Sunday, October 21, 2012

A Pile of Sticks

Real estate folks will start to shoot dirty looks at me.  Economists will call me "nay sayer".  But I have come to the opinion of late that a house is just a pile of sticks.  It is not a golden idol that gets more valuable with time.  We spend our adult lives trying to figure out how to acquire this pile of sticks, carefully wrought, in the "right" neighborhood, that says all the right things about us.  We willingly commit the next 30 years of our labor to pay for it.  It is a transmitter for our souls.  Or is it?

Does our home tell everyone who we are inside? Inside our lives and inside ourselves?  Maybe.  It tells others what we have picked for our shell.  The tortoise shell that we carry around on our backs.  It is the financial burden on our backs and it is not weightless.  It is both refuge and fear.  It is the material possession that we most fear losing.  Everything will fall apart. Without an address we become "homeless" and most of us are much closer to this possibility than we care to realize.  Tottering on the brink.  One good financial tweak, or physical injury, and it can all be gone.  It is something that many folks long for but cannot obtain. Why?

Whom is building these castles for us?  If I just sat down and added up all the lumber, all the drywall, all the shingles, paint, plumbing and wires, how much money would be on this list?  For a 2000 SF house, would it all add up to $300,000-$500,000 (or more) worth of materials?  I would guess not, but we are willing to plunk that money down and sign up for 30 years of fear. A mortgage.  Everyone in charge of this industry is working to make certain that it functions as an ever-increasing value.  There is no upper bound.  Invest in housing, you will get a big return....right.  Many of us learned the hard way in 2008 that false market value is just well, false.

I think those of us in the US remember the Beanie Baby toys?  Those plush little toy critters of all colors and of every description.  Those seemingly worthless toys made of faux fur, stuffing and synthetic beans had a run of "irrational exuberance", a value bubble that is now burst. Folks were fighting for them in stores. People were selling them in want-ads for $800 or $2000 each.  They held conventions for the collectors. Fundamentally, the material content within them was worth pennies.  The only thing that gave them value was how people felt about them.  Yes, opinion set the market price. Sounds an awful lot like the housing market to me.

Rethink housing.

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