NY Times Paul Krugman: "Home Not So Sweet Home."

[muntrv]

By PAUL KRUGMAN
Published: June 23, 2008
“Owning a home lies at the heart of the American dream.” So declared President Bush in 2002, introducing his “Homeownership Challenge” — a set of policy initiatives that were supposed to sharply increase homeownership, especially for minority groups.

Oops. While homeownership rose as the housing bubble inflated, temporarily giving Mr. Bush something to boast about, it plunged — especially for African-Americans — when the bubble popped. Today, the percentage of American families owning their own homes is no higher than it was six years ago, and it’s a good bet that by the time Mr. Bush leaves the White House homeownership will be lower than it was when he moved in.

But here’s a question rarely asked, at least in Washington: Why should ever-increasing homeownership be a policy goal? How many people should own homes, anyway?

Listening to politicians, you’d think that every family should own its home — in fact, that you’re not a real American unless you’re a homeowner. “If you own something,” Mr. Bush once declared, “you have a vital stake in the future of our country.” Presumably, then, citizens who live in rented housing, and therefore lack that “vital stake,” can’t be properly patriotic. Bring back property qualifications for voting!

SEE MORE AT LINK BELOW


http://www.nytimes.com/2008/06/23/opinion/23krugman.html?_r=1&th&emc=th&oref=slogin

[harry123]

1. If people can't afford hosues, how far down will we go then?

If a lot of people are being thrown out of their homes because they never should have been enticed into buying property in the first place, then a lot of houses will be on the market very soon. And with fewer buyers that spells trouble for prices. How far down are housing prices going to have to go to clear out this mess?

I'm actually conducting a poll to ask people on my website. Do we have to go down 10%, 20-30, 30-50? More than 50%!

When my poll is finished, I intend to post the results and compare them to actual declines. Let's ee how good we are at predicting where this thing is going.

http://www.creditwritedowns.com/

The poll is in the sidebar in the upper right.

[harry123]

2. New Post on how obvious it was this was a bubble

This got me to thinking even more about the bubble. Why did people buy into a bubble when they could have rented for less? Why was there a bubble in so many places? I wrote a blog entry covering this and a lot more.

http://www.creditwritedowns.com/2008/06/naysayers-housing-bubble-was-obvious.html

What's interesting is the number of people who were saying that this was a bubble long before it came to the public's general attention. Way back in 2005, the Economist warned about this, and not just in the US.

Take a look at the sidebar. Down near the bottom are a bunch of articles under the heading "interesting articles." Many were written way before everyone latched on to this as being a bubble. From where I sit, the blame lies squarely on the Fed for enticing people into circumstances they neither understood or could afford. It is almost criminal and very sad.

[snappyturtle]

3. I think people saw rents rising so-o much that buying, if at all possible,

was considered prudent. With interest rate and property tax advantages for tax reporting plus those in the real estate market bugle-ing that the prices would only go higher, I believe people thought they'd better buy or be forever priced out of the market. And, then they had all those helpful people to make their dreams come true. :sarcasm: imho

[AgadorSparticus]

4. I agree.

[harry123]

5. greed is the reason they got in it, but so is the fed

I can't disagree with your sarcasm. People were downright greedy. But let's put the blame where it belongs: the Fed. People are going to respond to the economic signals they are given. That's the nature of human beings. It's incumbent on our monetary stewards to be responsible regulators and captains of the ship. Do people deserve what they got? I can't say. At a minimum, we need to make personal finance a MUST class in our schools. ANd people need to take responsibility for their own financial decisions.

But, I think many people were duped into thinking Nirvana could last for a very long time. And the Fed is first on the list for blame as to why that's the case.

[anigbrowl]

8. It's a mixed bag - it looked wise at the time in many ways

I went through this in the UK back in the early 90s so I've been very leery of such bubbles since. A home is a sort of investment, but you still need to live somewhere so you have to consider how easily (or not) that investment can be liquidated, which most people didn't. Nor did they take into account the cost of property taxes and suchlike, which can be very high in some places.

On the other hand, if you don't own any property, you get screwed in a whole other set of ways.

[funflower]

6. If you don't buy a home, you'll be paying rent in your old age.

I'm all for leveling the playing field, but the idea that people are better off paying a landlord for the rest of their lives is hardly democratic.

Where is George Bailey when we need him?

[NMDemDist2]

9. that's assuming you will be employed in the same area your whole life

sadly, that is not the case for most people these days.....

[Karl_Bonner_1982]

7. Buying does make some sense

If you want to do gardening or build up some equity, then buying is the way to go. And right now it's a buyer's market for all those who held out over the last few years.

What's not good is the continued creation of endless urban sprawl and ever-increasing car dependency. More and more a sustainable homeownership plan will have to include apartment and townhouse ownership as options, not to mention more public transportation and mixed zoning.