Don’t waste your time on jealousy;

it’s only with yourself.

Everyone’s Free — Baz Luhrmann

Link to Music Video

I have ranted on numerous occasions on this blog about people’s desires to feel superior to their fellow man. I find it to be the least desirable feature of California’s culture. This need people have to raise their low self-esteem at the expense of other people is part of the impetus behind my posts on The Grand Illusion and The Reservoir of Schadenfreude. Releasing the anger caused by these interactions is part of the energy I find for writing on this blog. Today I want to address one of these California traditions and examine why homeowners feel superior to renters and see if there is any validity to these feelings.

Any group that feels superior to another group can live with their happy delusions forever. Every religious zealot or racial bigot carries a false belief of superiority. We can all laugh at them and let them be (assuming the “superior” group is not violent.) If those placed in the inferior position do not share the feelings of inferiority, the “inferior” group is not harmed — their energy is not stolen. It is when this latter group accepts and believes the feelings of inferiority that harm is done. To put it in terms of the housing market, homeowners can feel they are superior if they want to, but it is only when renters believe it that renters are harmed. Other than than the need to prop up a weak ego, why would a homeowner feel superior to a renter?

There was a time when home ownership was obtainable only by people of character. You knew if you met a homeowner, they went through the rite of passage necessary to achieve that status. Demonstrating the character necessary to become a homeowner used to be a good reason to respect someone — not anymore. I wrote in the post, Brio New World, “Previous generations had a formula for a “normal,” happy life. You used to save your money until you had a 20% downpayment, then you bought a house, and if you had increases in income, you could move up to a nicer place. Home ownership was a symbol of success. It proved you could save to reach a goal; it proved you were responsible; it made you happy. It was also a ticket to financial security as your home equity would become a savings account you could use to fund your retirement when you downsized to smaller accommodations. These were the rules of old.

The lending industry changed all of that. They eliminated all measures of responsibility including honesty with “liar loans,” integrity with low FICO scores, and accountability with 100% financing. When homes can be purchased by people who lie, cheat and steal, the prestige of home ownership is diminished — no make that eliminated. Home ownership no longer symbolizes sacrifice and success, instead it now is synonymous with greed and gambling in the commodities market. Welcome to our Brave New World.”

It reminds me of fashion fads. When a new fashion comes out, good-looking people buy the fashion, and it becomes popular. As long as the fashion is the exclusive purview of good-looking people, the fad will remain popular. Eventually, the not-so-good-looking who want to join the club purchase the fashion, and it goes out of style. When people who do not possess the attributes of the club they are trying to join are given access, the prestige of the club is immediately diminished. As Groucho Marx said, “I don’t want to belong to any club that will accept me as a member.”

Many homeowners are still living with the belief they are superior and they are members of an exclusive club. They turned a blind eye to the not-so-desirable element that was admitted to their exclusive club during the rally. Why would they care when admitting these people made them huge amounts of phantom equity?

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However, the fact remains, there are a great many “homeowners” who are not financially responsible, they do not know how to save, and they do not know what it means to sacrifice. These late entrants to the housing club are now defaulting in record numbers. They aspire to the respect homeowners were given in the past; they desperately want to look down on their renting acquaintances with that feeling of moral superiority of generations past; however, they just don’t possess the attributes which made homeowners a group to respect. The presence of these interlopers has made home ownership something to be ashamed of not something to be aspired to.

Flushing these interlopers out of the system is going to be painful. House prices are going to decline to pre-bubble levels when the fundamentals make sense again. It will be as if the bubble never happened. Homeowners who survive will be left with lingering memories of what their houses were temporarily selling for during the bubble. Those who are not qualified to be homeowners will be forced to rent again after the foreclosure. They will end up in the “renting class” all over again.

When this time comes, many “bitter renters” who sat out the rally and subsequent crash with money in the bank will step in to save the day. After the painful purge, the prestige of home ownership will be restored, as only owners will be the financially prudent who can sacrifice and save money — the attributes of respect formerly associated with home ownership. These are the times I look forward to. The next time a homeowner denegrates a “bitter renter,” I hope they realize these are the people who will step up and restore the prestige of home ownership when the time is right.