Moving Down

Every home "owner" I know, every one, wants housal unit values to stay put or rise 20% per year. Except me. I'd like them to crash down further, at least another 15-20%.

It would be a good thing for anyone "moving up." Sure, your own house at $250k is now only worth $185k, but the "move up" house you want has dropped from $425k to $345k -- what's not to like about that $15k spread? And think of the next twenty seven years of property taxes, how much less you're gonna pay?

When the couple (Mark & Melanie) across the street moved in in 2004, into an identical house to mine, I was well aware that their property taxes were putting my kids through school. Sure, I pay mine, but mine are over 50% less because I've parked my ass here for the last thirteen years and never moved-up. Every move costs immediate commissions and long term taxes, and over the dozen or so years I've been here I've seen dozens of neighbors come and go, each one losing a little bit more to the tax man.

Mark was schooled as a mechanic but over time developed a bad reaction to motor oil, so much so that he couldn't wrench anymore. He elected to process mortgages in 2001 and by 2004 they moved-up from Valley Hi. Hard to imagine my neighborhood as a move-up but bear with me. They moved-up because Valley Hi turned into liquid shit as almost all the suburban rings around Sacramento are destined to do. You can guess where this is going. He lost his job in early 2006 as the good times were ending and by late 2006 they spent eleven months trying to sell their house to no avail. They moved out of state and still "own" that rental elephant. The same factors that pumped up his income also raised his housal unit price.

Decades of low interest rates, decades of inflated housal unit prices, decades of suburban sprawl where the first hint of your neighborhood going downhill leads you to move to a new neighborhood ad infinitum, and decades of flipping houses for instant profit or moving-up have led to an environment where no one stays put and everyone pays more. We allowed a half million loan originators to rake cash off the top from every transaction, to sell any risk of default off to global investors who all have an implicit government guarantee for that risk (we the taxpayers) through the GSEs.

If we stupidly try to artificially hold housal unit prices up (and we are doing just that) then we should just accept that we're going to continue to get gang raped by investment banks, sales commissions, property taxes and three decades of higher interest payments. Sure, interest rates are artificially low, but please, tell me you'd rather pay 4.5% and fees on a $315k mortgage or 7% and fees on a $155k note.

But holding them up is exactly what we're doing. I will simply sit back and watch the implosion.