The list of things that New York Times blogger Josh Barro doesn’t understand is already long, but it just got longer.
Add to it homeownership, housing, housing finance, mortgage financing, and how life is lived outside East Coast urban enclaves.
Here’s his premise, where it goes off the rails before it really gets started.
Imagine if we bought food the way we buy housing.
Instead of buying the food you need right now, you would buy a contract giving you rights to a stream of food in perpetuity. Say, a contract entitling you to five pounds of chicken breasts, delivered to you every week, forever. That’s basically what buying a home is: securing the use of a residence, indefinitely.
Buying that stream of future food would be expensive, so you’d get a loan from a bank to cover most of the cost, secured by your interest in those future chicken breasts. And if for some reason you didn’t need your chicken contract anymore (you became a vegetarian or you moved out of the delivery range of your chicken supplier), you could sell the contract at the current market price.
So that’s the starting point of this descent into media mediocrity.
But it gets better.
People might start buying contracts on food they don’t even want to eat in hopes of selling later at a profit.
You mean like commodity investors? That’s a thing already, Josh.
Barro, who believes most people don’t know what’s best for them anyway (and who believes it’s perfectly fine to lie to cheat programs designed to give discounts to new moms and dads) believes the whole of how housing finance and homeownership isn’t in most people’s best interest.
And here’s where it’s really revealing.
That would all be pretty stupid. But it would all seem perfectly normal, as it very closely mirrors the way we approach housing.
Except that it’s not that simple at all. It’s Josh mirroring an angry teenager over the fact that the majority of people aren’t renting, like he does.
“Everyone in the world is doing something I don’t think is wise. What’s wrong with the world?!!”
When your analysis concludes the majority of people in a market are making irrational economic decisions, maybe the problem is your analysis.
(Also, renting is more expensive than buying in the 100 largest U.S. metros, so there's that, too.)
Maybe you’re not taking into account all the personal factors in the economic decisions made by tens of millions?
Strictly as an investment in terms of returns, no, a home isn’t your best investment. You can get a decent return and you build equity in a way you never can with renting, but there are other vehicles with better returns. If anyone in the industry tells you different, they’re wrong.
(Also, while there are some subsidies that the housing marketplace should do without, the desire people have for their own home – not a lease on an apartment – was driving western civilization long before the mortgage interest deduction was dreamed up.)
But that’s not the point. A home is not just a place to park yourself that’s interchangeable with an apartment, and it’s not just an investment vehicle.
Barro graciously allows there may be some intangible benefits to owning a home – you silly people must have some reasons. Barro more graciously offers two examples:
Owning offers people a sense of security, as well as the freedom to customize their residences as they see fit.
That’s all he thought worthy of mentioning. See what's missing? Return isn't the only thing you consider with investments. There's also risk. And the equity built. And the other kind of risk -- the risk curve for renters is far greater than homeowners. Miss a few rent payments and you're on the street. Miss a few mortgage payments, and your mortgage servicer has to contact you to work something out. You can literally go for years still in the home, working on getting your mortgage modified.
Even younger renters understand this. A recent Fannie Mae survey of younger renters and buyers finds that though most younger renters prefer owning, many of them may stay renters longer due to insufficient financial capability and/or preparation. They don't want to be renters. They know it's not as smart a deal.
In fact, 90% of younger renters agree that owning is a much smarter financial decision.
Finally, back to the initial Barro setup about a mortgage for chickens versus a home mortgage.
It just doesn’t work.
You can buy your chickens anywhere, but homeownership is the foundation of a community invested in its own success.
Renters have flowerboxes and ferns. Homeowners plant trees. Renting makes sense in certain markets or under certain circumstances, but homeownership is an investment in more than just future returns. It’s an investment in your own neighborhood and in your own community in a way that renters just can’t.
Dan McLaughlin at The Federalist put it in a way I wish I had:
And the homeowner is free, in ways no renter is. There’s no security deposit, no landlord with an extra key, no rules but the law, and if you own land (as opposed to a condo or attached house), no upstairs or downstairs neighbor to complain about the kids or the dog or your guns or your electric guitar or your pot smoke or your guests or the fireworks you set off in the yard. Technology and law have eaten away at the edges at the ancient doctrines built around the notion that “a man’s home is his castle,” but there remains a deeply embedded belief in American hearts, and seen throughout our legal and political systems, that the privacy of what you do and read and say in your own home is something uniquely your own.
Barro comes across poorly here, more so than usual. He’s yelling at the clouds that the rest of benighted America doesn’t endorse his rootless, urbanite renter lifestyle.
Everyone is wrong except him. It must be nice.