I like Nancy Nall, but the numbers show that almost everything she writes about here is wrong.
People who don’t own houses or apartments get a little impatient with this, and I guess I don’t blame them, but trust me: This crash hurts everyone, owner or not.
The boom is what hurt people. The crash was an inevitable result of a greed-ridden irrational boom that was completely unsustainable.
They were of the generation that saved up for a down payment, shopped carefully, bought and stayed put. No flipping or trading up for them. Three bedrooms, 1.5 baths, bought in 1962 and sold in 1995, paid off and worth seven times what they paid for it.
No way she’s using inflation-adjusted numbers — a very common mistake. Without knowing where the house was located (local housing markets vary a whole hell of a lot), but there has been 500% inflation from 1962 to 1995. Which means that her parents only doubled their money, which was almost certainly wiped out by interest payments on the mortgage (a 30 year mortgage would generally cost 3.2x or so the actual price of the house).
The evidence shows her parents would have, over that time period*, been much better off having put their money into stocks.
For years, for practically ever, real estate was the safest investment you could make.
Real estate is a terrible, terrible investment. Most people lose vast amounts of money on it when you calculate interest and upkeep especially. The only reason people perceive it as a good investment is that it’s like a forced savings plan.
And housing always went up. It didn’t rise at the redonkulous rates of recent years, but a steady 1 to 3 percent was a given.
If you ignore inflation….(you are fucked)
When you have a financial stake in something, you pay more attention to it.
A security deposit and a rental contract is plenty of fucking financial stake for me.
But that’s only part of it. Local governments rely on property-tax revenues to provide services. When property values slide, so do tax receipts.
Property values were ahistorically high, and so were tax revenues. QED.
It is sad that a lot of homeowners who made poor buying decisions got wiped out in the crash. We could (and should) help them. But there is no way I can support the idea that the boom was some kind of net positive. Housing being so expensive locked a lot of people out of the market and made it so that new prospective homebuyers could not afford even a rickety, run-down starter house in many markets. How is that a net positive?
Like most folks, Nancy has little knowledge or understanding of how quickly compound inflation builds up, or understands that the real problem was the boom and its causes, and the crash was only an inevitable side effect of that.
Homeowners like her are just upset. I get that. I would be as well if I’d been dumb enough to buy a house during that time. But fortunately, I was not. I’m pretty damn good at avoiding irrational markets, and I know one when I see it.
*This era was one of the largest bull markets in history.
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