Thursday, July 24, 2008

Housing Part 1

In his Two Treatises of Government John Locke wrote .” The great and chief end of men uniting into the preservation of property “. Conservatives tend to regard this as Cosmic verity, but en realité , the desire is neither a static or a national a phenomenon . Reference to the credit crunch fall like unbidden rain but lets remind ourselves that this supposedly impenetrable shift of gaseous markets, actually revolves around the eminently comprehensible desire to own property.

All over the English speaking world ownership is now the rule . Before the 30s no more than 2/5 of Americans were owner occupiers. Today that is 68%. In Britain the proportion rose from under a third in 1953 to a peak of 75% in 1981. 70% currently own their abode ,and this decline set against the increased desire for that heavenly state, is what has provoked serial hand wringing form the great and good , especially on behalf of first time buyers . I `ll return to that, briefly pausing now , to note that the various ideas Gordo has had for sticking our taxes into bricks and mortar demonstrate the innate timing we recall from the Brown Gold sell off debacle.

Back in the US the word is sub prime. Sub Prime is a market for loan sharking directed through a web of euphemism at vulnerable blacks who aspire to Cosby show lifestyles and have no way of judging the risk . Sub prime means ‘poor’ ,which in its chief target zones , Detroit and the like , means African American which means black.
Typically it was on a fixed to floating basis with a two year ‘teaser’ shifting to the full rate . Fixed rates rising by a quarter, from 5.34 to 6.66 % for a 30 year loan was enough to detach the sky hooks upon which the whole US edifice hung. We are recapping I know , the really deadly end of all this were the so called NINJA loans which you get with no income no job and no assets . The security is the value of the property which depends on the buoyancy of the market which ...well we know the rest. Given that the FSA carried out a survey here which found that one person in five had no idea what an either an inflation or interest rate meant and one in ten did not understand a percentage at all ,we can hardly blame the poor sap 'emptors 'who did not sufficiently 'caveat.'

The vision of a life incomplete without ownership, is in sense ,behind all our problems at the moment. As we know this earthquake created a Tsunami which is currently spending its destructive force on our own housing market amongst other things and the headlines make grim reading “ House prices may not recover for a generation “, “ House prices drop 30% “... and so on( This is a bad thing remember ). Set against this is the keen desire of the government to carpet the Southern Green belt with new homes and thereby if there is to be any point to it at all , reduce the cost of housing . Not only that but shared equity, Council loans, key worker grants and all manner of ad hoc “initiatives “, are designed make everyone’s negative equity worse and thereby create more homeless people. Or something ...

We can immediately see can ‘we’ cannot solve the property slump and the housing crisis at the same time, and the pretence that we want to is a transparent appeal to the general amnesia . I may be unique but it fascinates me that we all blithely skip along adopting nonsensical attitudes alternately . To cure this odd addiction I am going to have look at some aspects of UK housing in the hope that I will get a grip on it myself . If anyone else is interested you welcome to come along .Meanwhile I smoke an evening fag outside my modest semi and participate in the game as blindly as everyone else . Mine mine mine ....well half of it , if I can stay employed .


Philipa said...

I owe around 20% of my property value as it stands and I'm stuck here. If I rented I could have moved ages ago and been much MUCH happier. It's not just rent it's repairs too. I should have rented and invested money elsewhere. I don't know why the dream to buy when the state gets your house in the end anyway if it's worth anything.

Newmania said...

I was lucky this time but come to think of it only made back what we had spent in improvements and maintenance

Blue Eyes said...

The real reason for me is that hopefully by the time I stop earning I will own my home outright meaning that the pension does not have to pay for rent/mortgage. That is the economic bit. The "social" bit is the certainty that you will be able (all other things being equal) to control how long you stay in your home rather than being kicked out on the whim of the distant landlord.

Mr N you quote that stat about inflation and interest rates, but my highly intelligent professional flatmate doesn't understand these things either and seems to have no desire to find out. He says things like "I don't know how you afford to buy a place when even a small places costs five times your income". He earns considerably more than me but pays me rent!

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