Comment by JumpCrisscross
6 days ago
> If you buy a house for $400k, and suddenly it is worth $300k, you don't need to be "bailed out" for your purchase decision...we shouldn't be bailing out speeculators
When the speculators vote, yes, you need to bail out the speculators.
> It's called buyer's remorse
It's called building consensus. At the end of the day, if it costs making homeowners whole to gain their buy in to solve the housing crisis, that's money well spent.
I'm not saying what I'm proposing is fair or even palatable. But it's functional. If solving the housing crisis is more important than aesthetics, it's a good move.
I agree there are political considerations, but we are talking about a scenario where the only damage done is that the buyer must continue to live in the home they purchased at the price they purchased it for, and where the recipient of government benefits is a household capable of purchasing a house, presumably at the height of the market. Is a tax dollar better spent placating grumpy homeowners who already have a place to live they can afford, or by more directly building more housing and infrastructure?
> we are talking about a scenario where the only damage done is that the buyer must continue to live in the home they purchased at the price they purchased it for
In non-recourse states, you'd expect to see defaults as people leave the keys in the mail to reduce their housing costs by moving next door at the reduced price or rent. More broadly, people don't like seeing their wealth go down.
> Is a tax dollar better spent placating grumpy homeowners
If it gets you the reform, yes. The point is you don't get housing reform with grumpy homeowners barring a massive shift in voting patterns.
Also, let's keep scope in mind. You only need to bail anyout out if you reduce home prices. If you hold them constant in nominal terms, that shouldn't generate pushback. (If you hold them constant in real terms, people can continue feeling wealthier.)
> In non-recourse states, you'd expect to see defaults as people leave the keys in the mail to reduce their housing costs by moving next door at the reduced price or rent. More broadly, people don't like seeing their wealth go down.
At the trade-off of never being able to get a mortgage again, unless that's the bailout these homeowners get. Almost everyone will either sit tight or rent/sell at a loss. That being said, you will lose out on the public and private support of everyone who bought a house since roughly 2020. It doesn't matter if you've got a 3% rate if you're not getting your down payment out of the house.
The plan that makes the most sense to me is to keep housing prices constant/barely increasing while letting 3% inflation and gradual lowering of interest rates do its thing. Eventually the houses won't seem that expensive and those who locked in at high rates and high prices have an offramp through refinancing.
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> If it gets you the reform, yes. The point is you don't get housing reform with grumpy homeowners barring a massive shift in voting patterns.
I think this is a really good insight. The reason for long-lived NIMBY policies is because NIMBYs[0] vote and lobby more than everyone else does. I have, do, and will continue to vote for pro-housing policies, but there are a lot of people -- probably still in the majority -- who will not vote for anything or anyone that will reduce the value of their homes.
What matters is outcomes. If paying off the NIMBYs gets you a good future housing policy, then we should do it.
[0] I know "NIMBY" is generally a pejorative, and I agree with that for the most part, but I will admit that many NIMBYs are operating and voting quite logically, for their own interest, even if it hurts others, and hurts society collectively.
Catering to grumpy home owners somehow didn't produce a reform either.
It’s a valid point of view. That said, for most homeowners it is as simple as: My house is multiples More expensive than my next expensive asset. Loosing all the equity in my home will affect my lifestyle and financial future negatively, a lot. I will therefore continue to vote against whatever brings home values down.
There really isn’t an easy and elegant way out where you neither pay off the haves nor pitch the have nots majority against the haves.
> nor pitch the have nots majority against the haves
There are almost twice as many owner-occupied homes ("haves") as not ("have nots").
https://fred.stlouisfed.org/series/RHORUSQ156N
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The scenario to address is people who are forced to move (via e.g. layoffs, company relocations, industry collapse, etc) who are also suddenly saddled with a mortgage far higher than they can realistically payback while still moving on to whatever opportunity necessitated the move in the first place.
The first order consequence of treating housing as an investment vehicle is high prices, sure, but the second order consequence is that you dramatically increase the stakes when individual people buy any house whatsoever.
I would much rather give checks to every homeowner whose home value falls than to force even a single laid-off autoworker or whatever into bankruptcy (good luck buying a home after that) if they elect to move somewhere else for a new job and can't sell their house for enough to pay off their mortgage. If the consequence of a government policy to build more housing is that more people become homeless, then its failing.