There was a good discussion of housing market schadenfreude (or lack thereof) over the holiday weekend in the comments to a recent post. I thought would be worth posting the highlights of the conversation, and chiming in with a few thoughts of my own.
rose-colored-ghoulaid:
I for one don’t want misfortune to shine on others. At least not indiscriminately. But I do think a return to rationality will mean some particularly vocal cheerleaders will receive their comeupance. But in my mind, this is more akin to hoping the heads of Enron become felons, or that history books correctly cite Greenspan as the source of more economic problems than he ‘solved’.When a single mother is foreclosed out of a house (she had no business buying), I still feel sorry for her. But when a serial flipper loses his home due to gambling on the market, I feel no pity. Nor am I happy he lost the house, it is just how markets work, and that person played a game they didn’t understand. At that point I remember I’m in the catbird seat, and I might derive some joy out of that.
Jonny:
My main feeling about hoping for a market decline is simply that I will be happy to see affordable housing again. In the unlikely event that a decline doesn’t happen, it is extremely remote that I will ever own a home in this lifetime. I am, BTW, over 40 and well-employed. Think about that.
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However, if you must insist on seeing things this way, it seems to me that the logic works in reverse: people who currently own overpriced homes have been enjoying a feeling of schadenfreude with respect to those without them for years. So, when we return to a normal market and those with overpriced assets are forced to sell them, just don’t forget all those years that these unfortunate sellers enjoyed those assets while the rest of us have been forced to rent and endure this idiotic bubble. There will be casualties on all sides of this before it is over. Just don’t forget that the real villain is Greenspan.
disbelief:
I want to chime in and say that “schadenfreude” is not a fair term based on what I feel, and what the majority here have written. This seems to also be the main accusation of the RE cheerleaders who visit this blog. The only motive I have is to be able to own a house again without sacrificing virtually everything else.
Angie:
Schadenfreude is enjoyment of the misery of others. Despite the protestations today, there is a wide streak of that running through this blog.
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I think that if housing prices in this area get to the point that they’d be affordable by traditional standards, the economy in general will be in the toilet. So, be careful what you wish for.
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About being 40, well-employed, and never able to buy a house—there’s a lot more there to think about. My first thought is, unless there’s more going on in the background ($100K in law school debt, four kids and a disabled wife, whatever), there is no reason why you couldn’t sock away a big down payment and buy a modest place.I’m going to presume that you’re single and without those major encumbrances, and that “well-employed” means “over median income”, which is ~$54K for a single head of household in Seattle. (If it’s not true for you, Jonny, I gather that it applies to not a few other people who frequent this site.) People in this situation should easily be able to put together a substantial down payment (say $30-40K) in two to three years, even while shoveling away 10-15% for retirement. Just grow a backbone, show a little restraint, and start being fiscally responsible.
notabull:
Angie, there are not just two choices:a) Buy a house immediately.
b) Never buy a house, and continue to rent foreverYou seem to think that most on this board are choosing (b), hence your stupid comment about being fiscally responsible. Ultimately, it *would* be fiscally irresponsible for most people to never buy a house.
However, and please try to understand, there is a THIRD choice:
c) Save a down-payment, wait for prices to return to fundamental levels (whatever you deem them to be), and then buy a house.
Sure, I could go out and buy a house right NOW. I have a ton of money in the bank earning decent interest, but I’m not going to. Why? Because I’m being fiscally responsible, am saving $6000 in CASH a month (after tax) by TEMPORARILY renting, and then I will buy once the market softens some more, which I fully expect it to.
If it doesn’t soften more, I’ll just shrug my shoulders and buy a house anyway. But I’m not about to do so when all indications are that prices are heading down and about to head down some more. I didn’t get my big bank balance by being stupid.
Notabull accurately summarizes most of my sentiments quite succinctly. When prices are higher than any logical and sane measure indicates they should be (as they are now), and all signs point to an extended period of price declines (as they do now), the best way to “show a little restraint, and start being fiscally responsible” is by not buying, rent for a massive discount, and save the difference. That’s what I’m doing, and what many others who frequent this blog are doing as well.
I would also like to address Angie’s comment that prolonged and/or large home price declines will result in an economy that is “in the toilet.” In my opinion, the source of the problem is that the prosperous economic times that we have enjoyed for the last 5-10 years have been largely (not entirely, but largely) funded by a massive, unprecedented accumulation of debt. A large portion of that debt was the result of the housing bubble, which allowed people to “extract equity” from their homes (i.e. – take on more debt) to fund spending on vacations, plasma TVs, cars, and other non-necessary purchases. This was great for the “economy,” but the problem is that you can’t just keep borrowing your way to prosperity forever. Unfortunately, we (as a nation) borrowed prosperity from the future so we could enjoy ourselves in the here and now.
Eventually the bill will come due, and it will indeed be painful; even for those that did not participate in the irresponsible run-up in any way. That sucks. But when everything does shake out, and eventually homes are priced reasonably* again, is it “schadenfreude” to be grateful that insanity no longer reigns?
Is it schadenfreude to point out that while others were accumulating more and more debt, I was eliminating debt and accumulating liquid assets? Is it schadenfreude to point out the inevitable result of our nation’s debt-fueled spending spree? Is it schadenfreude to look forward to a time when people who have been and continue to be financially responsible—who didn’t buy things they couldn’t afford and actually regularly saved money—will receive the economic rewards they deserve?
If that is schadenfreude, then I guess the bubble blogs are schadenfreude central. To me, schadenfreude is what I felt when I watched the Yankees blow a three game lead and get beat in New York by the Red Sox in Game 7 of the 2004 ALCS (also when they blew a 9th-inning lead in Game 7 of the 2001 World Series). I derive no such pleasure from seeing poor people that should never have bought a house in the first place being foreclosed on and forced to go back to renting again. Watching people that bought at an inflated price who are now unable to sell because they are upside-down on their loan does not make me happy. I feel that these are the unfortunate, inevitable, and expected results of the mess we have gotten ourselves into.
* By “priced reasonably,” I of course mean relative to their location. I don’t think anyone ever expects homes in Seattle to sell for the same price as homes in Fargo.