In an eye opening report on Friday, economist and co-creator of the Case Schiller housing price index Robert Schiller made a very strong case for the fact that perhaps it’s time to re-think the American dream, that maybe the white picket fence could be rented rather than mortgaged in this updated version of the American Dream.
Schiller, who is unquestionably one of the foremost authorities of the housing situation in this country, makes some very interesting points in the article. One that really stuck out at me was the fact that many people bought “too much home” for the sole reason that societal pressures were so great and that they felt they needed to buy a nice home in a nice neighborhood in order to belong.
He traces this behavior back to 1899, when in “The Theory of the Leisure Class,” Thorstein Veblen described homeownership, particularly of large and expensive dwellings, as “conspicuous consumption.” By that, he meant that it was undertaken substantially for the purpose of impressing others by showing the amount of money one can afford to waste on space one doesn’t need.
And, aside from low interest rates and ridiculously loose lending standards, that really is what fueled the housing bubble isn’t it? The underlying notion that even if you couldn’t afford it, you should own a home, and not just any home, the biggest home you can (or can’t) afford? Isn’t this “keeping up with the Jones’s” mentality what had people making $25,000 a year taking out half million dollar, no doc, stated income loans in the first place?
But who said you have to own a home to be an upstanding member of society? Isn’t Freedom one of the cornerstones of the American dream? Debt is a form of financial slavery, so how can putting your financial future on the line by over-leveraging yourself to buy a home “because that’s what you’re supposed to do” possibly be a part of that dream?
Is putting your future, and the future of your family, in financial jeopardy part of that dream? Ask any of the 25% of homeowners in this country who are currently upside down on their home loans, and they’ll tell you they’re anything but free. Not free to move somewhere without finding a renter and/or taking a loss monthly, not free to modify their loan without jumping through hoops for their lender, not free to short sale the property, etc.
Isn’t it about time we rethought this idea that homeownership is a part of the American Dream? After all, I’ve seen lots of rental properties with white picket fences around them.