By Robert J. Samuelson (China Daily)
Updated: 2008-01-02 07:46

Down the block from my home in Washington, workmen are finishing a new house. It replaces a small bungalow that had measured about 139 sq m. The new home has a covered front porch, two fireplaces and a finished basement. It comes in at just under 529 sq m. What is it with Americans and their homes?

Everyone knows the direct causes of the present housing collapse: low interest rates; lax mortgage lending; rampant speculation. But the larger force lies in devotion to homeownership by Americans. It explains why government officials, politicians and journalists (including this one) overlooked abuses in subprime lending.

The homeownership rate was approaching 70 percent in 2005, up from 64 percent in 1990. Great. A good cause shielded bad practices. The same complacency lulled ordinary Americans into paying ever-rising home prices. Something so embedded in the national psyche must be okay.

"House lust" is what Dan McGinn calls it in his book by the same title. McGinn documents - sympathetically, for he dotes on his own home - our housing excesses, starting with supersizing.

In Sweden, Britain and Italy, new homes average under 93 sq m. By 2005, the average newly built US home measured 226 sq m, and there were many double, triple or quadruple that. After World War II, the first mass Levittown suburbs offered 69 sq m homes.

"We are not selling shelter," said the president of Toll Brothers, a builder of upscale homes. "We are selling extreme-ego, look-at-me types of homes."

In 2000, Toll Brothers' most popular home was 297 sq m; by 2005, it had grown 50 percent to 446 sq m. These "McMansions" often feature marble floors, sweeping staircases, vaulted ceilings, family rooms, studies, home entertainment centers and more bedrooms than people.

In a nation of abundant land - unlike Europe and Japan - our housing obsession is understandable and desirable up to a point. People who own homes take better care of them. They stabilize neighborhoods.

In a world where so much seems uncontrollable, a house seems a refuge of influence and individuality. In a 2004 survey, 74 percent of would-be homebuyers preferred a new home to an existing one.

One reason is that a new house often allows buyers to select the latest gadgets and shape the design. The same impulse has driven the remodeling boom, which totaled $180 billion in 2006.

"The most exciting thing was just watching the house go up piece by piece," said one buyer of a new $380,000 home in Las Vegas. He added a pool, hot tub and deck.

Homes are a common currency of status. As McGinn notes, many jobs in an advanced economy are highly technical and specialized.

"I could tell you more about (my job)," a woman informed him at a dinner party, "but you won't understand it and it's not that interesting."

By contrast, a home announces that, whatever the obscurities of your work, you have succeeded. There is a frantic competition to match or exceed friends, co-workers and (yes) parents.

Some house lust is fairly harmless. Several websites -www.zillow.com, www.realtor.com - provide estimated prices for homes. People can indulge their nosiness about the finances of their neighbors, friends, co-workers or relatives. They can also fantasize about their next real estate adventure by watching a cable channel devoted to houses, home buying and renovation.

Other effects are less innocuous. Although house prices recently exploded, they have increased only slightly faster than inflation since the 1890s, concluded a study by Yale economist Robert Shiller. The recent sharp run-up may imply years of price declines or meager increases.

"Buying a bigger house isn't an investment," warned Wall Street Journal columnist Jonathan Clements. It is "a lifestyle choice - and it comes with a brutally large price tag". Not only are mortgage payments higher; so are costs for utilities, furniture and repairs.

Worse, government subsidizes these supersized homes along with suburban sprawl and, just incidentally, global warming. In 2008, the tax deduction for mortgage interest payments will cost the federal government $89 billion. The savings go heavily to the upper-middle class and wealthy - the least needy people - and encourage ever-larger homes.

Even with energy-saving appliances, those homes are likely to generate more greenhouse gases than their smaller predecessors. As individuals and a society, we have over-invested in housing; we would be better off if more of our savings went into productive investments elsewhere.

Sociologically, the "housing bubble" resembles the preceding "tech bubble". When people paid astronomical prices for profitless dot-com stocks, they doubtlessly reassured themselves that they were investing in the very essence of America - the pioneering spirit, the ability to harness new technologies. Exorbitant home prices inspired a similar logic. How could anyone go wrong buying into the American dream? It was easy.

The Washington Post Writers Group

(China Daily 01/02/2008 page9)