The Housing Chronicles Blog: Housing Lust

Monday, January 7, 2008

Housing Lust

Your heart races. Your palms sweat. You hope the other party is interested and doesn't mind that you live with your mother. Yes, I'm talking about "housing lust," something which has really taken off in the U.S. since about the year 2000.

Writing in Newsweek, author Daniel McGinn explains in a new book why real estate investments -- somewhat irrespective of booms and busts -- have a unique hold on the American psyche:

While the economics of the real-estate crunch are familiar by now, the boom-and-bust cycle have been driven by more than supply and demand. Like the dot-com craze that preceded it, the run-up in home prices was fueled partly by psychology, as so many of us dreamed of trading up, renovating or building from scratch—and so many dinner parties devolved into real-estate gossip, whether it involved Jay-Z or the neighbors up the block. Indeed, during the heyday of the boom, many of us spent far too much time talking about, valuing, shopping for, refinancing or just plain ogling houses. It's a set of behaviors I call House Lust.

Even in the currently gloomy times, there's ample evidence that much of this obsession remains intact. The Web site, which gives users an estimate of their home value (along with those of anyone else in their address book, from bosses to former boyfriends), continues to attract 4 million monthly users. This year, Americans will still spend more than $170 billion remodeling homes. And even as the market weakened last year, a survey by Boston Consulting Group showed 55 percent of Americans figured their homes were still gaining value—a level of optimism that borders on delusional.

(Of course up to 40% of people took out sub-prime and Alt-A loans assuming they'd be able to refinance into better loans down the road).

As the boom recedes into memory, it's easy to dismiss our exuberance for homes as a fad. Some aspects of the bubble have already faded. For instance, many of the half-million people who became real-estate agents will likely leave the profession. But in other ways, having lived through the real-estate boom will prove for some to be a life-altering experience, in the same way the dot-com era changed attitudes about the attractions of working for a start-up or being paid in stock options. After watching too many hours of "Flip That House," a lot of us will still devote weekends to executing home makeovers large or small. Even as the pain of the foreclosure crisis spreads, would-be investors still flock to auctions. Frazzled baby boomers who desperately seek a refuge from their 24/7 work lives continue to pine for a charming beachfront getaway. Our homes may no longer be making us rich, but living through a half-decade when we believed they would has changed our perspective. Even in a bust, House Lust lives on.

Sweaty palms be damned!

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