Home Values

“There is nothing like staying at home for real comfort.”

Jane Austen

“I have a problem with too much money. I can't reinvest it fast enough, and because I reinvest it, more money comes in. Yes, the rich do get richer.”  Robert Kiyosaki

My daughter and her husband will soon be getting their share of the American Dream, at least in the popular, traditional sense.  They’re just waiting to get the keys to their new home.  In their mid-twenties; he’s a fire fighter and she’s a stay at home mom with aspirations of teaching. They’re tired of renting and they want a comfortable home in a nice neighborhood where they can raise their children and settle down for the long term.

Their reasons for wanting to buy a home are refreshing, gratifying and reminiscent of my childhood in the suburban town of San Mateo California. It was a time when the home represented the American Dream of putting down roots and cultivating a stable life.  It seems that at some point between then and now the concept of the home’s role in the American Dream took a cynical turn.  A home became less four walls and a roof over your head and more ATM.

Now don’t get me wrong here, I’m not above looking at the local home values now and then and feeling a smidge more secure when they’ve gone up.  And when it came time to pay off my son’s college tuition we dipped into the equity because it made financial sense to take advantage of the lower interest rate.  But my wife and I have always held on to that quaint notion that first and foremost your house is your shelter.  It’s something you pick up in Psych. 1A.  You know that Abe Maslow thing about shelter being a basic human need; right up there with food and, well, sex.

This all reminded me of an article that I’d read in The New York Times about this time last year that announced the end of the speculation era in home buying.  Analysts cited in the article believe that the huge appreciation of home values that Americans enjoyed in the latter part of the 20th century are gone, never to return.  According to economist Stan Humphries housing values will now only keep up with inflation.  Another economist, Dean Baker believes that all of the money that was lost in the housing bust that began in 2005 won’t be recouped until sometime around 2030.  Its bad news from a strictly economic standpoint but maybe good news from a values standpoint.

Could it be that now when you shop for a home the considerations will be finding the roof over your head that fits your physical and practical needs as well as your bona fide budget?  Does this minimize the factors of ego feeding, keeping up with the Joneses and impressing the relatives, all made possible by creating fictitious, fluffed up incomes and a fantasy budget?  Maybe it means that you’ll buy one home; the one that provides the roof over your head and you won’t be able to fall victim to the urge to finagle some questionable deal to pull cash out of the thing that is supposed to provide the basic need of shelter for the purpose of going to Europe or buying stuff.

Much of this buying and selling of homes was done, as we now know by using heavy doses of moral and financial sleights of hand.  Buyers created incomes out of thin air and banked on the notion that by the time the balloon payment would come due they would be making thousands more per year, ignoring the fact that on the whole middle class incomes have been stuck in neutral.  Lenders did no more diligence than to make sure that all of the signatures were on the correct lines not bothering to check if buyers could actually afford the loans they were taking.  The most unscrupulous used fairy tales and the proverbial voodoo economics to convince buyers on the fence that they could afford the American Dream.  Deals were struck in a moral vacuum and based on hope and a gamble.

I recall the times when my parents applied for home equity loans which they used in order to make improvements on the house.  I recall them because I would sit for hour upon boring hour at the Hibernia Bank while my parents filled out paperwork as the loan officer actually sized them up as a good credit risk.  That loan wasn’t going to be a risk laden bit of unworthy junk to get bundled and dumped to some dupe of a company like AIG; the bank was actually going to carry it and the banker made good and sure that my parents were solid, responsible people with jobs and the ability to pay back a loan.  If you want to see that sort of thing in action you have to watch Jimmy Stewart in, It’s a Wonderful Life.  When my wife and I refinanced we never met a real person, never had to provide employment confirmation, and never had to worry about a loan officer calling my boss to make sure I was a solid employee who didn’t have one foot out the door and the other on the proverbial banana peel.  There was a time when I would apply for a loan and the lender actually called my boss to verify my employment status and income.  Intrusive?  Maybe but how intrusive is it these days when someone asks for your Social Security number and driver’s license?  Take my life; please.

I can’t recall the popularity in my childhood days of snake oil salesmen like Robert Kiyosaki, so called experts who peddle the notions that you should get rich by gambling with your abode and if you aren’t a rich dad then you should be ashamed of yourself for being a poor dad, while making no mention of the responsible contented dads (and moms) who manage to live without scheming and who provide the family with simple stability, security and comfort.  Over the years my wife has been approached by friends and acquaintances to invest in real estate deals, rental property and other flim-flams.  Her response has always been, “Why would I want to gamble with my house just to get headaches and worry about losing everything? Never mind.”  

There are some experts who have actually thought it through and determined that maybe the home as investment isn’t all that it’s advertised to be.  In his book, The Ascent of Money, economic historian Niall Ferguson makes just that case.  Ferguson, whose resume I put much more stock in than Kiyosaki writes, “Suppose you had put $100,000 into the U.S. property market back in the first quarter of 1987. According to…the Case-Shiller national home price index, you would have roughly trebled your money by the first quarter of 2007, to between $275,000 and $299,000. But if you had put the same money into the S&P 500 and had continued to reinvest….you would have ended up with $772,000.”

Or, in my own simple, economics ignorant opinion, if you had put your money in a mattress or a coffee can in the back yard and not gambled with the equity in a perfectly good home you would still have your own home in which to lay your mattress and a backyard to bury your money in.  I know it isn’t sophisticated but sometimes sophistication isn’t all that it’s cracked up to be.  

We’re still reeling from a historic recession brought on in large part by the greed of buyers and sellers who mortgaged morality and responsibility for status and the allure of wealth.  There are many who are suffering for it but I have a hard time finding sympathy for people who helped take down a global economy.  My wife, bless her heart, is much more charitable in that respect.  She sees folks who are suffering in their own little purgatories and are paying for their mistakes.  I guess I’m not so charitable as I wouldn’t mind seeing those agents, lenders and buyers who played fast and loose with ethics, the law and the truth slip off the ledge of purgatory into hell.

My wife and I have lived in our home for over twenty years.  If and when we do move it will be with the idea of downsizing to something more manageable and we’ll do so with heavy hearts.  The treasure in our home isn’t monetary; it’s in the remembrances of the greater part of our lives together with our children.  This is a value hearkening to those of my own parents.  

In 1956 my parents bought a home in San Mateo, California. They paid somewhere in the neighborhood of 16,000 dollars for that home.  My mother died in that home and it was sold in 1989 only after my father was no longer able to fend for himself. They could have sold that home at any time during those 33 years and made many times over what they originally paid. But that was never in their plans. My father was heartbroken when he left that home.

Likewise, selling for a windfall was never in the plans of many of my parent’s neighbors. When I finally sold the house many of the families whose children I played with in the fifties when I was a child still lived in those homes. Those homes were something dear to their hearts. They were places not only where they lived but where they stored their memories; where marks on the wall showing the growth of a child or a scrawl in the cement were special remembrances. That 20 year old tree was where their son built his tree house.  To those people, as it is to me, the home is where you go at the end of a hard day of work. It is where you enjoy a meal with your family. It’s where you play with your children and grandchildren. It’s the place where you celebrate special occasions, decorate for the holidays and establish your own family’s traditions. It should be the place that gives you a sense of security and comfort instead of being a source of stress over what it will be worth in the next five years. 

There are two epigraphs that begin this post.  I would prefer to follow Jane Austen’s  sentiment than Kiyosaki’s.  I prefer a simple, stress free, comfortable life unconsumed by greed and the temptations of crossing the ethical border.