First: I want to be very clear that I have the deepest sympathy for people who were tricked or defrauded into taking on a mortgage they cannot afford, particularly veterans who would have qualified for stable, low-interest Federal loans and were instead funneled into sub-prime and/or adjustable rate mortgages. You were rooked, and I am sorry.
Second: Some people currently affected by the real estate market probably knew they were buying at the top of the market, and carried out their plan, thinking that it still made sense. Now some aspect of their lives have changed, they cannot make their payments, need to sell and cannot. That is a hard situation, and I am sorry.
But if you are basically fine, except for being somewhat underwater on your house: Shut up about it already.
Not just because there are people in much worse situations, although that is a good reason to shut up about it.
No, you should shut up about it because there is NOTHING SPECIAL about your situation. Pretty much everything there is in the whole world loses value as soon as you buy it.
Cars. Food. iPods. Furniture. Clothing. Jewelry with the exception of perhaps a dozen really major pieces, most of which are held by the British royal family or Elizabeth Taylor -- they all lose value as soon as you buy them. Which is to say, having bought a head of lettuce or an iPod Touch, you will not be able to find someone to buy it off of you for anything close to what you paid.
The reason for this is that anything for which there is more supply than demand will experience falling prices.
I know, real estate seemed like a special case, a situation in which demand would outstrip supply forever and ever.
That was wrong. Real estate was not a special case. And hearing people -- smart people, ethical people like Elizabeth Warren -- talk about being underwater on a mortgage as if it were akin to, say, losing your house completely... well, it's infuriating. Let's save our sympathy and our energy for the people who ARE in peril, who WILL lose their houses.
I know it is hard to look at a mortgage and see how many thousands of dollars you owe on a property that is not currently worth that amount. But try not to get too worked up about it.
Think of your home or your condo as a iPhone, which you bought on the first day Apple was selling them. Sure, lots of people paid 10-25% less for the same exact (or even nicer) device, but did they have the use of their iPhone for the last two years? NO! And you did! So you've paid a premium for that convenience -- isn't that one of the foundations of our modern world?
We live in a nation that worships market forces. We seem to think there's no problem in the known world that cannot be fixed by market forces. When GE bumps 200% in 5 years and someone sells his stock to buy a house in Bermuda, we're like: YES! Go market forces!
But these same market forces have dragged down real estate prices, behaving according to the exact same principles of supply and demand that pushed up GE in days of yore. So to stand around now, complaining that It's Not Fair and It's Not Right and I Should Be Able to Adjust My Mortgage Even Though I Can Make My Payments Just Fine?
Or failing that, take that head of lettuce back to Whole Foods and see if they'll give you back half the price because now that it's a couple days old, no one will pay you the $7 it originally cost.
It's like gravity. We love gravity when it pulls the basketball through the hoop on a free throw. We love gravity when it drops the club into the hand of the juggler. And you notice that we don't stand around complaining when gravity makes a basketball player hit the ground like a ton of bricks. We don't stand up and yell "Boo gravity! This is bullshit!"
It's the nature of market forces that some prices will rise, and some prices will fall. To get all worked up about the fact that right now, the market is doing what markets do, is like getting angry at gravity for making your pen fall off your desk.
This concludes this week's Two Minutes of Mean. Please return to your regularly scheduled civility and good manners.