A major de facto government-supported investment vehicle for U.S. households has been buying a home. Unfortunately, sinking your earnings into an investment that’s leveraged, at best, 4-to-1, localized in exposure, and highly illiquid doesn’t always work out (boldface mine):
Yet Mr. White, like many people here, says he is as good as trapped in this poisoned city. [Flint, MI]
…Untold numbers of them are desperate to leave. But few see a way to pick up and move to a place where the water that flows from the taps is clean and safe.
Homeowners have little hope that they will be able to sell….
“I couldn’t rent out my house now if I wanted to,” said Joyce Cruz, 35, a homeowner and the mother of five. “Who would want to move to Flint?”
…Few “For Sale” signs are visible on Flint’s worn-down streets, but brokers said that was not because there was no interest in selling.
Chris Theodoroff, the president of the East Central Association of Realtors in Michigan, said that before the water crisis, properties in Flint were still “a tough sell,” with houses languishing on the market and homeowners underwater on their mortgages. The median value of owner-occupied homes in Flint was only about $41,700.
“We never recovered completely in the city from the economic downturn,” he said. “What this did was absolutely stop any momentum we had.”
Just last week, Mr. Theodoroff came close to a sale on a $25,000 house in Flint, but the buyer backed out at the last minute, citing fears over the city’s water supply.
While a poisoned water supply is an extreme case, as delayed maintenance costs in suburbs start to get paid, a lot of housing is going to be worth less. Not worthless, like Flint, but worth less. To the extent that housing prices are considered a key component of retirement security, this could be a real problem.