The last couple of weeks have given me pause. There has been a lot of talk about moral hazards and unintended consequences.
On the two extremes of humanity, the criminals and the saints. The saints and the selfless will help their fellowman without any further incentives. The criminals will take advantage of the weakness of others. The rest of us life in-between. Some may give to charity more than others, some may not return extra change. As the society is set to change once again, the question is whether the government is making a bad situation worse.
Do you feel like a chump because you worked hard, maybe scrimped, so you can afford your mortgage, and then you see the government bailing out your neighbor? Do you feel cheated because you rent. Those that own a home get a mortgage interest deduction and they get a possible increase in value later. The renter gets a receipt. Should you pay because your neighbor bought too much house? Does not keeping the price of housing artificially high make it more difficult for the renter and the poor to own their own house? Should we help them because the made a bad investment, that their house is worth less than what they paid. Do not most cars lose value the minute you drive it out of the dealership? Why shouldn't a house's value gradually decrease over time, like most everything else?
Does bailing out your neighbors mistakes make it more likely that these mistakes will be repeated by others?
Monday, February 23, 2009
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4 comments:
"The renter gets a receipt."
The renter also gets to call the landlord everytime there is a problem and NOT be out any money for repairs. The renter can also move WITHOUT worrying about IF they can sell their home.
"Should we help them because the made a bad investment," Well the Republicans sure bailed out Wall street and the banks who made BAD INVESTMENTS.
"Why shouldn't a house's value gradually decrease over time, like most everything else?" Because a house is an investment. Would you knowingly invest in anything that was going to lose value?
There are many pros and cons of renting, such as renewing a lease for a year and then having to move. Thus paying rent for something you do not use. But renter does not have an investment. There are pro and cons of owning a house, but it should not be considered primarily as an investment. It is not very liquid.
More Democrats bailed out Wall Street than Republicans, though Bush was in charge. The bailout would appear to be a bust, but who really knows.
"Because a house is an investment. Would you knowingly invest in anything that was going to lose value?" The same reason one would rent - as a residence. Like a car, you use a residence. Some cars go up in value, most do not. There is no reason why a house should go up in value just because houses in general have gone up in value. For most people it is dangerous to use housing for "investment".
"There is no reason why a house should go up in value just because houses in general have gone up in value."
Your arguement makes absolutely no sense let alone "common sense".
Let me try to make this clearer. A single house may go down in value because of disrepair, decline of neighborhood safety, decline of schools, decline in living environment, higher taxes, higher insurance, higher upkeep costs. Supply and demand, if an area that was previous limited in housing is now surrounded by affordable housing, then you would suspect the price to go down. If you live have a house with long stairs, maybe at one time a fashion statement, if may become a detriment in an increasing elderly population (who don't want to go up long stairs).
The general assumption is that their is a limited amount of land, so it should be more valuable in the future. But tastes change. Sometimes the city is more desirable than the suburbs, other times it is the opposite.
Housing went up recently, like oil, stocks (dot com) because money chases bubbles, artificially inflating values for a short term.
In the end, there is no reason why anything should be more valuable in the future than another.
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