[19 May 2008]
Tanta at Calculated Risk does us the service of dismantling the bizarre recent NYT editorial fretting over the “psychological scarring” brought on by foreclosure by economist Robert Shiller, once a stern critic of “irrational exuberance” who seems to have become an apologist for the homeownership cult and the property buyers who went in over their heads.. Foreclosure is no doubt painful, but I vigorously disagree with the idea that people skeptical of bailouts are “cynics”. And this preposterous piece of ownership society propaganda made my eyeballs melt: “Homeownership is fundamental part of a sense of belonging to a country.” Really? “People instinctively understand that homeownership conveys good feelings about belonging in our society, and that such feelings matter enormously, not only to our economic success but also to the pleasure we can take in it.” Owning a home is “instinctual”? Aarrrgghhh. Not only am I not a real citizen, but I have faulty human instincts. Perhaps I should be interred somewhere to protect the ownership society at large. Then, Shiller wries,
The psychologist William James wrote in 1890 that “a man’s Self is the sum total of all that he CAN call his, not only his body and his psychic powers, but his clothes and his house, his wife and children, his ancestors and friends, his reputation and works, his lands and horses, and yacht and bank account.”
Homeownership is thus an extension of self; if one owns a part of a country, one tends to feel at one with that country. Policy makers around the world have long known that, and hence have supported the growth of homeownership.
Apparently Shiller thinks we should adjust laws to help men’s Selves feel sure of all their possessions, not just their houses but their women as well. If he owns her, he will feel at one with her, and isn’t that a recipe for a good marriage?
As Tanta says:
I’m actually, you know, in favor of some sympathy for homeowners, but one thing that does get in the way of that for a lot of us is, well, the rather disgusting shallowness that a lot of them displayed on the way up. There is this whole part of our culture that has sprung into being since 1890 that takes a rather severe view of conspicuous consumption, unbridled materialism, and totally self-defeating use of debt to buy McMansions, if not yachts. We were treated to a fair amount of that kind of thing in the last few years. In fact, we had Dr. Shiller explaining to us last year that a lot of folks just wanted to get rich, quick, in real estate.
It is undeniably true, I assert, that not everyone was a speculatin’ spend-thrift maxing out the HELOCs to buy more toys, and that part of our problem today with public opinion is that we extend our (quite proper) disgust for these latter-day Yuppies to the entire class “homeowner.” But it is surely an odd way to engage our sympathies for the non-speculator class to speak of it in Jamesian terms as the man whose self is defined by his Stuff, and whose psychological pain is felt most acutely when he recognizes that he is now just like the riff-raff.
It’s worse than odd—it’s downright reactionary—to then go on to that evocation of homeownership as good citizenship and good citizenship as “feel[ing] at one with [the] country.” This puts a rather sinister light on Shiller’s earlier insistence that we need to make sure people don’t get too “cynical.”
At Naked Capitalism, Yves Smith also mocks this ludicrous editorial:
This piece illustrates much of what is wrong-headed about the “rescue the homeowner” concept. First, attempting to prop up assets at levels not supported by the underlying economics (in this case, incomes) does not work (see here for an illustration). The prices will in the end revert to a sustainable level, if not trade below them for a while in some (perhaps even many) markets. Japan is an extreme example of the consequences: low growth due to good capital being thrown after bad and delays in clearing out bad loans and recapitalizing the financial system so it could get back to its job of funding productive enterprise.
Second, keeping housing expensive hurts first-time buyers, such as the young and the lower income. It not only makes it more difficult for them to engineer a purchase, but in communities which participated in the housing boom, assures that their housing investment will be lousy, if not a loser. It’s unlikely to appreciate from an inflated level; the best outcome would be for it to hold its nominal value for a long time while its real value gets eroded by inflation.
Then, in response to Shiller’s call for a salve on the wounded psyches of distressed homeowners, she adds:
Moving if you are a kid sucks. But Shiller wouldn’t argue that government intervention is called for to prevent family relocations due to getting a new job, divorce, deciding to be closer to aging parents. Note that other forms of financial trauma that might lead to a residential downsizing also fail to merit government subsidies, such as a renter having to move into even smaller digs (or moving in with parents or children) due to a job loss, high medical bills, or overspending. No, thanks to the sanctity of homeownership, giving up a house you can’t afford is a tragedy deserving of Federal aid, while other forms of psychological or financial loss don’t cut it.
That’s it in a nutshell. Homeownership is seen as something we must protect at all costs, even for people who overreached; poverty, homelessness, health insurance, etc., etc., etc.—not so much. The cult of homeownership has too many people brainwashed. Economist Tim Duy, looking at how out of whack home prices have become in Bend, Oregon, puts it succinctly in a very concrete context: “the magnitude of the misalignment in Bend is quite remarkable, and in my mind represents a complete failure of social policy. This is especially the case when policy has turned homeownership into a moral imperative, creating a culture that equates renting with failure and granite countertops with success.”