Friday, January 30, 2009

Is it a home or just a house?

Just this morning (January 30, 2009), Reuters reported that sales of newly-built homes plunged to the lowest level since these statistics were first recorded. I was not surprised by the substance of this announcement. After all, we are confronted daily with indicators of the ever-deepening economic crisis. What surprised me was that statistics only go back to 1963. I suppose I assumed that such an important measure would date much further back than a mere 46 years ago.
That brought to my mind the recollection that my parents purchased their first home just one year before. It was a newly-constructed home that they bought. I guess they were included in those very early reports. It was located in a modest suburb and had a "garden" apartment to help with the mortgage payment. They had realized their piece of the American dream just seven years after arriving in the United States with family in tow.
In the same article, Reuters suggests that housing is "the root of the worst financial crisis in more than 70 years." If you have read any of my postings, you know that I could not agree more.
Having provided a backdrop, I now ask you to consider the advise of "personal finance guru", Chris Farrell, who, also just today, instructs us that now is a good to to look for housing, but not necessarily to buy. No telling how much lower prices will go is his rationale.
In other words, treat home ownership as portfolio management. It's easy: buy low, sell high (somehow, I seldom get that right). So, folks that are taking Mr. Farrell's advise are out there waiting to buy. They are waiting for prices to hit bottom so that they can make a killing in real estate.
What ever happened to the notion of house as home? We used to buy residences for shelter and to raise our families. Our homes should be reflections of who we are and extensions of our dreams and aspirations. The home is a cocoon where a family is safe and secure, is nourished, nurtured and allowed to grow. When did we begin to regard it merely as investment strategy?
I know that in 1962 my parents did not fret over whether the timing was right nor were they concerned about how fast their new home's value would rise. They were just anxious to provide a home and start realizing the rich return offered by many years of happy memories.
I agree with Reuters assessment that housing is at the root of our current economic woes. But, perhaps, it is so for more profound reasons than we think. It may be worth considering that, if we stop feeding the notion that housing is our sure-fire ticket to easy street and get back to the bedrock principle that, above all else, a house is a home, then the true recovery can begin.

Thursday, January 15, 2009

U.S. Congressman Proposes Bill for Government Refinances

Although I've never been to Merced, California, the pictures on the city's website depict a very inviting scene. White stucco buildings framed by palm trees and all set against a sky of brilliant azure. They evoke notions of the California us icy and snow-laden Midwesterners yearn for and dream of. But when you study the homepage more carefully, you'll be struck by a very sobering link captioned "I want to ... avoid foreclosure". The reason for this is that Merced, California, has one of the highest foreclosure rates in the country.
Merced is located within the U.S. Congressional district represented by Representative Dennis Cardoza. Earlier this month, Mr. Cardoza proposed a bill in the U.S. House of Representative suggesting a plan very much like the one suggested by Professors Hubbard and Mayer of the Columbia Business School; and that I have written about in this blog on October 8, 2008 and November 17, 2008. Mr. Cardoza, in support of his proposal, states, "You cannot fix the economy unless you fix the foreclosure crisis." He contends that the core of the current economic crisis is the "ravaged housing market" The following link will take you to the full story published in the Merced Sun-Star on January 8, 2009: http://www.mercedsunstar.com/167/story/628022.html
I could not agree with you more, Rep. Cardoza. The fact that housing alone supported a floundering economy a few short years ago further buttresses the argument that the ailing housing sector is exacerbating the ills in the larger economy. I hope this bill has legs and makes it through Congress. If not, I hope it at least has impact on where we should focus attention in creating solutions.
I am with you all the way, Congressman Cardoza. I wish I could vote for you, but, sadly, I am here in Chicago; shivering.