While reading the great tut-tutter, Ben Stein, over the weekend, a notion I’ve been kicking around for awhile crystallized in my mind: Home ownership isn’t always a good thing. In his typically breezy and persuasive style, Stein (a Fox News pal of mine) makes the case that while, yes, this subprime mess has been unfortunate, we’re overlooking the fact that the advent of subprime loans has allowed a lot of people to pursue the American dream of owning their own home. (Ben’s article in Sunday’s New York Times is free.)
First, I’ll acknowledge that, of course, home ownership is good. Period. As Ben gracefully puts it, “Owning your own home is generally considered the bedrock of the American dream, so this is a good thing, both socially and individually. Walking into your own home, seeing your own dogs waiting for you there, is a major blessing.”
But I think Ben and others are ignoring how far in the wrong direction the pendulum swung toward achieving that social good. I’m all for creative financing, and I’m even for the mortgage interest tax deduction (a bit of gospel — and a gift to the housing and lending industries that never, ever is questioned). But the very fact that someone can only afford to buy a home with a low down payment, a teaser rate and no initial principle payments means, stay with me here, THEY CAN’T REALLY AFFORD THE HOME.
Think about that. The only way these creative loans worked was if home values kept appreciating. The professionals knew it wouldn’t last forever. First-time buyers didn’t necessarily understand that. Oh, how they were encouraged to think otherwise.
Consider a market where rates are ultra-low and new loans are created for people who still can’t qualify. Might a market like that drive up home values, creating an unvirtuous cycle that ends in tears? Is it just possible that people who can’t afford homes should be encouraged instead to save until they can? Or to buy something they can afford?
Is it just possible that we as a country pushed too hard to make everyone think they SHOULD own a home?