Friday, April 06, 2012

A "Rentership Society" sounds like a good society

To the Point asks "Is the US becoming a 'Rentership' Society?" as the home ownership rate plummets in the last six years.  I don't see a problem with it.

In the olde times of 15-20 years ago, the ubiquitous 30 year fixed rate mortgage with limited refinancing operated as a useful nudge for increasing the savings rate, but those days are gone.  It now doesn't make that much sense for middle class people to tie up such a large portion of their limited assets in a risky investment.  The few poorer people who could buy, should invest instead in either something safer or something more liquid in case something happens to them like a medical emergency.  Homeowner sale costs also limit job mobility.

Renters are probably somewhat less interested in making community improvements, but they can provide incentives for the same by voting with their feet.  More acceptance of renting can also facilitate more dense housing that works well with renting.  If only we eliminated or greatly reduced the mortgage tax deduction then we'd do a ton to fight sprawl, but that's a dream.

What's apparently not a dream is trend of people moving back from the worst of the exurban sprawl in the US.  That's good, although some of the urban counties they describe that I happen to know - Alameda and Contra Costa - can have plenty of people living pretty far away from the Bay Area's urban core.

A Randian zealot, Alan Greenspan, is partially responsible for the US and global financial meltdown because he openly manipulated the housing market to support his political ideology.  Less manipulation in a rentership society sounds like a better choice.

(FWIW, my wife and I own a townhouse in a 30 unit association.  It's fine, but I can also see us renting.)


EliRabett said...

Amortized fixed rate mortgages were an invention of the New Deal in the 1930s. Before that the pattern were interest only with the balance due at the end, usually for five years. At the end of which you refinanced or left.

This is what happened in the movies where mom and the kids got kicked out after dad died.

Eli is very old (well not that old, but Mom and Dad Rabett were)

Andrew Judd said...

The current economic situation arose in part because of multigenerational amnesia and could be here for ten years or more with no rosey outcome, and in fact the possibilities for horribleness are fairly real, and of the kind that are unthinkable and yet exist anyway.

Even so nuclear war or huge social unrest, is probably not going to destroy the nicest parts of the USA, and you can take a punt on buying now and feel quite justified it would be a wise decision, where in the final analysis life has to be lived and enjoyed rather than worried about to the point of paralysis.

Probably it has never been a better time to buy! :-)

J Bowers said...

Multigenerational amnesia? 100% arse. The bankers themselves put it down to deregulation; their words to the head of the IMF or the World Bank. They probably now have attempted amnesia concerning that, though.

Antiquated Tory said...

I dunno, I think AJ has a point here with the multigenerational amnesia, and it doesn't exclude J Bowers' point on deregulation. My parents are ancient and they are the last generation to remember the Depression--the last generation to remember why the regulation was put there in the first place. Since then we've had 3 or 4 generations of people who have seen some recessions but no financial crises and who have seen asset values, and especially housing values, relentlessly increase. By "people" I am including bankers and politicians, of course, though some folks might exclude them...
By the way, the houseowning mania never really caught on here in Continental Europe. The Brits on the other hand embraced property fetishism with both hands, with the crucial difference compared to US that they live on an overcrowded island.

Brian said...

Eli - yep, read about those in law school. If after paying interest for five years you were unable to make the balloon payment (or rollover the loan), then the bank kept your interest and took your house, thanks very much. Even judges were disturbed by that system. We could have those fine days again if we only acknowledged the sanctity of contract in the Constitution.

AJ - by your analysis, investing in land is crazy. Invest in T notes, gold, or ammo, depending on how bad you think it'll get, and then clean up after the smoke clears. I don't recommend this approach, though.

geoff wexler said...


Anonymous said...

Snow Bunny says (with chagrin)

I used to hang on Greenspan's every word like he was the wizard of Oz, before Oz got unveiled.

If ever I'd known he was a 'devotee' of Rand, ugh. I shake my head.

I thought the housing market was boiling over when I refinanced my house to pay off faster in 2004 and found other people were hauling out cash for their SUVs and kitchen rehabs. This bunny's Mom and Dad would never have done that. In fact, old Dad shook his head when I told him.

Then Alan the Great said the housing market was fine. This dumb bunny thought that was so, because the government has statistics and economic models and so forth. Which the Fed would base decisions on.

After the housing market crashed with an awesome shudder, the bunny came across a key chart: the ratio of monthly mortgage costs to monthly income. It was stable, bouncing up and down around a mean, until the 2000's. Then the monthly mortgage cost grew and grew.

Greenspan has now admitted his remark about the stability of housing was based on hot air. Senility cannot be blamed; there is a photo of his adoring look at Ms. Rand, while walking down the street in the mid 50's. Touchingly, he sent a large floral arrangement showing $$ signs to her funeral.

Now Ms. Rand's theories of life are popping up like dandelions in your spring lawn. "I'm fine; the hell with you, don't interfere with me walking around with tuberculosis is I want to. I have an absolute and unfettered right to express my true self".

End of Randian rant, but I don't promise to never do it again.

Snow Bunny

Brian said...

I started ranting against Greenspan in May 2004, my second month of blogging, and averaged a wisecrack or two annually thereafter:

Not sure how much earlier I realized he was full of it, not more than a year probably. Some people figured him out long before then.

willard said...

Thanks for the goldmine, Brian.

Rand and Greespan got some ice time at Keith's, starting there:

Hauling out cash for SUVs and kitchen rehabs never makes sense.

J Bowers said...

Q: What do you think of the Libertarian Party? [FHF: “A Nation’s Unity,” 1972]

Ayn Rand: I’d rather vote for Bob Hope, the Marx Brothers, or Jerry Lewis. I don’t think they’re as funny as Professor Hospers and the Libertarian Party.

Q: Why don’t you approve of the Libertarians, thousands of whom are loyal readers of your works? [FHF: “The Age of Mediocrity,” 1981]

AR: Because Libertarians are a monstrous, disgusting bunch of people: they plagiarize my ideas when that fits their purpose, and they denounce me in a more vicious manner than any communist publication, when that fits their purpose. They are lower than any pragmatists, and what they hold against Objectivism is morality. They’d like to have an amoral political program.

Q: The Libertarians are providing intermediate steps toward your goals. Why don’t you support them? [Ibid., 1981]

AR: Please don’t tell me they’re pursuing my goals. I have not asked for, nor do I accept, the help of intellectual cranks. I want philosophically educated people: those who understand ideas, care about ideas, and spread the right ideas. That’s how my philosophy will spread, just as philosophy has throughout all history: by means of people who understand and teach it to others. Further, it should be clear that I do not endorse the filthy slogan, “The end justifies the means.” That was originated by the Jesuits, and accepted enthusiastically by Communists and Nazis. The end does not justify the means; you cannot achieve anything good by evil means. Finally, the Libertarians aren’t worthy of being the means to any end, let alone the end of spreading Objectivism.

Makes me giggle when I read the likes of Joseph Bast bang on about how reading Ayn Rand converted them to libertarianism. Must be very confusing for Marxist-libertarians.

willard said...

Just as I needed a quote where Rand tells that her philosophy was moralistic. Thanks, J.

J Bowers said...

You're welcome, Willard. Strange person, Ayn Rand. Couldn't seem to make her mind up about anything, even accepting altruistic gestures from her inner circle in the form of sex (admitted on camera by one of her accolytes in Adam Curtis's documentary 'All Watched Over by Machines of Loving Grace').

willard said...

J Bowers,

Your pointer got some ice time at the 400th comment of that thread:

Thanks again,


Anonymous said...

For several years prior to the meltdown my wife and I could NOT figure out how people we knew were affording those vacations, snowmobiles, new cars, boats, etc. We knew they didn't make any more money than we did yet they seemed able to afford all the toys while we plodded along.
Ka-Boom! Along came the implosion and surprise! Those neighbors are now in foreclosure or gone as the banks repo'd their homes as the 2nd/3rd/4th "home equity loans" came due.
Well, today we own our home outright plus another property or two, our payments are easily managed and although we still don't have the toys our neighbors had, my Scottish ancestors are also smiling and nodding their heads and we now know where all the toys came from and their ultimate cost...
Ghillie Brogues