Joe Weisenthal, Executive Editor of Business Insider, pronounced we’re at “Peak Anti-Homeownership” after reading Barry Ritholtz’ Bloomberg View piece on homeownership a few weeks ago.

If financial journalists and housing pundits today truly reflect the US sentiment about housing and homeownership, then we’re clearly manic about our largest asset class.

The conversation by a number of financial journalists and a particular Nobel Prize winning economist has morphed into a homeownership-is-a-false-aspiration pronouncement, almost entirely supported by treating this asset class as a stock. Didn’t we learn the hard way that this was flawed thinking during the prior boom? And unless I’m mistaken, the majority of US homebuyers, aside from investors, used leverage for much of the last 50 years. How about we estimate the ROI on what real people actually do and stop thinking about homeownership as a stock transaction? Good grief.

2012-2013 – Last year’s housing market “recovery” pronouncement was based on nothing fundamental, merely Fed policy of QE and years of pent-up demand released after the “fiscal cliff” came and went without a major catastrophe. Pundits caught up in the price euphoria said the housing market was firing on all cylinders. Yet surging price growth was largely based on sales mix-shifting, less distressed sale buying, tight credit causing, lack of inventory inducing, fear of rate rising, double-digit price growth. Positive housing news was refreshing news to many, but there was nothing fundamental driving the market’s performance to such incredible rates of growth. I couldn’t wrap my arms around 13% price growth with tight credit, stagnant income growth and unacceptably high under-unemployment as economic fundamentals.

2014 – This year’s housing market, which is being compared to the year ago frenzy, is showing weaker results. The housing recovery “stall” is being blamed on the weather, falling affordability and weaker first time buyer activity. This has brought some in the financial media to conclude that homeownership is over rated.

An aside about the weather – a homebuyer last January didn’t say “Gee, since it is 0 degrees outside, let’s cancel our appointment with the real estate agent and delay our home buying plans for 5 years.” Of course not – the harsh weather merely delayed the market for a month or two. However since it hasn’t “sprung back” yet, then clearly there is something else going on besides the weather.

Falling homeownership and anemic household formation is the result of a lackluster economy and a global credit crisis hangover. I can’t make the connection how these weaker metrics have anything to do with a flaw in the homeownership aspiration. Homeownership is falling because it rose to artificial highs (Fannie Mae was shooting for 75% during the housing boom) and is now overcorrecting because credit is unusually tight, the byproduct of a lackluster economy, the legacy of terrible lending decisions and fear over additional forced buybacks of flawed mortgages among other reasons.

I’m quite confident that a significant, sustained economic recovery will go a long way to ease credit conditions and eventually revert homeownership to the mean and we can stop with the “cart before the horse” orientation. While homeownership has never been right for everyone, recent calls that it’s not right for anybody is just as flawed.

Then we’ll pronounce “Peak-Homeownership” in our own manic way.


  1. 10 Thursday AM Reads | The Big Picture May 22, 2014 at 11:38 am

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  3. Talik Sato May 22, 2014 at 12:43 pm

    I was reading through this article admiring how the author could look past what people were saying and see the underlying fundamental facts then there was this reference to Fanny Mae thrown in. This has become something of a peeve for me because I have yet to see a single credible explanation of how it is that a company that was not participating in the subprime market in any way during the bulk of its build up somehow influenced that markets growth. From 2000 until they were allowed to start buying subprime loans by an act of congress in 2005, neither Fanny nor Freddy had any involvement in the subprime market. People sight their desire to increase homeownership as a cause of the crisis and yet never bother to state what it was they actually did in that regard that had any effect. Whenever I see a reference to Fanny and Freddy this way I start to question the intellectual honesty of the person that states it. If we cannot look past this distraction and acknowledge the real culprits (Countrywide, Ameriquest, BofA, JPM Chase, Citigroup, and Goldman to name a few) and the immoral incentives that drove them we will not be able to avoid similar crises in the future. The author cites Barry Ritholtz as an impetus for this article. If he had followed Mr. Ritholtz work he would have known better than prop up such a mendacious meme as this.

    • Jonathan Miller May 23, 2014 at 12:46 pm

      I have no idea what you are talking about…other than getting the “me following Barry” part wrong.

      • Talik Sato May 23, 2014 at 2:10 pm

        “Fannie Mae was shooting for 75% during the housing boom” Is a total non sequitur. From 2000 through 2005 Fanny and Freddy were massively loosing market share. Their assets under management declined about $800B to people refinancing to subprime loans before they managed to get congress to allow them to purchase such loans and stop the bleeding. The meme that Fannie and Freddy pushed the housing boom is complete fiction. Had you done your homework you would know that and you would not have put this statement in your otherwise well developed article.

      • Talik Sato May 23, 2014 at 2:27 pm

        And incidentally I did not state that you followed Barry, I stated that if you followed Mr. Ritholtz you would have known better. He has written extensively on the subject.

        • Jonathan Miller May 23, 2014 at 2:51 pm

          Thanks, I admire your persistence and you are clearly a fan of his. He’s a prolific writer and one of the smartest people I know – plus he’s a good friend of mine. My Fannie and Freddie 75% comment reference doesn’t suggest nor have I ever said or written that they were the cause of the financial crisis. They weren’t. As you know, Barry refers to them as merely “big dumb banks.” I agree.

          Thanks for sharing your thoughts.

  4. Steve Kayner May 22, 2014 at 1:37 pm

    Seems to me the all-cash institutional buying of the last couple of years pushed prices up, and out of the range of many. The market has been highly manipulated over the past 5-6 years. Hard to get a square deal.

  5. Queen’s Talk 2014 - iForeignAffairs June 4, 2014 at 6:49 am

    […] My ministers will continue to promote the Help to Buy and Right to Buy schemes to support home ownership. […]

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