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“Owning a house remains central to Americans’ sense of
well-being,” write
David Streitfeld and Megan Thee-Brenan for The New York Times,
“even as many doubt their home is a good investment after a punishing
recession.”
The NYT and CBS teamed up to poll about a thousand folks and
determined that 9 of 10 Americans believe home ownership is a part of the
American dream. More of those polled think the government should help
homeowners in distress even more than the unemployed.
Who’s to blame for the housing crash? “Only a handful of
respondents at either moment [2008 or now] blamed the borrowers themselves
for taking loans they could not afford,” write Streitfeld
and Thee-Brenan. And while those polled in ’08 thought the regulators
caused the crash, now more people think it was the lenders.
“I believe the financial institutions willingly and knowingly
allowed people to apply and receive credit at a rate higher than they could
afford and this has degraded our economy,” said Steven Goode, an
environmental health manager in Las Vegas, told the NYT.
However, while those polled told the NYT and CBS that virtually
everyone should own a home, “The underlying trend in sales is flat or
slightly downwards, but we do not expect a serious further decline,”
according to Ian Shepherdson, chief U.S. economist at High Frequency
Economics.
With 30-year mortgage rates sporting a 4-handle and home
prices at 2003 levels, people should lining up to buy homes and start
enjoying a dreamy suburban America. However, while pending home sales were up
8.2% in May, that is after an 11.3% downturn in
April.
Reporting on the new home market, CNBC’s Diana Olick reports, “The 319,000 sales pace is 14%
higher than the record low set in February, but new home sales are still 77%
below their peak in 2005, and 900,000 is considered healthy.”
So while people say
home ownership is the path to happiness, fewer people are actually taking the
plunge. Murray Rothbard described
“demonstrated preference” as the idea that a man’s actual
choices in action indicate what he genuinely values. A corollary to
demonstrated preference is the recognition that we can never know
another’s valuations except as he displays them through his actions.
Once upon a time in America, owning a home was considered to be the
best investment a person could make. Now, only 49% of those polled think
it’s a safe investment and 45% think buying a home is risky.
“Beyond all these ills, however, a persistent belief endures
that the market will eventually improve and housing will regain its
traditional importance,” write the Times reporters.
“But I don’t think I’m throwing my money
away,” Donna Boyd told the NYT. “I rented for years when I was
younger, and I just don’t like the idea of putting money in someone
else’s pocket for something I will never own.”
One wonders if Ms. Boyd is annoyed by putting money in the
grocer’s pocket instead of owning her own farm.
Robert Shiller, co-founder of the
S&P/Case-Shiller housing index says
he wouldn’t be surprised if property values fell another 10% to 25%
over the next five years. If he’s right, actions will continue to speak
louder than words.
Douglas French
Mises.org
Douglas French is president
of the Mises Institute and author of Early Speculative Bubbles & Increases
in the Money Supply. See his tribute to Murray Rothbard.
Article originally published
on www.Mises.org. By authorization of the
author
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