In the midst of a tough fight for the GOP nomination, former Massachusetts governor Mitt Romney recently decided to tear down and replace his 3,009-square-foot beachside home in La Jolla, Calif., with an 11,062-square-foot property.
It might be less of an attempt to tell the American people “I’m one of you” and more to let them know “I might hire you to paint my garage.” This led Vanity Fair to run a list of things that would fit inside Romney’s new house, including “the Diane Von Furstenburg flagship store in New York’s meatpacking district” or “the world’s largest whale.”
But Romney’s chances of success in the GOP race are not likely to be affected by this. After all, we already knew he was wealthy, and even lower-class Americans are aspirational in their attitudes toward the rich. As Democrat Joan Williams pointed out recently at The Commonwealth Club, attacks on the rich have limited value and much built-in danger for the Democrats because most Americans respect the wealthy, assume they earned it through hard work, and want to be like them. And if most Americans don’t have a house the size of the one Romney’s going to demolish, they do have a house. Around two-thirds of the population owns rather than rents a home. It might actually be underwater instead of next to the water, but they do have a home that is their own, and that makes them at least a bit similar to rich politicians like Romney or Al Gore.
The bigger headwind Romney faces is the one we’re all facing: a stubbornly slow and fragile recovery from a financial panic. At the heart of that stubborn fragility is our housing market, which has been boosted for decades by a bipartisan commitment to moving as many people as possible into home ownership. Sensible lending and regulation kept that national aspiration strong for many years, but when both of those virtues went out the window, we ended up with a severe recession and an estimated loss of $6 trillion in value that Americans had stored in their homes and borrowed against for a spending spree that powered the economy.
But even though the capital or savings or government incentives might no longer be there, the desire to buy a home remains central to the American character. The nation’s largest cheerleader for homeownership is the National Association of Realtors (NAR). (Full disclosure: I used to be an editor at an NAR affiliate.) The “2010 NAR Profile of Home Buyers and Sellers” includes the surprising bit of information that “first-time buyers most often cite the desire to own a home as the primary reason for their recent home purchase,” according to the organization’s press announcement.
One assumes they also cited the desire to own a car as the primary reason for their car purchase. But what NAR is trying to say, of course, is that Americans are infatuated with being homeowners and always have been. I certainly share that infatuation, so I don’t want to minimize it. However, through bank recapitalization, the federal bailout of Fannie Mae and Freddie Mac, the increased taxes or decreased government services as a result of cratering real estate tax receipts, or the increased difficulty in borrowing money, we are all paying for an infatuation that probably got out of hand. We’ll be paying for many years, in fact, and some of those people who’ve lost their shirts on their mortgages and either walked away from them or declared bankruptcy will possibly never again have a chance to own a home.
The country will recover, just not quickly. Barbara Desoer, the president of Bank of America Home Loans, recently told The Commonwealth Club that “we have weathered and we have overcome cycles like this before.” But it’s going to take “several more years to clear the excess of supply that exists,” she added, “and that view is very highly dependent on the healing of the economy and most important on the creation of jobs.” She expects no real increase in housing prices nationally until the end of 2012; and even that’s only after an expected decline of another 3 percent to the end of this year, all on top of the 33 percent decline we’ve experienced nationally in this crash.
The areas with the most underwater mortgages are those areas that also had the largest appreciation in prices during the bubble. Those areas are likely to take the longest to recover. (San Francisco, Desoer says, is ahead of the game, experiencing some price increases already.)
It will, therefore, take years before the housing market comes roaring back. The question then will be: Do we want it roaring back or just humming along nicely? After all, will we have learned from our infatuation that turned into a fatal attraction, or will we just think bad things won’t happen to us the next time?
John Zipperer is a San Francisco-based writer and editor. E-mail: firstname.lastname@example.org