(Originally posted on 2007-11-20)
The 2007 Subprime Mortgage Financial Crisis is well underway, and what does MasterCard do? Present me with an ad about using a credit card to get busy with some big-time housing market speculation (see a cobbled-together version of it below). Priceless.
To be sure I don't see many enemies there. The market is non-evil. It just is. Real Estate has always been a very risky business. Why? ...because buildings aren't liquid capital, and houses eat up a large part of one's income, so one isn't diversified when one buys a house. What do I call a non-liquid, non-diverse investment? I call it a gamble. Still, if you really want to live in that house, and that house is for sale, then you will need to buy it.
Me? I tend to prefer to go the Coliag route, which is to rent while putting the difference between what I pay for rent and what I would have paid for a house into diversified funds. Coliag (not his actual name) did so well this way that he was buying things like cars, computers, and photographic equipment with cash... before the age of 44, and he stilled had a great retirement stash. The man was frugal and it paid-off, plus he didn't need to worry about mowing the lawn.
Yes, some folks have done really well buying and selling their houses, but guess what? It's still a gamble, and the baby boom that drove the long-term-run-up is over.
My first house purchase was in Plano Texas... just North of Richardson's Telecom Corridor... just before the Dot-bomb-bubble-burst. IT is a luxury, and spending on luxuries slows down when the overall economy slows down. Yes, I know, "But computer jobs are important." ...but they are not. If I run a foundry that makes car parts, and business is slow, then do you think that I am going to buy more aluminum, or complete my new HR IT project? That's the real story of the dot-bomb implosion. The media focus on the failing dotcoms, but that didn't account for most of the layoffs. We had too many computer programmers, working on too many projects, at too many companies, that were still needing to "buy their aluminum". In a slowdown-like-that the luxuries go first. My industry went first.
I survived one-layoff-per-quarter for 5 years at two different companies, but when I finally was "affected" it was certainly not within my control: the company that I worked for went from around 2500 workers to less-than 250 during my period with them. No-one is safe when the cuts run that deep. Folks said, "Why aren't you looking for another job?" and then looked at me like I was some kind of freaky alien when I said: "There aren't many available jobs for what I do, so I am going to focus on doing the best job that I can at my current position."
- I lost my job and most people that do-what-I-do were already flooding the job market. I could no longer afford my house because I had too-little work (I never completely stopped working).
- My foreign national neighbors, most of whom were great engineers, were forced to go home, when they also lost their jobs, and couldn't afford to pay Dallas Texas real estate prices, and also live in India, or wherever, so many of them were forced into foreclosure. This drove down the value of my house. So I couldn't afford to sell it.
- I could not afford to rent-out my house because any potential renters could simply buy my neighbors' houses for peanuts. I was very disappointed with NPR's recent article about renting-out your house if you can't sell it. The interviewer had a good experience doing that... when the market was hot... and the article implied that Y'all will have the same experience now. It's just not so.
- The housing market in my area-of-town completely crashed as developers put their new houses on the market because these builders were also competing with the foreclosures. Spec builders make building decisions based on yesterday's demand: where "yesterday" was around five years ago, but the housing market moves up-and-down much faster than that. (This is is the type of thing that makes it tough to sell a house in Phoenix these days.) Plus, new houses are luxuries, and "spending on luxuries slows down when the overall economy slows down." <-- I just quoted myself! (Why 5 years? They need roads, and sewers, and utilities, and government approvals, and so on.)
- ...then my car got totaled.
- ...my spouse divorced me (actually that happened before the layoff).
- ...my arthritis got worse.
- ...and someone kicked my dog. No, I just made that part up. I didn't have a dog.
How much did I lose by "owning" that house for three years? It cost me $100,000 more (two closings, two residences, and a 30,000 loss in value) than I would have paid for renting one apartment, but hey, my (former) spouse wanted that house, so we bought it. I now had no job, no family, and no savings. Swell.
My plan was to work as much as possible while spending my free time either looking for better work or riding my motorcycle to Wendy's for that great dollar menu. Really.
I followed every lead. I went to a Diversity Job Fair like this one (because how diverse would it really be without at least one white male? That's a joke. Actually, it was because I was going to every job fair.)
So I go to the hotel that's hosting the job fair, and they have 30-or-so companies arrayed around a large conference room. Two of those companies were tech companies. Hundreds of people were in line to speak to those two companies. One of the companies was looking for Math folks with top-secret government clearance to work on a flight simulator or something (not a good fit for me), and the other one wasn't taking resumes. They simply asked every person to go to their Web site. Well... Well, why not talk to everyone else?
The Wal-Mart recruiter that was there explained to me that she was hiring night stockers for the Christmas rush, and I told her that I loved doing night stocking when I worked in retail, plus that I would really like to move to Bentonville Arkansas to work for the IT department there. She told me that she would take my resume back to Arkansas. I assumed that it would just be tossed. It wasn't.
Wal-Mart called me up. I had a few interviews. They asked me to fix something that couldn't be fixed in the way that they wanted it to be fixed (this "something" happened to be listed on my resume). I told them what could and couldn't be accomplished. I have integrity, so I was clear about the situation.
During one of the interviews, Jeff (the manager) spins around in his seat and types "W. Paul Caligiuri" (my old name) into Google and finds the Web site that I set up to sell my house. He laughs and says: "Did you put this up yesterday in order to impress us about how confident you are about this job?" or something like that. "Well... No." I didn't explain that the Web site had been up for years. Bentonville Arkansas had a booming economy. So that's how I ended up in Arkansas: the best motorcycling-place in the US of A.
I had to pay for the Texas house for 1.5 years of my stay in Arkansas. It was simply that hard to sell. I would go down there every other weekend and work on it.
I suspect that lots of folks are being burned by the mortgage crisis, but that we only hear about the fringe cases because the fringe cases make for better stories (just like in the dot-bomb days). Also, Real Estate is:
- A gamble
- ...and a luxury, and "spending on luxuries slows down when the overall economy slows down." <-- I just quoted myself!
Oh, and the MasterCard ad was a really bad idea on someone's part.
There are lots of bad ads out there. They don't get made "because they work", they get made because advertising firms know more about selling their own services then they know about selling their client's products.