Tuesday, September 16, 2008

Is the ownership society sustainable?

As more financial institutions falter, here is a factor to keep in mind.

I keep hearing that the median wage is not enough to qualify for a mortgage to buy the median priced house. That's true in so many regions.

When people can't afford home ownership and at the same time home ownership is being held up as a holy grail of life, "ownership society," there is a disconnect.

In trying to afford homes via fancy financing from unregulated banks, rather than wages and house values in better balance, we get the default situation being faced today.

We need less emphasis on home ownership as the holy grail of living, or we will need to inflate the rest of the economy to catch everything from wages to candy bars up with home values.

$10 candy bars?

Either people stretch too far and buy, or have to give up that dream.

What we need is a more sustainable dream than buying over our means.

Less expensive housing, like mobile home courts for instance, Smaller houses and more apartment living may be in the future.

Is it a sacrifice, or maybe just making things more convenient? Maybe it's better.

My bike touring version of "American Dream" is now visiting Canada. Might not be that sustainable either. Exploring around Vancouver has meant some motel stays for me. More expensive than camping.

Now I am out east of Vancouver in the sprawl around Abbotsford. Yes, Canada has sprawl too, but maybe not as much as Washington State.

Single family homes all spread out. Narrow rural roads crammed with traffic. I'm confined to bigger highways that have shoulder, but "gritty" along side all those noisy dusty trucks. Not a lot to see except mountains and farms in the distance.

Time to head back. The camping is still too far out and the riding is a bit boring. Heading back into beautiful central city Vancouver would be better scenery, but more motel stays. I have to think about what's sustainable for my bank account also.

The city is pretty, but more of the outskirts need to be like the city. The city is rare, making it more expensive. People pay a high price for convenience, yet most of the sprawl around large cities doesn't build for convenience. Convenience needs to be more common and affordable. They should build the outlying areas with more density and smaller homes. A more sustainable version of of both the American and Canadian dreams.

Out here in the sprawl, it's still too urban for camping, but still too rural for convenience. Motels near attractions like Midas Muffler shop. Wow. The worst of both city and country?

3 comments:

Vancouver realtor said...

Rob,
what you write is right, but I think that the financial institutions checked every client. Problem is probably somewhere else. I can't believe that so many people became unable to pay their mortgages at the same time. Something must happened, what caused this. Some combination of different factors, world politics and whoever knows what else all together caused this crisis.
I admit, that to own a house is a prestigous thing, but there is a difference between owning and "owning" with a morgage for next 40 years on it. But, on the other side, you have to live somewhere. And many people choose rather to pay interest payments and own a house after all than pay the rent and own nothing...
So, the truth is somewhere between.
Take care,
Jay

Robert said...

Good to get your comment.

Our news, in USA is full of talk about banks loaning to lots of people who wouldn't normally qualify. Sub prime introductory rates, no money down and so forth. It was kind of like a frenzy.

At the same time, prices and home values were going up faster than usual. It seems like a large chunk of people got into the market during the last, say, 5 years who were in over their heads. More people going into market who were in over their heads in last 5 years than normal. In some cases, they thought rising values would help them pay the debt when they sold again.

Eventually,a lot of those balloon payments started coming due as values started dropping leading to a significant rise in foreclosure rate. This has meant insolvency for a lot of lenders.

When home values climbed so fast,the percent of workers able to afford homes without some of that irresponsible financing dropped. Home values went up during the last few years a lot faster than wages or quite a few other things in the economy.

Now it is time for this correction.

Robert said...

Our news talks about quite a bit of deregulation in banking over recent years that has lead to more questionable loans. Also this has helped to fuel the frenzy of so many people wanting to own. Low interest rates fueled the frenzy also. Sort of like a fad that now needs to come back into balance, at least in my opinion.