Sunday, May 18, 2008
While Robert Shiller is normally dead-on when it comes to most aspects of the nation's housing market mess, he makes one critical error in his Sunday op-ed piece in the New York Times.
Dr. Shiller noted, "No one is likely to starve or sleep on the streets as an immediate result of a foreclosure, and the authorities no longer dump a family’s furniture on the sidewalk when it happens. Nonetheless, there is deep trauma."
As noted in the comments section of the last post where a reader left this link to a CNN video report, that does not appear to be the case in Santa Barbara. Unless, of course, there is a meaningful distinction between "sleeping in your car" and "sleeping on the street".
Poor Barbara lost her job in the mortgage business and then lost her place to live. The 67-year old now sleeps in the back of her car in a "women's only" parking lot set up by the city of Santa Barbara and her kids worry.
While it was not clear whether Barbara or the other ladies were former homeowners, there must be at least a few foreclosure stories further south in Ontario where the homeless numbers are growing.
This LA Times report notes the efforts of the City of Ontario to reduce their "tent city" from over 400 to about 170 by allowing Ontario residents only. Surely, some former subprime borrowers populate these ranks.
Back to Dr. Shiller's NY Times piece:
Homeownership is fundamental part of a sense of belonging to a country. The psychologist William James wrote in 1890 that “a man’s Self is the sum total of all that he CAN call his, not only his body and his psychic powers, but his clothes and his house, his wife and children, his ancestors and friends, his reputation and works, his lands and horses, and yacht and bank account.”It's funny (and now sad) that so many new homeowners in the last few years thought that they somehow "owned" the home they purchased when in reality all they really owned was a debt obligation that many really didn't understand.
Homeownership is thus an extension of self; if one owns a part of a country, one tends to feel at one with that country. Policy makers around the world have long known that, and hence have supported the growth of homeownership.
MAYBE that’s why President Bush’s “Ownership Society” theme had such resonance in his 2004 re-election campaign. People instinctively understand that homeownership conveys good feelings about belonging in our society, and that such feelings matter enormously, not only to our economic success but also to the pleasure we can take in it.
But we are now seeing the president’s Ownership Society plan operate in reverse. Already, the homeownership rate has fallen — from 69.1 percent in the first quarter of 2005 to 67.8 percent in the first quarter of 2008. That’s almost back to the 67.5 percent level where it stood when Mr. Bush took office in 2001. And it is likely to fall further.
The pain of this reverse movement could leave a psychological scar that will be with all of us for the rest of our lives.
This week's cartoon from The Economist: