Tuesday, April 5, 2011

The Debt Aesthetic

I have just finished a (very) long househunting campaign. I have come to the conclusion that there are several ironclad rules of homebuying --

1) Women are the choosers.
2) Men have veto power and some influence on the price.
3) You will never get what you want if you want it too badly.

Only once the first two rules are clearly understood can househunting be undertaken in anything approaching an efficient manner. Once the third is understood, the likelihood of success in negotiation is much improved. Those who do not hew to these rules will find their efforts frustrated.

I made several other important discoveries in the process, most of which saddened me a bit. These phenomena all seem to have one thing in common -- the housing market is dominated by the whims of women and debt.

Distortions of Proportion

I grew up in a home built in the 60's in a Dallas suburb. I suppose that everyone takes his childhood experiences to be normal, such that they later serve as the standard against which he measures everything else. By that measure, it would seem to me that there has been a disturbing distortion to the proportions one observes in the design of houses, as well as in some other properties. One could argue that evaluating things in this fashion is wrong, that in reality all is relative. I disagree, but even if it were, I could still say that I think people of the early 60's must have had more sense about housing than we do today.

I further rest my argument on this notion floating about that beauty is objective, contrary to the zeitgeist notion that it is in the eye of the beholder. Call me a recent convert. It seems to me that it is objective, and supposing it is, then one can legitimately claim to have witnessed its violation.

Many qualities go into the determination of what is beautiful, most importantly symmetry (or balance) and proportion. In this department, I have noticed a strong and disturbing trend in housing -- the more modern the house, the proportionately larger its closets and bathrooms. Grotesquely larger, even.

I was actually embarrased by some of the houses we saw. Enormous, lavish bathrooms larger than the bedroom I grew up in, with tiny little second and third bedrooms. For the kids, I suppose. They must love their bathrooms. I saw closets a person could rent out to other tenants. Maybe put up a couple of college kids to help pay the mortgage.

A guy I know bought a house several years ago which had been modified by its previous owners. Its third floor consisted almost entirely of one giant room, which contained what can only be described as an 'open bathroom.' You just opened up the door at the top of a staircase and there it was -- halfway across a cavernous space, a large shower with four glass sides and a toilet next to it, all elevated up on a circular, three-step tile pedestal about a foot off the floor. It was quite a display. The only thing it lacked was stagelights. All told I estimate the area of that single room at perhaps eight hundred to a thousand square feet. Presumably the remainder of the room was meant as a bedroom.

Conformity -- Resistance is Futile

Actually, that example is a little heartening, as at least the choice shows some spontaneity and personality, even if it isn't exactly what I would want.

But as far as the other houses go, there were no two ways about it. You were getting an enormous walk-in closet and huge bathrooms whether you liked it or not. The exact size could almost be predicted by the year built. So I suppose that if one wanted, he could stay in the right ballpark of the size he wanted by only visiting houses built in a specific year. Within a relatively narrow range of years, there was very little deviation.

Likewise, the building materials, style, and lot size could be predicted by the year built, and I have to say it was depressing to see the trend. Increasingly houses are built with cheaper materials (and shoddier workmanship), on smaller lots, in a dumpier and more ostentatious style. Cardboard palaces, as it were. Maybe that is what was meant by McMansions.

Touring the newer neighborhoods was especially irksome. Row after endless row of cookie-cutter houses, endless inconsequential variations of the same rotten thing. For all the resources thrown at the housing market in the last few decades, it seems the lowest priorities were quality of materials and construction. Everything went towards square footage, closets and bathrooms, as statistics seem to have commandeered the whole enterprise, price per square foot being the principle metric of evaluation. Nobody seems to have cared about how the actual house turned out, what it looked like, or how it was built.

But that is a man's perspective. I have no doubt that a woman might have a different opinion. But after two years of seeing house after endless house, I can honestly say that I didn't like a single one. They were for all practical purposes the same to me and didn't remotely reflect my priorities.

If You Build It, It Will Still Suck

That situation briefly led us to consider building our own house. Looking into it led me to the reason (I believe) that the market is this way.

I was discussing the idea with an architect friend of mine, and he was talking about all the different ways houses can be built. But when he got into the financial part of it, I think I found the reason that they are all the same.

Almost everyone borrows the money to build a house. Because they do, the bank has a stake in the outcome of the project (in particular, its broader marketability, should the borrower walk away) without really having a stake in the house. In fact, he told me, they will send people to the site while it is being built to make sure that it is being built according to the specific plans that the bank required of the borrower to get the loan in the first place. In other words, the bank is in control. Satisfying one's creditors must necessarily take precedence over taste when the building is done on another's dime. The bank will simply refuse to fund a project it doesn't like. Which is understandable.

But of course, what a creditor doesn't like is risk. So, every house is going to come out more or less like others built in the same period and area, however much a homebuyer might like something different, in order to satisfy the conservative tendencies of the lender. Forget about subdivisions, as those builders have absolutely no interest in the houses they produce so long as they get good lending terms and the houses sell.

That is to say nothing of building codes.

The overwhelming preponderance of this type of financing has caused the industry to develop very homogeneously in a physical sense. Furthermore, since prospective buyers are bidding against one another and massive leveraging is accepted practice in the market, it is extremely difficult for a cash buyer to compete. Practically all homes are built the same way in a given area, so it is difficult to find a builder who even knows how to do things any other way, even in a theoretical sense. Forget about actual experience.

The finance aspect of the thing made me give up on the idea. As the bible says, the borrower is slave to the lender. I could see immediately who was in charge, and they were not going to go for any of my crazy notions of what constitutes a good house. Why go to all the trouble of building a house you don't want when you can just buy one cheaper?

Debt Reigns Supreme

Note that I'm not trying to be one of these people who thinks himself the authoritative arbiter of taste. If people really want gargantuan closets and bathrooms, and dumpy, poorly constructed houses then they should have them. I don't want to interfere with that or deprive people of the ability to choose for themselves. They can live in big styrofoam igloos if they want.

But it seems to me that two things are wrong. One is some kind of social pathology as far as the design of the house is concerned. I do not know exactly what is causing it, but it clearly includes something between the sexes as the house is becoming increasingly feminized. Sorry, but men don't typically care about walk-in closets. It reminds me of the kinds of crazy behaviors that one sees in isolated cultures that have been taken over by some bizarre sexual custom or fashion, granted in a bit more subtle manner.

Please, don't get me wrong on this.  Every society should have its Arnold Schwartzennegers and Elviras, but when everybody is either a steroid pumping bodybuilder or a Goth fashion enthusiast with a silicone enhanced figure because they think they have to just to fit in and get by, something somewhere has gone off the rails. That is not what a free and healthy society looks like. Individual tastes and preferences are one thing, and everybody should have and enjoy their own. But when an entire society's sense of proportion and balance has been pushed to an extreme far outside what has long stood as an objective ideal, something has gone very wrong. I could not say that if there were no objective ideals.

The second is that the trend is being pushed with a very heavy hand by the fact that home purchases are almost universally financed by third parties. I understand the financial benefits of this arrangement, but it is disturbing to me the rigid, unhealthy homogeneity that the arrangement seems to be producing, and the funneling effect it has of moving society in what would otherwise be an unnatural direction. It also bothers me that practically everyone opts for the financial advantage rather than pursuing his own ideal.

Has money become that important? Capitalist orthodoxy has it that entrepreneurs are supposed to be risk takers. Where is the risk taking here? I see an almost completely undifferentiated market, with the mean and standard deviation being set by the gatekeepers of available lending.

Maybe I am mistaken. Perhaps homebuyer tastes really are that homogeneous, and my tastes are just strongly at odds with theirs. It wouldn't be the first time. Most people I talk to seem to think I'm crazy, and everything is fine and reasonable. Perhaps I am seeing ghosts where there are none. But I can't help but get the feeling that I am observing a market pathology, yet another manifestation of the ills of inflation. It is said that in its later stages, obsession with money and markets begins to take control of everything, and I can't help but think that a cash society would not have produced this outcome.


Maybe all of this is obvious.  I probably would have looked a lot smarter if I had written this in the buildup of the bubble rather than after the crash, when practically everyone can see that something has gone wrong. On the other hand, a nice crisis has a way of focusing the mind and bringing things into contrast. It would be nice to learn something from the fallout.

There are two possible ways to get what you want in the housing market. Build your own and pay cash, which probably won't even work, or want the same ugly, dysfunctional houses that 'the market' produces on its own. My guess is that this is one example of many, many 'ways things are not supposed to be.' It's high time -- way past time, really -- that the present money and banking system were scrapped. I, for one, would like to see less of this kind of insanity, and a house just be a house again.

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