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<h1>Unstable Stock Market Is a Warning: Treat Your House Like a Home</h1>
<p>Remember last week when the stock market dropped more than 10 percent over a matter of days and suddenly everyone was looking for signs that the bubble had popped?</p>&#13;
<p>After the breaking of the domestic abuse scandal in the White House, the release of President Trump&rsquo;s draconian budget proposal, the latest school massacre and, in a rare bit of good news, the public display of international cooperation that is the Olympic Games, it&rsquo;s easy to forget that we all had a panic attack over the market just 12 days ago.</p>&#13;
<p>It&rsquo;s also true that the major stock indexes have largely recovered from that drop, and are significantly higher than they were a year ago.</p>&#13;
<p>So, false alarm?</p>&#13;
<p>Not exactly. If you&rsquo;re inclined to fret about bubbles, consider instead the housing market.</p>&#13;
<p>Most of us invest in stocks only indirectly, through our retirement accounts. We&rsquo;ve come to expect uncertainty and instability in the stock market. We&rsquo;ve witnessed the ups and downs, even if we don&rsquo;t invest. But housing is where many of us invest right where we live.</p>&#13;
<p>And that&rsquo;s the problem.</p>&#13;
<p>Houses are where most Americans keep their accumulated wealth&mdash;<a href="https://www.urban.org/research/publication/how-much-house-do-americans-really-own-measuring-americas-accessible-housing-wealth-geography-and-age" target="_self" title="" rel="noopener noreferrer">about $7 trillion nationwide</a>, according to the Urban Institute. Yet, the housing market is showing behavior more akin to the stock market.</p>&#13;
<p>Houses evoke nostalgia for us as Americans: stately homes on Main Street, U.S.A., populated by longtime residents who join bowling leagues and the Rotary Club. And there&rsquo;s an element of truth to that picture, in that the rise of the 30-year mortgage in post-Depression America created a sense of security in lending: So long as you made your monthly payment, your home was yours, and there was an expectation that eventually you&rsquo;d pay it off and own the house outright before you retired.</p>&#13;
<p></p>&#13;
<p>A lot has changed. We&rsquo;ve become a highly mobile society that facilitates and even encourages us to move to a new city for school, work, marriage, or retirement. The ease with which we can get mortgages compared to other countries&mdash;<a href="https://daily.jstor.org/how-real-estate-became-a-global-commodity/">facilitated by standardization and monetization of mortgages by Fannie Mae and Freddie Mac</a>, among other factors&mdash;has contributed to that mobility. Not only is it feasible to pick up and move across the country, homeowners have reasonable expectations that they&rsquo;ll continue to be homeowners in their new location.</p>&#13;
<p>That trend has continued into the 21st century. Especially in the hot markets of the West Coast and the urban Northeast corridor, homes have become an investment commodity. There has been an <a href="https://newrepublic.com/article/144528/gone-baby-gone-wake-housing-crisis-new-breed-real-estate-investor-destroying-america-cities"> increase of investor-ownership</a>, an aftereffect of the 2006 housing crash in some cases. In that case, a high rate of foreclosures&mdash;<a href="http://money.cnn.com/2009/01/15/real_estate/millions_in_foreclosure/">about 860,000 nationwide</a>&nbsp;in 2008 alone&mdash;left a lot of housing stock in the hands of banks.</p>&#13;
<p>In some depressed areas of the country, that hasn&rsquo;t happened. Areas that suffered high foreclosure rates during the Great Recession, including Phoenix, <a href="https://www.nytimes.com/2016/05/15/us/las-vegas-squatters-housing-collapse.html"> Las Vegas </a> and <a href="http://www.detroitnews.com/story/news/special-reports/2015/05/14/detroit-abandoned-homes-volume-terrifying/27237787/"> Detroit</a>,&nbsp;wound up with large numbers of vacant houses. Rather than sell off those houses, the banks rented out a fair amount of them (there is now a <a href="https://www.usatoday.com/story/money/personalfinance/real-estate/2017/11/11/renting-homes-overtaking-housing-market-heres-why/845474001/"> higher than normal rate of single-family home rentals</a>), and others were left vacant until the market could recover enough to allow them to be sold.</p>&#13;
<p>A <a href="http://www.jchs.harvard.edu/research/state_nations_housing"> 2016 study </a> by the Joint Center For Housing Studies at Harvard University indicated that for both cities like Detroit that didn&rsquo;t experience as big a housing bubble as other areas, and boom markets like Las Vegas that collapsed catastrophically, housing prices 10 years later are still underwater: values in 32 out of the largest 100 cities are still <a href="http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/harvard_jchs_state_of_the_nations_housing_2017_chap1.pdf"> 15 percent below their pre-crash peaks</a>.</p>&#13;
<blockquote>In cities with strong economic growth, housing prices now exceed those from the pre-crash era.</blockquote>&#13;
<p>In cities with strong economic growth, such as those on the West Coast, housing prices now exceed those from the pre-crash era, leading to extremes in both sale prices and rents. According to the <a href="https://us.spindices.com/index-family/real-estate/sp-corelogic-case-shiller" target="_self" title="" rel="noopener noreferrer">S&amp;P CoreLogic Case-Shiller Home Price Indices</a>, the average price of residential housing went up 6.4 percent from November 2016-November 2017. The changes in the 20 largest metropolitan areas vary significantly, however, with prices in Las Vegas going up just 1.1 percent year over year, while at the same time they shot up 12.7 percent in the Seattle area, a region that already has the fourth most-expensive real estate in the nation.</p>&#13;
<p>Meanwhile, the rental market continues to tighten, reaching a <a href="https://fred.stlouisfed.org/series/RRVRUSQ156N"> national vacancy rate of 6.9 percent </a> in 2016, the lowest since 1986, which puts upward pressure on rents.</p>&#13;
<p>All this leaves average would-be homeowners and renters in a position of competing for houses that continue to become more expensive. And it&rsquo;s a reflection of the same rich-get-richer-while-poor-get-poorer economic polarization we see elsewhere in the U.S. economy. And the problem is only likely to get worse, thanks to a convergence of stagnant wages, a shortage of affordable housing, population outpacing housing inventory, and a lack of political will to take steps to curb investor-ownership and other speculation in the housing market.</p>&#13;
<p>&ldquo;Safe as houses,&rdquo; that 19th century phrase that used to connote the house as a slow but sure place to put your money, has been replaced by the agent&rsquo;s mantra: &ldquo;Location, location, location.&rdquo; With a 12.7 percent rate of annual return, who wouldn&rsquo;t want to invest?</p>&#13;
<p>Treating houses like tradable commodities to be bought and sold for short-term profits is a stock market game, played by investors and banks with billions at their disposal. It&rsquo;s also the game of small-time house flippers akin to the amateur day-traders of the tech boom, foreign investors, and even <a href="https://www.forbes.com/sites/omribarzilay/2017/04/13/the-rise-of-a-new-asset-class-a-home-ownership-investment/#5023e0b95ee5"> new forms of speculative behavior </a> that call to mind the crafty financial instruments like credit default swaps that inflicted so much damage 10 years ago.</p>&#13;
<p>Individual homeowners and renters, those who just wish for a safe place in which to live and grow old and a community to belong to, are at the bottom of the pile, with little control other than to refuse to succumb to market mania. That much at least is a step toward putting home back in our houses.</p>
<p>This article originally appeared in <a href="https://www.yesmagazine.org">Yes! Magazine</a> at <a href="https://www.yesmagazine.org/economy/2018/02/16/unstable-stock-market-is-a-warning-treat-your-house-like-a-home">https://www.yesmagazine.org/economy/2018/02/16/unstable-stock-market-is-a-warning-treat-your-house-like-a-home</a>.</p><link href="https://www.yesmagazine.org/economy/2018/02/16/unstable-stock-market-is-a-warning-treat-your-house-like-a-home" rel="canonical"/><p>Yes! Magazine is a nonprofit, independent media organization dedicated to telling stories of ... . Learn more at <a href="https://www.yesmagazine.org">Yes! Magazine</a></p><img id="republication-tracker-tool-source" src="https://www.yesmagazine.org/?republication-pixel=true&post=12282&ga4=G-74QJNNY44Z" style="width:1px;height:1px;">

Unstable Stock Market Is a Warning: Treat Your House Like a Home
Remember last week when the stock market dropped more than 10 percent over a matter of days and suddenly everyone was looking for signs that the bubble had popped?
After the breaking of the domestic abuse scandal in the White House, the release of President Trump’s draconian budget proposal, the latest school massacre and, in a rare bit of good news, the public display of international cooperation that is the Olympic Games, it’s easy to forget that we all had a panic attack over the market just 12 days ago.
It’s also true that the major stock indexes have largely recovered from that drop, and are significantly higher than they were a year ago.
So, false alarm?
Not exactly. If you’re inclined to fret about bubbles, consider instead the housing market.
Most of us invest in stocks only indirectly, through our retirement accounts. We’ve come to expect uncertainty and instability in the stock market. We’ve witnessed the ups and downs, even if we don’t invest. But housing is where many of us invest right where we live.
And that’s the problem.
Houses are where most Americans keep their accumulated wealth—about $7 trillion nationwide, according to the Urban Institute. Yet, the housing market is showing behavior more akin to the stock market.
Houses evoke nostalgia for us as Americans: stately homes on Main Street, U.S.A., populated by longtime residents who join bowling leagues and the Rotary Club. And there’s an element of truth to that picture, in that the rise of the 30-year mortgage in post-Depression America created a sense of security in lending: So long as you made your monthly payment, your home was yours, and there was an expectation that eventually you’d pay it off and own the house outright before you retired.

A lot has changed. We’ve become a highly mobile society that facilitates and even encourages us to move to a new city for school, work, marriage, or retirement. The ease with which we can get mortgages compared to other countries—facilitated by standardization and monetization of mortgages by Fannie Mae and Freddie Mac, among other factors—has contributed to that mobility. Not only is it feasible to pick up and move across the country, homeowners have reasonable expectations that they’ll continue to be homeowners in their new location.
That trend has continued into the 21st century. Especially in the hot markets of the West Coast and the urban Northeast corridor, homes have become an investment commodity. There has been an  increase of investor-ownership, an aftereffect of the 2006 housing crash in some cases. In that case, a high rate of foreclosures—about 860,000 nationwide in 2008 alone—left a lot of housing stock in the hands of banks.
In some depressed areas of the country, that hasn’t happened. Areas that suffered high foreclosure rates during the Great Recession, including Phoenix,  Las Vegas  and  Detroit, wound up with large numbers of vacant houses. Rather than sell off those houses, the banks rented out a fair amount of them (there is now a  higher than normal rate of single-family home rentals), and others were left vacant until the market could recover enough to allow them to be sold.
A  2016 study  by the Joint Center For Housing Studies at Harvard University indicated that for both cities like Detroit that didn’t experience as big a housing bubble as other areas, and boom markets like Las Vegas that collapsed catastrophically, housing prices 10 years later are still underwater: values in 32 out of the largest 100 cities are still  15 percent below their pre-crash peaks.
In cities with strong economic growth, housing prices now exceed those from the pre-crash era.
In cities with strong economic growth, such as those on the West Coast, housing prices now exceed those from the pre-crash era, leading to extremes in both sale prices and rents. According to the S&P CoreLogic Case-Shiller Home Price Indices, the average price of residential housing went up 6.4 percent from November 2016-November 2017. The changes in the 20 largest metropolitan areas vary significantly, however, with prices in Las Vegas going up just 1.1 percent year over year, while at the same time they shot up 12.7 percent in the Seattle area, a region that already has the fourth most-expensive real estate in the nation.
Meanwhile, the rental market continues to tighten, reaching a  national vacancy rate of 6.9 percent  in 2016, the lowest since 1986, which puts upward pressure on rents.
All this leaves average would-be homeowners and renters in a position of competing for houses that continue to become more expensive. And it’s a reflection of the same rich-get-richer-while-poor-get-poorer economic polarization we see elsewhere in the U.S. economy. And the problem is only likely to get worse, thanks to a convergence of stagnant wages, a shortage of affordable housing, population outpacing housing inventory, and a lack of political will to take steps to curb investor-ownership and other speculation in the housing market.
“Safe as houses,” that 19th century phrase that used to connote the house as a slow but sure place to put your money, has been replaced by the agent’s mantra: “Location, location, location.” With a 12.7 percent rate of annual return, who wouldn’t want to invest?
Treating houses like tradable commodities to be bought and sold for short-term profits is a stock market game, played by investors and banks with billions at their disposal. It’s also the game of small-time house flippers akin to the amateur day-traders of the tech boom, foreign investors, and even  new forms of speculative behavior  that call to mind the crafty financial instruments like credit default swaps that inflicted so much damage 10 years ago.
Individual homeowners and renters, those who just wish for a safe place in which to live and grow old and a community to belong to, are at the bottom of the pile, with little control other than to refuse to succumb to market mania. That much at least is a step toward putting home back in our houses.

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