Comments on: Waking Up to The American Dream http://pluranomics.com/waking-up-to-the-american-dream/ Doug Wolkon's ideas for succeeding through economic diversity Fri, 12 Mar 2010 03:46:59 +0000 http://wordpress.org/?v=abc By: Sandor http://pluranomics.com/waking-up-to-the-american-dream/#comment-32 Sandor Tue, 04 Nov 2008 17:08:24 +0000 http://pluranomics.com/?p=136#comment-32 The argument for renting versus buying has been going on in the hallways of affordable housing programs and within organizations like HUD for the last 30 years. What I think is important to note is the differences in more evolved or mature housing markets in comparison the US. Europe has approximately 90% home ownership, but looking at the amount of time that it has taken to accomplish that versus the recent history of the US is the relevant point. In the US we are currently at approximately 65% home ownership, so the real question is "What is the correct % of home ownership we as a country should be shooting for, and by when" When you take the time to look at what the greatest generator of wealth has been for the American family, over multiple generations it is the ability to own a home. It is also one of the greatest feelings of pride, sense of place, upward economic mobility, and socio-economic foundations. When you put someone in a home and teach them how to stay in that home you can pry them out. I certainly know that even if short term it was the better decision economically to rent I would always aspire to own a home. Presuming you can afford it, there is no real debate against the concept of home ownership for all of the pluses that it brings. The problems that we are experiencing with the current slew of foreclosures are caused by two main failures of the system. The first failure is business models of lenders that focused on originations and then using the CMBS market as a disposition method. This encouraged lenders to put people in a house that did not know how to "stay in the house" because they lacked the necessary financial discipline or education to handle their credit based on their ability to service their debts. Our credit system is designed to take advantage of people in this way and even educated business owning "responsible people" have fallen prey to the seduction of money. On a more philosophical level that is more of a human condition that opens up a much larger conversation. As Jack Kemp, Moon Landrieu, Henry Cisneros, and Alphonso Jackson (all fmr secretary of the united states department of housing and urban development) all agree, putting people in houses is not and never will be the problem, teaching them how to stay in houses is where we fall woefully short. The second failure is related to human ability to choose self preservation over excessive greed. Alan Greenspan believed that the value of self preservation would override the opportunity for a company to make short term gains. It certainly makes sense, if you know that making a business transaction with drug dealers might cost you your life but you will make a huge sum of money then most people would opt to not participate in this type of self destructive activity. Unfortunately what we and Mr. Greenspan have learned is that once again there is a place for government and regulation because excessive greed seems to always win. When the underpinning of the CMBS market is tainted by “Liar Loans” “Stated Income- Zero Doc” loans, you can only create an environment of opportunistic undisciplined business practices and unfortunately, as always, it starts at the top. Please don’t misunderstand, I believe greed is not bad, it is a motivator, a driver, and is essential to a functional economic meritocracy. The history is now clear we had an interwoven web of liabilities that were misrepresented and underreported underpinning a 100 trillion dollar derivative market. In conclusion, I firmly believe in homeownership and that it is fundamentally an important piece to our socio-economic growth and the arguments are clear in that regard. I also believe that homeownership is not for everyone and we must get back to fundamentals. Unfortunately from a free market perspective this is going to come with new costly regulation and oversight and I wish I could make an argument against it, but history proves that I can’t. The argument for renting versus buying has been going on in the hallways of affordable housing programs and within organizations like HUD for the last 30 years. What I think is important to note is the differences in more evolved or mature housing markets in comparison the US. Europe has approximately 90% home ownership, but looking at the amount of time that it has taken to accomplish that versus the recent history of the US is the relevant point. In the US we are currently at approximately 65% home ownership, so the real question is “What is the correct % of home ownership we as a country should be shooting for, and by when” When you take the time to look at what the greatest generator of wealth has been for the American family, over multiple generations it is the ability to own a home. It is also one of the greatest feelings of pride, sense of place, upward economic mobility, and socio-economic foundations. When you put someone in a home and teach them how to stay in that home you can pry them out. I certainly know that even if short term it was the better decision economically to rent I would always aspire to own a home. Presuming you can afford it, there is no real debate against the concept of home ownership for all of the pluses that it brings.
The problems that we are experiencing with the current slew of foreclosures are caused by two main failures of the system. The first failure is business models of lenders that focused on originations and then using the CMBS market as a disposition method. This encouraged lenders to put people in a house that did not know how to “stay in the house” because they lacked the necessary financial discipline or education to handle their credit based on their ability to service their debts. Our credit system is designed to take advantage of people in this way and even educated business owning “responsible people” have fallen prey to the seduction of money. On a more philosophical level that is more of a human condition that opens up a much larger conversation. As Jack Kemp, Moon Landrieu, Henry Cisneros, and Alphonso Jackson (all fmr secretary of the united states department of housing and urban development) all agree, putting people in houses is not and never will be the problem, teaching them how to stay in houses is where we fall woefully short.
The second failure is related to human ability to choose self preservation over excessive greed. Alan Greenspan believed that the value of self preservation would override the opportunity for a company to make short term gains. It certainly makes sense, if you know that making a business transaction with drug dealers might cost you your life but you will make a huge sum of money then most people would opt to not participate in this type of self destructive activity. Unfortunately what we and Mr. Greenspan have learned is that once again there is a place for government and regulation because excessive greed seems to always win. When the underpinning of the CMBS market is tainted by “Liar Loans” “Stated Income- Zero Doc” loans, you can only create an environment of opportunistic undisciplined business practices and unfortunately, as always, it starts at the top. Please don’t misunderstand, I believe greed is not bad, it is a motivator, a driver, and is essential to a functional economic meritocracy. The history is now clear we had an interwoven web of liabilities that were misrepresented and underreported underpinning a 100 trillion dollar derivative market.
In conclusion, I firmly believe in homeownership and that it is fundamentally an important piece to our socio-economic growth and the arguments are clear in that regard. I also believe that homeownership is not for everyone and we must get back to fundamentals. Unfortunately from a free market perspective this is going to come with new costly regulation and oversight and I wish I could make an argument against it, but history proves that I can’t.

]]> By: Aaron http://pluranomics.com/waking-up-to-the-american-dream/#comment-26 Aaron Thu, 30 Oct 2008 10:00:17 +0000 http://pluranomics.com/?p=136#comment-26 Excellent article and awesome points, especially about renting vs. buying. We are currently renting and do not have plans to buy unless we can <i>actually afford</i> to do so (i.e. not doing what everyone else did in recent history). The American Dream has moved from the intangible to the tangible, and I think this was inevitable. As Americans, we like to see things with our own two eyes and hold things with our own two hands. We also like to impress others and will do anything to get the approval of strangers and family. The Dream is alive and well, but as you said, it just may take some time to get back to sleep after this nightmare. Again, excellent read! Excellent article and awesome points, especially about renting vs. buying. We are currently renting and do not have plans to buy unless we can actually afford to do so (i.e. not doing what everyone else did in recent history).

The American Dream has moved from the intangible to the tangible, and I think this was inevitable. As Americans, we like to see things with our own two eyes and hold things with our own two hands. We also like to impress others and will do anything to get the approval of strangers and family. The Dream is alive and well, but as you said, it just may take some time to get back to sleep after this nightmare.

Again, excellent read!

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