Why do we get so much pleasure from failed flips? I can think of no other human endeavor which has engendered so much pleasure in the misfortune of others. In my opinion, the outpouring of schadenfreude we are seeing as the housing bubble deflates is a mixture of Greek tragedy and bad karma. In short, bubble participants should have seen it coming, and they are getting what they deserve.

Schadenfreude is not a spiritually uplifting response. Most religious traditions would counsel us against it. In Buddhist teaching, people are taught to cultivate feelings of compassion for the misfortune of others — feeling empathy and sadness for the slings and arrows of outrageous fortune when they impact another. The near enemy of compassion is pity: it masquerades as compassion, but it has an element of separateness which detracts from the sense of Oneness with all things. Joy is good: Sypathetic joy, the joy in the happiness of another, is another pillar of a spiritual existence. However, joy in the misfortune of another — schadenfreude — is not a skillful behavior leading to happiness. Even knowing that, many of us feel this joy anyway. Why is that?

I recognized financing terms were creating artificially high prices early on. By 2004, I was telling people I knew this was a problem which would cause a market crash. I can’t tell you how many people looked at me like I was crazy. “Real estate always goes up,” I was told. “The government would never allow prices to crash,” I was told. “If you don’t buy now you will be priced out forever,” I was told. You know the intoxicated language of those who imbibed the kool aid. If these statements had been offered in a defensive manner of someone who is being made to realize they made a serious mistake, I could have felt sympathy for them. I would have been able to disarm their defensiveness and helped them see the light. However, what I generally got was a smug assuredness of someone who truly believed they were right and I was wrong; not just was I wrong, I was a stupid, cowardly fool who did not have the brains or the courage to take the free money being given out.

During the bubble rally, those of us who chose not to participate were labeled as “bitter renters.” We were labeled as envious of the good fortune of homeowners as their property values rose, as they took on insane amounts of debt, and as they learned to finance a lifestyle well beyond their means. This was undoubtedly true for some, but in my opinion, this is not the primary reason so many derive so much pleasure from the misfortune of those now suffering from declining property values.

These same people who chided us for being envious actually wanted us to be envious: they wanted us to know they were the winners in our competitive society; they wanted us to view them as superior. This need to feel superior is undoubtedly a manifestation of Southern California’s Cultural Pathology, but it more than that. This act of putting themselves above us created a separation which prevented us from feeling sympathetic joy for their good fortune, and it will prevent us from feeling compassion for them when they fall.

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In our collective unconscious which manifests in our dreams and our mythology, water is often symbolic of our emotions or our emotional state. Have you noticed people are often categorized as deep or shallow? If you are in debt you often feel “underwater,” etc.

Anger is much like water: if not given an outlet, it will fill a reservoir until it reaches a breaking point and is expressed in a flood of emotional rage. Each encounter with a pathologic, kool-aid drinking housing bull over the last few years has added to this reservoir, and reveling in failed flips is an outlet for this pool of toxic emotional waste.

There is an element of tragedy in every disaster, but financial bubbles are some of the most interesting because they are completely man made. They are created by the individual decisions of buyers who are motivated by greed, foolish pride, and a false sense of security. Each of these people should have known better. Many of them were warned of their impending doom and chose to go down the path to the Dark Side.

Newton’s Third Law states, “For every action, there is an equal and opposite reaction.” The Law of Karma states, “For every event that occurs, there will follow another event whose existence was caused by the first, and this second event will be pleasant or unpleasant according as its cause was skillful or unskillful.” Do you believe the behavior of buyers over the last 4 years has been skillful?

Whether it is Newton’s Third Law, Karma, or a Calvinist form of retributive justice, as this bubble deflates, all the participants in this bubble are about to experience a great deal of hardship. Like many of you, I will enjoy their suffering until my reservoir of schadenfreude is emptied. For the sake of my own personal spiritual well being, I hope this happens soon so I can get back to feeling compassion for my fellow man.

ARTIST: Dire Straits

TITLE: Money for Nothing

I want my, I want my MTV

Now look at them yo-yo’s, that’s the way you do it

Now that ain’t workin’, that’s the way you do it

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Many people have horror stories about dealing with their local homeowners association (HOA). Hopefully, some of these people will regale us with their stories in the comments to this post.

Most of Irvine is homogeneous: this was intentional. Homeowners associations are formed to maintain facilities in common ownership, and to maintain property values in an area through the enforcement of covenants, conditions & restrictions (CCRs). It has been shown, painfully, that individuals acting without governance will allow their properties to deteriorate, appropriate public spaces, and express their individuality in ways which harms neighborhood values (anybody remember this clip from Cheech and Chong’s Next Movie?). In this post, I want to show what can happen — even in Irvine — when the HOA is weak, or does not exist at all.

The property above is located at the intersection of Fulton and Lewis in Northwood. Perhaps you find it attractive? The color scheme is well executed, but the selections would be outside the norm for an Irvine property. You would never see this in Westpark, for instance.

I am sorry you can’t get the full impact of the colors in these photos, but I can assure you that this house catches your eye when you drive on this street.

The real case to be made for HOAs in Irvine comes from this property on Ecclestone Circle. First, look at the size of this thing. Even in a neighborhood of large homes — which The Ranch is — this home stands out as being enormous. When I first saw it, I thought it was multi-family.

Do the words “starter castle” come to mind when you see this place? The property at 5 Eccelstone Circle is for sale. Do you think this house is helping or hurting its resale value?

This is the view from the neighboring street. This place dominates the scene in other neighborhoods.

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Homeowners associations have gotten a bad reputation because they are often taken over by individuals of limited competence or those with a Napoleon Complex. These criticisms aside, Homeowners associations provide a value-adding service which, in my opinion, is worth the hassles they create.