which is probably going to happen anyway. Hopefully about the time Obama takes office! Ha!
{ sarc }
How dare you suggest that people in general, not specific people on this board, learn to be satified, not even with less, but with a modest amount, rather than the continual clamour for more, More, MORE!!!
That’s un-American, ya know..
{ /sarc off }
I certainly didn’t contribute to the housing crisis — I don’t own a home. But I have made a concerted effort in the past year to get rid of things I no longer use, and more important, not to buy things that I don’t really need. At this point in my life, I have pretty much what I need and will replace it when it wears out. The real problem is that most people are consumed with consumerism and convenience.
I would never begrudge CherylD her home, and she shouldn’t feel bad for having a carbon footprint. She worked for it. Why can’t she have it? In the long run, it’s a good investment for her. And for most people who bought homes in the last few years, it was a good investment. There are those who were greedy, who wanted to trade up and beyond their means, and they are paying the price. And those people tend to be the ones who really need to learn about credit cards. A lot of people have been using the equity in their homes, and now it has caught up with them. What we need to do on a daily basis is to think twice about ALL our purchases.
I love to look at those magazines, including Southern Living. My favorite is Coastal Living, and if I get the money, I’ll buy something on the water. But I won’t go into exorbitant debt over it. Until then, why can’t I look at pretty pictures? As long as I remember not to covet, there’s no problem. Oh, but that’s one of the Big Ten, and we’re not allowed to talk about those basic principles in our society.
Amusing.
We bought among the cheaper houses available at the time.
We got a fixed mortgage on it.
We are down to where the mortgage payment is a minimal part of our budget.
We have a modest home equity loan used to support some required repairs.
Hmm, and where did I contribute to the housing crisis???
Now the following perhaps is worth considering: after the dot com bubble, the economy was in the doldrums. As has been noted, the consumer is now the backbone of the present economy. And where did the present adminsitration conclude we should get our financial wherewithall to drive consumer spending???
We bought the least inexpensive house we could find that had a basement (for protection during tornados, such as the one that came through last June and destroyed a lot of property), seemed to be in reasonably good repair, and was on the market during the short timeframe we had to move out of the house that we had been living in but did not own. (Unfortunately this house turned out to have problems we had not been aware of, such as roof needing replacement and now a leaky basement.) But I still struggle with to pay all the bills each month.
Inside the house, we certainly have stuff we don’t need - but the quantity of it is at least partly due to different family members having different priorities. I buy books, my husband buys music, the kids prefer movies or video games. Other than that, we don’t buy much new - my favorite store is Goodwill.
I thought our house was pretty good-sized, by the way, until the first time we invited the high schoolers from church over (they go to church together Saturday evening then one family or another invites the group over afterward to talk, play, snack, etc). They apparently found our house too small, especially considering the size of the houses some of them live in.
Pauline post 13,
indeed you always struck me as a sensible sort.
But my heavens you seem to be much too rational about this!
Musing, don’t blame the government for people falling for advertising. This problem of greed and wanting what others have has been around a lot longer than the United States and goes back way before the colonies!! Come on. It’s universal and it’s been around for as long as there have been people on the planet who had “property.”
“But I still struggle with to pay all the bills each month.”
Pauline, clearly, the housing crisis is your fault. After all, you bought the “least inexpensive” house you could find.
Stubob (#5) - your last sentence is a little bit scary coming from a doctor.
Even scarier when you realize he’s a gynecologist.
(But since we know where Stubob stands on abortion, we know what reputation he’s after.)
This American Life had a whole program on the housing crisis that was really fascinating. I left the i-Banking world right before the dam broke (literally, and inadvertently), so it’s been interesting.
But you’re completely right. I thankfully do not own property at the moment, but if there’s one thing I’ve learned from NYC living, it’s that you really need very little stuff to get by. Shrinking wardrobes, less furniture, fewer appliances and toys, it’s all kind of nice, once you get used to it.
I’m starting to wonder, with the price of gas, if what I pay in rent is going to actually undercut what it would cost for a mortgage and a car if we lived elsewhere.
(Ok, I confess, we do buy a lot of books. Somehow I feel ok about that. For now.)
I bought the house I could afford, and now it’s paid for, so I didn’t contribute to the housing crisis [actually, I’m not totally convinced there really is one].
I love to watch TV shows about people looking for a new home, it’s almost as much fun as model home visiting. However, one thing I’ve noticed is that the show often will end with the buyers choosing the beautiful house that was over the budget they set at the beginning, then giving no, or a very low, deposit and getting an interest-only loan. These people have no business buying something they can’t afford. Then, when they can’t make the payments we see them on the news, whining about how unfair life is and how the government [that’s you & me, folks] should do something to make it easier for them.
BTW, when I bought my first and only house, I was 53 years old and had more than half the cost safely in the bank. I made a concerted effort to pay it off before I retired, so now I only have HOA and relatively low taxes to contend with.
I do buy a lot of books, but books are the expression of someone’s ideas, so I never think of them as something I don’t need.
NJLawyer post 15,
I have no difficulty with your argument about greed.
I do find it odd, however, that the government explicitly did not provide any where near the regulation on the mortgages but more importantly the martgage backed securities than they do for much of the rest of the financial industry.
Now it is possible that the government did not understand the risks that were developing.
But it is equally plausible that the government explicitly chose to stay out of this market in an effort to keep a weak economy afloat.
I do note that most of these loans do not appear to meet say the standards for Fannie Mae loans. the inconsistency here does sound telling to me.
Musing, when I started working for the bank years ago, I was amazed by how much regulation there was. I was also sure that the ARMs would turn out to be trouble — because the rates were so low. Even I realized that what goes down will go up again! Some of the mortgage companies came up with products to lure people in, and those mortgage companies were nowhere near regulated the way banks were. And people also went out of their way to get those 30-60-90 days change rates left and right. Stupid? Yes. I don’t understand why there were different regulations for banks and mortgage companies. That’s where the government went wrong, but that apparently, was years ago already, when they came up with the truth in lending stuff.
The sub prime market, as I understand it, doesn’t do Fannie Mae loans. The problem came in with “no docs” loans — the mortgage companies lent money without verifying income; then the loans were bundled and sold. Banks couldn’t do no doc loans. If the government screwed up in the past few years, it was with the sub prime market, and I’m even willing to join you in that I think if I saw it coming, they should have, too, and they should have passed new regulations for the sub prime market. You know I don’t know economics, but as I say, if I saw it coming, it had to be obvious! Congress screwed up.
Mass advertising, television shows, unregulated mortgage companies etc all contributed to a bubble but when the bubble bursts lets blame the poor who had the nerve to think they could live like their betters.
HRW,
Are you saying everyone “deserves” a house whether or not they can afford it? Otherwise what you are saying makes no sense. (Well, if you are saying that, it doesn’t make any sense either.) Nobody here said anything about some people being “better” than others. (I’m on the poor side of the fence right now, income wise, and come from people who at times barely had anything at all. I don’t think all the people on here are “better” than I, and I doubt they think so either.)
For the record, poor people can afford debt less than rich people can, so it’s definitely not being anti-poor to dislike seeing poor people getting into debt they cannot afford. What is bad is encouraging poor people to think of others as “their betters” and encourage them to try to live as though they had the same income richer people do! That’s anti-poor, and you might not have noticed, but all of us are against that.
Again, having come from a family of seven kids whose father had such jobs as school janitor, if you think I’m sticking up for the wealthy, you’re mistaken. But my less-than-rich family never took government handouts (not even reduced-price school lunches), and we paid all our debts. And we always had a meal on the table. It really is possible for poor people to live within their means, generally.
What is bad is encouraging poor people to think of others as “their betters” and encourage them to try to live as though they had the same income richer people do!
Which was exactly my point — the advertisers, TV programs, mortgage brokers etc all take advantage of the poor’s desire to live rich. When reality comes crashing down, people turn on the poor for daring to think it was possible to live rich.
HRW,
I’d agree that advertisers can be annoying, and frequently they make their living by selling us things we don’t need, can’t afford, and/or don’t really even want. But can we really say poor people aren’t responsible for their own bad choices–that they aren’t, perhaps, really adults? I think some business practices should be illegal, and I think it’s unethical to try to talk someone into a home he can’t afford. But I also think that poor people are responsible to make their own choices, just as much as rich people are–partly because the consequences are greater for the poor.
CherylD writes: “But can we really say poor people aren’t responsible for their own bad choices–that they aren’t, perhaps, really adults?”
No, we can’t. Any more than we can say that about the “middle” class — and if you really look at the foreclosures, the middle class people are the ones who messed up the most. Poor people know how to get by on less, but middle class people feel they need to compete with other middle class people. Poor people are more honest about their situation, in my experience. Middle class people don’t want you to know they can’t really afford what they just charged.
We’ve told people in our society for the past 40 years that they can have whatever they want. Well, that isn’t true. The poor don’t have the credit card problems because they don’t have the credit cards. The middle class, on the other hand, is in deep doo doo. And while some people want to blame advertisers and mortgage brokers, what you really have to blame is the INDIVIDUAL who doesn’t want to face up to the fact that the bill will come due.
As a former budget counselor, I’ve observed many people have no concept of budgeting or understand how to live within their means. If I, who have owned bought and sold four houses, can barely understand the terms of a mortgage, how can you expect a newcomer to follow all the ins and outs?
We keep coming back to the adage, “If it sounds too good to be true, it probably is.” Everyone should have taken a deep breath, stepped back and known better. It’s basic math. If you can’t afford it, you can’t afford it.