There has been a lot talk that the housing market has found it’s bottom and maybe even had some growth in 2012. Which raises a big question with myself, do we want a housing market recovery? Full disclosure I bought a house for $126,000 with the $8,000 government credit. I now owe roughly $117,000 on the house after 3 years of ownership (I also massively rehabbed the house).

I think the answer is no. Before you light up a brown bag of your dog’s waste on my front porch, let me make my case.

We’ve been trained to think that housing is the way to personal wealth, and it has been a fairly effective way of growing personal wealth for many families. This did not come without a corresponding downside, the effective cost of housing has increased.

Imagine a world where the cost of living in a home was half, but there was no expected growth or fluctuations. That $150,000 housing gamble now becomes a $75,000 “fixed asset.” Knowing full well this is not the world we live in, I dream of a world of stability when it comes to fixed expenses (houses, energy, etc.). Also, people who don’t see a home in the current world as a gamble, are kidding themselves. Now I understand it’s likely we will return to business as usual (3-5% yearly growth) in the near future, but housing has ultimately become a way for our country to leverage itself. We create artificial value in our homes, even when our wages are stagnant. Now a days we win by leveraging ourselves and seeing unsustainable growth. By being the guy who bought 10 years ago and has a smaller payment because of doing so. Of course this also promotes the mentality of “you don’t want to miss the boat.” You have to buy your house today to benefit from it years from now.

I’m the first person to understand how important the housing market is to a healthy US economy, but I believe one universal truth.

Truth: “The more available finance for something, the higher the effective price.”

Maybe it’s time we throttle back the housing market, require 20% down as a minimum and stop hoping for a large portion of our GDP to be housing based. I understand this will take the edge off our growth as a country, but I have to believe that long-term it would play out much better for average working class family. With having lower, more fixed housing prices, we can avoid the next bubble and the next collapse. We can have more money in our pockets today and not in 15-30 years from now.

But hey, let’s be honest for a minute. We are far too deep in this housing mess to ever have real reform without a massive depression. Despite my personal feelings it’s most likely back to business as usual. Massive leverage, massive gambling, and bubbles.  (Chart Below credit to

One final comment: “You shouldn’t view your home as an investment” is a luxury statement. The only way you can say this statement is that you can easily absorb a 100% loss on your home or your credit score (defaulting) and it not effect your life. People should absolutely view their home as an investment. Doing anything to the contrary can potentially ruin your finances.

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Filed under: InvestingOwning a HomeReal Estate

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