Houses

April 27, 2011 at 3:29 AM | Posted in Economics | 2 Comments
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In a recent article by in the NY Times, Builders of New Homes Seeing No Sign of Recovery, David Streitfeld details the lengths that builders are taking to sell houses; one is throwing in a car with the deal. Everyone knows that the last housing boom was built on the shifting sands of bad mortgages but what will the next boom be built on?

That housing prices kept going up and up gave many of us a false sense of our own intelligence. In Long Island in 1986 we sold a house for almost double what we paid just three years before. We weren’t flipping as we were moving to Chicago for a new job but we knew just when to buy — and when to sell. Now, our move was pure circumstance but we took credit anyway.

The first step to the next boom — and bust — is when we think of a house as an investment and not a place to live, hopefully, for a long time. Who, really, can get comfortable in an investment “instrument”?

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  1. Though I’m not much of an economist it seems to me that there’s nothing wrong with a home as an investment, as long as it’s a home first and an investment second. It’s a decent feeling to save for your home and to see its value appreciate over the years so you can leave something for your kids.

    Where it all goes wrong is if house prices grow too fast. That leaves first-time buyers with unaffordable prices. Even worse it encourages the arseholes who got us into the present mess to see it as a speculation opportunity, and normal people to get carried away by borrowing more than they should on the ‘value’ of their house. A few years ago you could get a mortgage here of more than four times your TAE and 125% of the price of the property. Hardly surprising that it all went wrong.

  2. Tom, I completely agree. It seems that we spend a lot of time getting comfortable investments that aren’t investments but rather things we want to do and attribute it to ‘investing’.


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