Loan Modification

Mom, Apple Pie and Mortgages

By Implode-Explode Heavy Industries

... what is the long-term justification for putting taxpayers on the line to subsidize homeownership? Is this nothing more than a sacred cow in American society ? a political necessity because so many voters own homes and are mindful of their resale value?

We think you had it there, Bob. But then Shiller wanders off and makes a weird "cultural" argument that we somehow "need" subsidized housing in America to "feel free". Or feel like "real Americans". Or something. We're not so sure about that... it's probably more like the middle class just likes voting themselves into home ownership... and then after that, voting themselves higher home "values".

But it seems the market and culture have already left Shiller (and the government) in the dust. It is evident from building statistics that the real activity now is in high-density urban housing, which is undergoing a renaissance around the country. And we can say anecdotally that not many people under 35 have much interest in living in stereotypical suburban tract housing. It seems both gen Xers and Yers, as well as empty-nesters, would rather live in the city where there is stuff to do, and it doesn't take two hours to get anywhere, fighting maddening traffic all the way (and costing a mortgage payment's-worth of money in gas every month).

Lessons HAVE been learned in the bubble, if only by shock. And there is now a natural aversion to getting over-extended on McMansions out in the middle of nowhere, as well as buying before one has a stable location. And being able to "settle down" in a city is much more rare in our increasingly volatile economy.

No, it is more like the "culture" Shiller is commenting on is already dead. And the longer it takes the government to figure that out, the higher the public's loss will be on all that busted property out there in the exurbs.

Full post as published by Mortgage Lender Implode-o-Meter on March 06, 2010 (boomark / email).