Maybe you house is like your car.
I can recall back in the days when I had a fat lot of money built up in equities due to some very well timed investments in the tech sector of the market. My best picks were Inktomi, and I made a nice pile channeling the mostly sideways nature of my own company's stock which traded in a group with the likes of Oracle and ePiphany. I could depend on several quarters of cycles when the stock would drop with the group until we made our earnings call when it would jump.
I got skeptical of the market for a number of reasons, but I do remember being an outsider as far as black money was concerned. The general consensus was that African American investors kept out of equities and spend disproportionately more on real-estate. There was basically a trust gap.
In light of that, perhaps there is some light at the end of the tunnel of the enormous decline in stocks and bonds over this year. People keep deleveraging, selling out of equities just to keep their losses to a minimum and this, especially from Boomers, will keep market prices low for some time to come. Ordinarily, such money would go to collectables, commodities and real estate, but now it's almost all going into money markets. There's a lot of money now sitting in cash like Mayo saying 'I got nowhere to go', when it would ordinarily go to real estate.
In all this momentary chaos, as people adjust to the reality of recession, several habits are about to change. But part of the looming promises of stimulus might foreclose the possibility of people developing the right habits. I am thinking particularly of the sentiment towards bailing out homeowners whose mortgages are under water.
As I said before, there is no particular political incentive to let banks and mortgage holders work out their own deal. Debt for equity swaps would work out just fine. The bank ends up owning more of the house, the homeowner owes less debt - problem solved. But there is a political incentive for the two jabbering candidates to promise to come to the rescue of the poor homeowner. There are, after all, some 21 million at risk of walking away from their obligations as they realize that a soft housing market means they owe more on their house than it is worth. Absence the debt to equity deal, that's the scope of the problem. It would bring on a second crisis which could be amplified by what most agree is going to be 7.5% unemployment this time next year.
But what if Americans were to treat their house like a place in which to live instead of an investment vehicle? What happens to the American dream then? Nothing. The 'problem' of being underwater on your mortgage is not a problem unless you need to sell your house. It's the same as being underwater on your car payment. Most people accept that their car is worth less than the payments owed, so most people 'drive their cars into the ground'. They accept that they're not going to sell it and suffer the indignities of the car dealership's well understood drive off depreciation. If these people would use that same common sense and live their houses into the ground, then we'd avoid the temptation for Obama and McCain to come up with something clever and expensive.
Maybe your house is not a piggy bank. Maybe it's just a house. Not a tax shelter, just a shelter. Live in it, live with it.