On falling home property prices and social psychology...

Human psyche is a funny thing. The current collective doom and gloom, as a result of the falling residential prices, is a case in point.

It's often cited (and is often the case) that our home equity holding is one of the largest purchases in our lifetime. For most of the people, it's also the one primary residence that we would well spend most of our life in. In other words, it's a long term holding/investment. In the bygone days, our generations past would toll away, save up to pay down the mortgage, and would have a mortgage-free property by the time they're retired. With the once new (and now defunct) high finance of home equity loan, our home has become our not-so-little piggy bank that a lot of people cash out to finance their high life that they couldn't otherwise afford and they shouldn't have taken, in the first place.

As in most other long-term investment, we're supposed to sit tight in hard times, and ride it out, which is pretty much what I do right now. Afterall, what does it matter to me now, if I have not considered selling our home now? The only difference is, I would feel poorer, since the market value might not be rising 10-15% every year; and home equity loan might not be as forthcoming (but I never have any intention of taking out home equity loan anyways). For those who still can afford the mortgage payments, I would argue that the falling market value really should have no impact to their immediate life style.

But of course that's not meant to be. Human psychology is at work, and people take their feelings very seriously - BOTH men and women. They feel poorer since the readily available piggy bank with cash is slammed shut. If these homeowners are not forced to sell (for failing to make mortgage payments), their home is still what it is - a home.

The only difference is that, a lot of those who complain about the current mortgage mess are the ones who are encouraged into buying a home (remember the Ownership Society by Bush?) that they couldn't afford and shouldn't have jumped onto the bandwagon, to start with. For those who think the party will go on forever, taking out exotic loans, and now complain that they would not be able to afford interest-only loans (like the homeowner in the article who gloomily commented that his mortgage will be $12,000 a month, nine years from now), should they get help? I don't think so. It's exactly like people going to casino, expecting to strike it rich fast, and when they lose all their money on the roulette table, they complain about the casino taking their money. The air of entitlement by people like that sounds disgusting to me.