Louis Proyect: The Unrepentant Marxist

April 13, 2005


Filed under: Uncategorized — louisproyect @ 4:33 pm

posted to www.marxmail.org on April 13, 2005

Over the last couple of months, I have become a big fan of “Househunters”, a half-hour show that appears nightly on the House and Garden cable TV network and that is as ritualized as Kabuki. It starts usually with the introduction of a couple and their children who have outgrown their current house or apartment. If they are renters, they make clear that their dream is to own something. They see a house as an investment. Renters watching this show cannot help but feel that they are losers.

They proceed to go out with a realtor and evaluate 3 houses like Goldilocks. One house might be too expensive, the other too small, etc. Typically, the 3rd house is the one they make an offer on–it is usually the most expensive. After the final commercial, they get a call back from the broker who breaks the good news to them that their bid has been accepted. The final minute or two consists of a tour of their new house, with their moved-in furniture and a fresh paint job usually. The family cannot be happier.

While the househunters are usually heterosexual, there is a lot of a metrosexuality on display even from blue-collar husbands who feel comfortable describing a house under evaluation as having “charm” or “character.” I can’t imagine my own deceased father speaking that way. When he bought our house back in 1958, it was strictly to relieve the constant pressure from my mother and not because he had dreams of backyard barbecues. He was a truckdriver before WWII and would have been content to continue living in the apartment above a nightclub in our rural upstate NY village. My mother thought that it was not a healthy place to raise children, since I spent far too much time in the kosher slaughterhouse behind our apartment building staring in wonder at ritual chicken-slashing. I also enjoyed hanging out in front of the nightclub in the evenings with the “greeter”, a former professional boxer and heroin addict named Barney Ross. Ross, who was a Jew like the nightclub owners, my family and just about everybody else in our village, had acquired his drug habit at a veteran’s hospital where he had been given morphine for wounds suffered at Guadalcanal.

Next week or so I finally will close on the sale of my parent’s house. My mother went into a nursing home last May and I have spent nearly $20,000 and close to a month getting it into shape. The proceeds of the sale will allow me to stay in my apartment in Manhattan’s Upper East Side, where the rent has now gone up to $2100 per month. At first I had hopes to purchase a co-op or condominium with the proceeds of the sale of my house but have discovered that the real estate bubble in Manhattan makes that impossible. The median price of an apartment in NYC right now is one million dollars. It is as if somebody had just given me $20 and invited me to go into Bloomingdales and buy all the clothing I wanted. My current plans are to purchase an annuity that will pay out about $750 per month for the next 20 years. After that, the money is gone and I will have to make new plans. Of course, by that time I will be 80 years old and just happy to be alive.

Back in 1981, I had dinner with Peter Camejo and Jeff, an old friend from Bard College who has been a Nation Magazine subscriber since the 1950s and who has strong social democratic politics. The subject of the feasibility of socialist revolution came up and Jeff as might be expected argued that it was not possible because workers were imbued with petty-bourgeois values. To my surprise, Camejo–who had been thinking outside the box for a very long time–responded that there was much truth in that, especially since home ownership is so pervasive in the USA.

On March 26, the NY Times reported:

“Real estate-crazed Americans have started behaving in ways that eerily recall the stock market obsession of the late 1990s.

“In Naples, Florida, some houses have been bought twice in a single day, an early-21st-century version of day trading. Buying stocks on margin has been transformed into buying homes with no money down. The over-the-top parties of Internet start-ups have been replaced by flashy gatherings where developers pitch condos to eager buyers.

“Five years ago, the cable channel CNBC sometimes seemed like a backdrop to daily American life. Its cheery analysis of the stock market played in offices, in barbershops, even in some bars.

“Today home-improvement shows are the addictive fare that the exuberant stock shows once were.”

It turns out that the same psychology that drove the stock market boom of the late 1990s is now at work in the real estate market today. One speculator mentioned by the Times “owns two condominium units around Fort Lauderdale and one in Miami Beach, all bought during the last year, in addition to the one where he lives. He plans to sell one of the Fort Lauderdale condos in June for a price he believes will be double his investment.”

David Lereah, chief economist of the National Association of Realtors, argues in his new book, “Are You Missing the Real Estate Boom?” that real estate investors will “experience substantial and satisfying wealth gains” into the next decade.

The Times wonders if this book will end up like “Dow 36,000,” a best seller in late 1999. The authors were convinced that stock prices “could double, triple or even quadruple tomorrow and still not be too high.”

If the same thing happens to real estate that happened to stock market investors, the consequences might be profound. Even now, some of the problematic underpinnings of the real estate boom are becoming undone, especially variable mortgage rates. With variable mortgages (something I utilized to finance improvements to my house), the interest rate you pay to the bank can go up if interest rates in general go up. Last month I noticed that my payment jumped from $60 to $65.

Fortunately, I will liquidate this debt (it is mandatory as part of the closing) next week, but other home-owners who will watch a steady rise in interest rates might be forced out their homes at some point. With gasoline prices still rising, the economic pinch on American workers might reach the point where they begin to think more like workers than small proprietors. Right now Bush’s popularity rating is lower than any second term President in American history. The next few years will possibly involve some serious shocks to the system. Let’s hope that the left is up to the task of breaking the American people of their illusions.

1 Comment »

  1. Interesting. There’s been a property bubble in New Zealand too – Auckland, in particular, has become a ridiclous expensive place to rent or buy. In recent months, though, value have declined in many parts of the city, and some analysts with teir eye on the US are predicting that the decline could become a steep one.

    In the past home prices here never really dropped, they just stayed stable for a while and then rose again. They were ballasted by the fact that most folks were not prepared to move out of home sweet home just because interest rates rose. They stuck it out.

    Today, though, there is a much larger number of people buying houses as an investment and not living in them. If interest rates keep rising and they can’t screw enough money out of tenants to cover the mortgage payments, these folks prefer to get rid of the investment and out their money somewhere more profitable. There’s the potential for investors to depart the property market en masse and create a real crash.

    The left should really have more to say about all this, shouldn’t it? The housing issue could almost become a First World version of the land reform issue that leftists have given so much attention to in the Third World.

    Comment by Scott — March 28, 2007 @ 11:02 pm

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