No surprise the real estate industry cheerleader had to jump to the defense of homeownership, though I was not aware that it was a concept that needed to be defended any more than iPod ownership needs to be defended. Vicki Golder's letter to the editor starts out with "Recent attacks on the value of homeownership are knee-jerk reactions to current economic conditions..." and ends with the usual industry plea for government support.
Attack? What attack? An argument that the pendulum has swung too far in one direction? Extolling the virtues of renting? The NAR is clearly on the defensive and trying to talk up the real estate market. They regularly send us propaganda to feed to unsuspecting clients. Just this week I received links to 5 reasons homeownership trumps renting and 10 market facts for uncertain times. Some of these points are absolutely correct:
- Mortgage rates are indeed at historic lows
- Sizable homes in attractive communities are almost always owned, not rented
- Fixed rate mortgages never rise and you eventually pay them off, while your rent will increase over time
But a lot of their arguments are really weak:
- Paying the principal is forced savings. (Like you don't have any self-discipline?)
- Home prices are going up. (I think they have a credibility issue there.)
- A landlord can kick you out at any time. (How big of an issue is that?)
- Home ownership is the path to wealth. (Another credibility issue.)
And they usually ignore the fact that renting trumps buying if you're not going to stay put for at least 5 years, given all the transaction costs.
Let's face it this crap from the NAR is getting old and the public is tired of it. In addition, the taxpayer is tired of pouring money down a black hole and it's only a matter of time before the government decides to kill Fannie Mae and Freddie Mac. Home ownership should never have been subsidized by the government in the first place and the sooner we can stop that misallocation of resources the sooner the housing market will reach its true value. Until then the NAR can try to stand in front of a moving train but sooner or later they are going to get run over.
The funny thing is if Vicki Golder had really wanted to diffuse the Time article she could have just written a one liner. You see, everyone knows that the cover of Time Magazine is a contrary indicator - i.e. when they run a story on the great bull market in stocks it's time to get out of stocks. So it must be a great time to buy a house. In fact, even I'm looking to buy and I have been a long term (the last 10 years) housing bear.