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Hots For Housing Boosted The Bust

Consumers' compulsive behavior over housing market contributed to crisis

By Broderick Perkins

October 14, 2008

Living in a Bubble? Mortgage Crisis? Act Now to Avoid Foreclosure • Avoiding Foreclosure Takes More Than Hope --- • Consumers Fall Further Behind in Payments • House Democrats Seek Bankruptcy Rule Changes • Pending Home Sales Post Record Drop • Home Prices Plunge in October • Navigating the Mortgage Modification Maze • Mortgage Rates Reach 37-Year Low • Boomers Facing Tough Social Security Choices • Is It Safe to Buy a House? • Mortgage Modification Meltdown • Mortgage Defaults Still Rising • Mortgage Rates Take Another Sudden Drop • Fed Slashes Rates to Near Zero • Consumer Prices Plunge in November • Home Values May Fall More in 2009 • Americans' Net Worth Plunges Nearly $3 Trillion • Surge in Mortgage Applications Doesn't Last • Pending Home Sales Slide in October • Get Your Mortgage Rate Lock Ready • Modifying Mortgages Isn't Slowing Default Rate • Mortgage Delinquencies, Foreclosures Surge • Mortgage Applications Surged 112 Percent Last Week • GAO Calls for Better Bailout Oversight • Homes Lose More Value In Third Quarter • Home Prices Post Record Decline • Fed Throws $800 Billion Lifeline to Consumers • Existing Home Sales Drop in October • When in Doubt, Leave Nothing Out • Fannie Mae and Freddie Mac Suspend Foreclosures • Consumer Prices Plunge in October • Paulson Rejects Bailout Money for Detroit • Another Glimmer of Hope in The Housing Market • Buyers' Beware Market • FDIC Backs More Aggressive Loan Modification Plan • Housing 2009 Forecasts Mixed, But Mostly Grim • Foreclosures Up Five Percent in October • Feds Shift Gears On Bailout, Puts Focus On Consumers • More Homeowners Under Water in Third Quarter • Feds Mount New Effort to Help Struggling Homeowners • Lenders Embrace Workouts for Struggling Homeowners • Obama Can't Quickly Raise Homebuyers' Hopes • At Last: Bailout Trickling Down to Struggling Homeowners • New Home Sales Rise in September • How to Appeal Your Property Tax Bill • Existing Home Sales Rise in September • Administration Considers More Help for Homeowners • Foreclosure Activity Drops in September • Southern California Home Sales Surge 65 Percent in September • HOEPA: New Hope for Outlawing Abusive Mortgages • FDIC Chief: Not Enough Help for Homeowners --- • More ...

Consumers' own obsessive compulsive behavior over housing is as much to blame for today's housing market mess as Washington D.C.'s slothfulness and Wall Street's greed.

And just as the economy is struggling with one of the worst down turns since the Great Depression, housing consumers face forced withdrawal from unaffordable lifestyles.

During the boom, misguided consumers hankered for housing they couldn't afford, they lied to borrow more than they needed and they stalked homes, ogling properties they didn't even want.

Earlier this year, a journalist dubbed the behavior "house lust" a malady that became a distinctly American addiction of realty gluttony, enabled by the ca-ching of loose mortgage money and a false sense of affordability.

Unfortunately, when the cost of housing exceeded consumers ability to pay, their fetish-like preoccupation with everything real estate left them with a throbbing housing hangover, says Daniel McGinn, a Boston-based national correspondent for Newsweek.

McGinn is author of "House Lust: America's Obsession With Our Homes" (Random House, $24.95), which describes the outbreak of house lust, its symptoms and -- before Wall Street crashed -- the inevitable prognosis.

McGinn said instead of taking the practical roof-over-your-head approach to housing, too many American consumers become emotionally attached to shelter. During the boom, consumers supersized trophy homes, bought second, third and fourth homes, binged on over bidding and made the hosts of house-and-home TV shows household names.

The fascination with housing reached "obscene" levels, says McGinn. Even professionals with tenured careers rushed off and join the army of real estate agents.

McGinn, who obtained a real estate license in a single weekend, explored the deadly sins of house lust in his book, did sleepover research in model homes and attended real estate investment seminars to peer into the psyches of the house hungry.

Here's what he saw.

• Mr. and Mrs. Big Stuff. McGinn hung out with a couple who, through a series of trade ups went from a home with 2,000 square feet to a $3 million, 9,000 square foot estate with a men's hangout room and twin dishwashers. One for the guys, one for the girls? The couple complained the backyard was too small. Many such McMansions are now McEmpty.

• The smell of "new." An "ick factor" underscores house lust. People preferred an unsullied new home's smell, rather than the gritty odor of a resale. The penchant helped fuel new home construction, and ultimately, a new sub market of apartment conversions.

• Stalkers. Americans became both virtual and real life voyeurs who gathered intel on line from the growing number of data-based real estate web sites. They swarmed open house events with no intention of buying.

• Gold diggers. At the onset of the boom in the early 2000s, real estate became the "psychological equivalent of gold" rather than just shelter. Housing became to the New Millennium what dot coms were to NASDAQ. Many who'd just fled the spoils of the technology meltdown, sought financial refuge in residential real estate and enjoyed the "wealth effect" of a big asset with little leverage -- until the walls caved in.

Now, the party's over. The easy money is gone. Some mortgages carry interest rates that are triple and quadruple the amount of those original "gotcha" rates. The stock market has all but collapsed. The feds are bailing out Wall Street. And large chunks of Main Street is getting plowed under.

House lust is no longer in vogue. It's unaffordable.

From 1996 to 2006, as the average annual household expenditures on housing rose nearly 65 percent, incomes rose only 36 percent, according to the Center for Housing Policy, "Stretched Thin: The Impact of Rising Housing Expenses on America's Owners and Renters, 2008."

Now, with the prospect of economic recession, all that hand-rubbing chatter has become the subdued language of Las Vegas losers as former spendthrifts attempt to adjust to reality and finally get what "unsustainable" really means.

Luckily, there's no place like home -- if you still have one -- to change your squandering ways.

Architect Sarah Nettleton and landscape historian Frank Morton can tell you how in a book with a saner approach to shelter.

"The Simple Home: The Luxury of Enough" (Taunton Press/American Institute of Architects, $40) says simple living, not bigger living, is better. They say what you might think is "enough" is often much more than you really need.

The key, when you inspect your life at home, is to find areas where the simple life is a better, less expensive life. You can even hang on to just a little of the lust. It doesn't really matter where you live, what kind of home you have or how much it cost. If you build a simple life, the savings will come.

Here's what the authors suggest:

• Enough already. Identify your true tastes, throw out notions of what you think you should have, avoid excess clutter to maintain only the essentials and simplicity begins to set in. Sure, you need a place to eat, but does it really have to be a dining room addition?

• Consider "flex" spaces. Rooms that serve multiple purposes, help you get more out of what you already have. A breakfast nook can be a play area until a child ages. A kitchen can double as an art studio. A small screened porch is more functional if you install a custom-sized table rather than a porch expansion.

• Grow a garden. Fresh tomatoes from the garden taste better than greenhouse food. They'll also get you outdoors. Remember that great aunt who could make clothes you could really wear? Learn how. Make a list of simple pleasures that delight but do not require expenditures for more stuff.

• Use your own style. Avoid the attraction to "new" for "new's sake." Select a starting point for the feel your want in your home. edit your wish list down to one favorite image from a book or magazine. Trust your instincts. Your style is authentic too -- and timeless.

• Sustain. Electronic widgets and gizmos don't create sustainability. You do. Find the balance between what you can afford and what you really need. A comfy window seat tucked into a window nook where you can curl up with a good book, can be as comfortable as a large custom leather sofa in an imposingly large rec room.

• Resolve complexity. Talk about disliking complexity in your life, but walk the talk. Examine aspects of your home that prove troubling. Identify the real value of change. Is bigger really better? That home for sale's kitchen is darkened by the attached garage. What about a cheaper home with a detached garage? Is saving a few steps with the groceries really worth missing the morning sun beaming into your kitchen?

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Broderick Perkins parlayed 30 years of old-school journalism into a digital real estate news service, the DeadlineNews Group, offering "News that really hits home!"™. The Silicon Valley bootstrap includes the Web site DeadlineNews.Com and the back shop Deadline Newsroom. Contact him at news@deadlinenews.com.

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