Amidst bad economic news from manufacturing to elsewhere, there are signs of life in the real estate sector. The Wall Street Journal reports that home prices have started to go back on the upswing for the first time since 2007. But while this is good news for homeowners, I wonder if it?s not a mixed blessing at best for the economy as a while.
If the real estate revival is built on the easy credit of the past, it will have the same ending the last "boom" did.
The real estate industry hit a boom thanks to easy credit, which presumably made it easier for more people to achieve what some see as the American Dream, that being home ownership. But the flip side of the easy credit was that as demand soared, the prices of new residences skyrocketed, and the high cost of a new house was often prohibitive for first-time buyers, especially in the Northeast. The only way to do it was easy credit?which resulted in people being pushed (whether through their own volition or by manipulative sales tactics, or a mix of both, is anybody?s guess). Which in turn led to the market collapse. And when the real estate market collapsed, it rippled across the construction sector and became the most visible aspect of the economic troubles these past several years.
Foreclosures then became the story of the day, and the media lapped it up. To listen to the mainstream press, one might have thought we were living through a modern-day version of It?s A Wonderful Life, with mean Henry F. Potter ready to close in on the homes of a hardworking family that just happened to be down on its luck. It makes for a great story, but it had little basis in reality.
I spent a few months working for a law firm that handled foreclosures in Maryland and as part of my job was able to see the sheets indicating how many payments the debtor had made. It was shocking to find out that the answer to this, in an overwhelming number of cases was ?zero.? That?s right, not a single payment made against a mortgage. And I don?t think I ever saw a sheet where more than one payment was made.
It's a myth to suggest that most people foreclosed on were the victims of a modern-day Henry F. Potter.
What that tells me is that the foreclosure ?crisis? was not something that hit a family who?d been faithfully making payments for ten years, hit a string of bad luck and saw the bank pull the rug from under of them. More likely it was a cause of wanna-be entrepreneurs trying to house-flip, getting caught in the middle and losing their bet. Now I?m sorry their bold venture didn?t work out, but losing an entrepreneurial bet is no different than losing a bet on a football game. Pay up, live with the consequences and don?t turn your problem into everyone else?s. At the very least, don?t try and align yourself with the interests of a stable family who really did just have some bad luck.
As a result I still get mixed feelings when I see a report that home prices are on the rise. If you?ve got a house that you?re trying to sell, I?m happy for you. But I wonder if the bottoming-out the market hit was less a crisis than a simple correction back to the norm, with a market no longer driven by easy credit and wanna-be entrepreneurialism. And on the flip side, is the rise in real estate value today something to be celebrated or viewed with a skeptical eye? We?re about to find out.
Dan Flaherty is the author of Fulcrum, an Irish Catholic novel set in postwar Boston with a traditional Democratic mayoral campaign at its heart, and he is the editor-in-chief of TheSportsNotebook.com.
Source: http://www.catholicvote.org/discuss/index.php?p=33545
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