I wonder how that graph would look if they normalized to actual ownership. That is, home equity. I'm sure that huge spike in the 2000s would look just a bit different. It's really disingenuous to call something "ownership" when the bank owns 105% of the property.
I don't think that's fair. It's not like airlines buy planes with cash. Retailers don't pay net zero. Regardless of whether you hold the title, the lien holder has much less legal right than you do. The lien holder is not making equity (which is a point of this article). The lien holder gets no mortgage interest deduction (which is the principal point of this article). Nonetheless, the data you're looking for can be gleaned with the search term "mortgage equity withdrawal over time."
Certainly not fair, because of the legal rights you cite. But it's another data point that needs to be considered when evaluating the good and bad of homeownership. Like all investments, there's a level of risk with buying a home that is often underweighted, because of all the good that it comes with. Home equity is actually rising in America, but unfortunately I think that isn't reflected too much in down market housing--the rich are still getting richer for the time being.
The radical part of me thinks that home equity loans should maybe not be illegal, but should be so strict in their distribution that you would need a really damn good reason for taking one (redoing the kitchen because it "adds value" not being one of those reasons).
- But it's another data point that needs to be considered when evaluating the good and bad of homeownership.
I understand the problem you're trying to solve, but the way you're trying to solve it is wrong-headed. In finance, we call it "leverage" and it isn't a bad thing - it demonstrates how much of your stake is on the line vs. how much is other people's risk. We talk of "highly leveraged businesses" but home owners are debtors, despite the fact that their transactions are much more secure and much better backed.
- AT: Sure. A number of groups, President Bush included, have advocated increasing homeownership. That's a great goal, to be sure, and these groups have good intentions. The problem is that they usually advocate waiving downpayments, or subsidizing downpayments for people who can't afford to put up the money up front. Unfortunately, a family that doesn't the financial resources to put together a downpayment on their own, is 15-20 times more likely to lose the home on foreclosure. Let's face it, if you haven't been able to save up some money for a downpayment, it's a sign that your income is too erratic or your expenses are already too high, and you can't afford that house right now.
The second problem is that mortgage companies will charge these low-income homeowners a much higher rate, because they view them as a higher risk -- the banks know full well they're 20 times more likely to get foreclosed on. So they're paying more for the same product.
The basic issue is that housing is not affordable, people are barely making ends meet, and for the past 80 years our government has based advancement on property ownership. The hardest thing is to bring property values in line with wages. The easiest thing is to waive equity requirements. So we do the easiest thing.
- The radical part of me thinks that home equity loans should maybe not be illegal, but should be so strict in their distribution that you would need a really damn good reason for taking one (redoing the kitchen because it "adds value" not being one of those reasons).
The sane part of you recognizes that this problem could be simply solved by limiting predatory lending practices.
We got a flyer in the mail the other day. It offered a $100k line of credit on our house, no questions asked, pre-approved. This differed radically from the line of credit we actually applied for from our credit union, who were willing to extend us a HELOC only on the equity we actually had in the house, and only for two years, and only at 7%. The bank-by-mail didn't disclose interest or anything else, of course, and had done no due diligence. The credit union required us to pay to have an approved assessor come out.
The truly appalling thing is that the bank-by-mail offer wasn't even to us. It wasn't even to our last tenant. It was to a guy who lived here in 2011 and moved out in 2012.
I'm both a believer that leverage can be used for good and that consumers should be able to take on risk without government interference. That said, most consumers aren't savvy enough to understand their own risk structure (e.g. "Do I need that operation the doctor recommended?"). So it's left up to experts to inform consumers of risk beyond the consumers' expertise. That's a major conflict of interest, especially in the commission-based finance system. I suppose the real question isn't whether or not HELs should exist, but rather how liable should banks be when mortgagees go belly up en masse? Miami is trying to convince the courts the answer to that question should be "a lot". Their standing in a suit against big backs was recently affirmed by a federal court, so now we'll see what happens. Very much anticipating the results, even though it will be years.
Kind of amazing how it all comes back to predatory lending, which all comes back to Glass-Steagall, which all comes back to Marquette, which all goes back to usury laws.
It's fuckin' tragic. Ban the Jews from owning property or farming and act surprised when they turn into moneylenders. Forbid them from discourse on default and condemn them when they charge high interest rates. Do the same thing as a gentile?
JP Morgan is a captain of industry and Meyer Rotschild is a zionist lizard person.
I'm not super sure I feel a lot differently about today's tech CEO than I do about the robber barons. If course we think we live in a more morally enlightened time, but wtf has Zuckerberg ever done besides make it so you're inundated with ads like all the time instead of just most of the time?
Amusingly enough, they're both working with Orbital ATK.
- If the NGL can overcome these challenges, it will still be an unorthodox design. No other launch vehicle has ever used two solid stages topped with a liquid hydrogen/liquid oxygen upper stage. But, for Orbital ATK, this design makes sense as it draws on their decades of experience and utilizes facilities they already have. This unique architecture could actually be seen as an advantage by the US military, whose doctrine of “assured access to space” depends on having several independent means of launching satellites into space. SpaceX will use only SpaceX hardware on their Falcon rockets. ULA, as a traditional contractor, will integrate Blue Origin’s rocket engines on their new Vulcan rocket. If Orbital ATK uses their own solid-propellant motors and an RL10-powered upper stage, that would be a technologically independent means of launching national security payloads. While the NGL is unorthodox, its unconventional nature may actually prove to be its greatest asset.
Their current principal launch vehicle, the Minotaur, is the WMD formerly known as the MX Missile.
400 missiles, 90 billion dollars. that's about 2500 Falcon 9 launches.
This was fascinating. I couldn't stop reading.
I've heard in a few economic circles about the scope of largesse that is the MID. But Jesus. $71 billion a year. And pretty much mostly for rich people.
- In providing millions of middle-class families stealth benefits, the American government rendered itself invisible to those families, who soon came to see their success as wholly self-made. We forgot because we were not meant to remember.
It makes my head spin to think of how secure I am because I was approved for a homesteader's credit that put me into a home with an affordable mortgage. I hope that not only do I pay all of it back in taxes, but that we look into this:
- President Barack Obama’s 2017 budget proposal estimated that it would take $1 billion a year over the next 10 years to eliminate family homelessness in America — not decrease it or slice it in half, but end it. That’s less than 1 percent of what we currently spend on homeowner subsidies. And yet a bill designed to provide every child in America with a home was pronounced dead on arrival in Congress. Up to this point, bills proposing modest reforms to the mortgage-interest deduction have met the same fate.
What low hanging fruit. Instead we're gutting $800 billion from Medicaid to pay for a tax cut for rich people.
Desmond's Evicted has been recommended to me a few times. This was a great introduction.
Shit. Now I'll have to read it.
My first introduction to the radical imbalance imparted on the American landscape by real estate came from Elizabeth Warren's first book. Among other things, she points out how the system of paying for schools through property taxes basically silos poor people in perpetual poverty while overvaluing houses for everyone else - she goes as far as arguing that single-earner households no longer exist because we've grown accustomed over three generations to having both parents work in order to stretch in order to get to the neighborhood that has the school. She profiles a neighborhood where the rumor of a new charter school going in a "bad" neighborhood (in Delaware? I think?) drove up property values by like 100% in 18 months.
I've voted for those Seattle levees mentioned in the article. I vote for mass transit. And I had to leave NextDoor because it was all about people bitching about how expensive their car tabs were now "and they never ride the bus or anything!" No shit. 'cuz you don't have to. It's funny how many people I know in LA that aren't even aware that LA has rail.
Of course you're unaware. You're white.
Don't feel guilty that you've got a house now. Just don't feel entitled.
I've completely given up trying to have conversations with (white) people out here who refuse to understand that their car tabs are subsidizing transit for people who can't afford a new Subaru, new Mercedes, or, you know, reliable private transit in general.
- I've heard in a few economic circles about the scope of largesse that is the MID. But Jesus. $71 billion a year. And pretty much mostly for rich people.
I'm not sure I agree it's "for" rich people, even if only well-off people can claim it . It's for banks, really. The benefit isn't really so much to the people claiming the credit, but to the banks who are charging the interest. That is because we calculate tax savings into any reasonable calculation about how much house we're willing to pay for. If you know you're going to "save", say, $4,000 per year on your taxes, then you might also think that's $250 more per month to put toward that mortgage (which is all interest in the beginning). That $4,000 is money that the government is taking from everyone and giving to mortgage bankers. I hate the MID. It's a scam (and I say this as someone who qualifies for it). I would love to see it destroyed. A mortgage is a product, and I should no more get a deduction for buying a house than for a car, a computer, or a lap dance.
You're right. I hadn't considered that it's such a boon to lenders. Tax (or deduction) incidence is an interesting rabbit hole. It almost makes tax law really interesting.
There's a thought piece that I come back to often. It's an episode on Planet Money called The No-Brainer Economic Platform. In it, six economists that span the political spectrum present six policy changes they'd make to the economy. Importantly, it's six policy ideas they all agree on. And first on that list? The MID. But the other ideas are great, too.
It's revealing that all of them are political non-starters.
You're missing the fundamental problem: no one can afford their houses. And they all know it.
Not only that, but the MID is really only useful to those who can afford their houses otherwise. Did you itemize? Did I? Do you know anyone who did? For everyone who is actually strapped by paying for their house, the MID is a fantasy. For everyone who is reallocating this that or the other in order to sustain their lifestyle, the MID is a factor.
Pairs well with Ta-Nehisi Coates on racist housing inequality in The Case for Reparations