Sunday, January 27, 2013

Essay Contest Submission by Rachel Burke

"How do Conservative principles impact the happiness and prosperity of all Americans?"

The Housing Debacle: An Illustration of how conservative principles impact the happiness and prosperity of all Americans by preserving value

by Rachel Burke, Midway, UT

Have you shopped for a home lately? 

If so, then you have probably seen first-hand a home that is gorgeous on the exterior, perhaps regally situated on a hillside or tucked endearingly by a stream, beckoning you with its wood cladding and stone masonry,  spacious three-car garage, and charming lawns and gardens.  With great anticipation, you eagerly open the door only to be greeted by what appears to be a crime scene:  walls used as punching bags, gaping holes where high-end appliances, fixtures, plumbing and electrical wiring used to be, smashed doors half off their hinges, and worse.

Who COULD do such a thing?  Who WOULD do it?  Why is this experience routine for any house-hunter today, yet virtually unheard of prior to the late 1980s?  ROBERT HANLEY, The New York Times, Published: July 30, 1990, wrote:  "Just months after the giddy boom years of the 1980's, with their rising home values, generous bank lending policies and firm optimism about the regional economy, banks have started declaring defaults on thousands of delinquent mortgages and forcing owners to scramble for new financing or face property losses.  Officials in the (NY metropolitan) region say they are stunned by the depth and suddenness of the increase in foreclosures."

Officials may have been "stunned," but  conservatives were not.  When banks were pressured to loan money to unqualified individuals; when individuals were allowed to buy homes with virtually no down payments or closing costs (thereby minimizing the individual's stake in his/her own home); when media and government officials convinced Americans that every one of us "deserves" to own a home (never mind that homes are in fact often owned by a mortgage holder, not a home"owner"; when unqualified borrowers were approved for loans to purchase homes newer and grander than those of families struggling to make ends meet under the conventional system, everything we knew about markets was turned on its head. 

What conservatives know is that when the tried-and-true principles of economics are ignored and replaced by regulations and manipulations of politicians seeking to impose what they idealize to be a system of fairness, havoc is sure to ensue and the laws of unintended consequences are ushered in.

Was your credit history scrutinized when you took out a mortgage on your home?  Did you make a substantial down payment when you purchased your home?   Did you take out a so-called conventional loan with the expectation that you would pay it back over thirty or so years?  Did you sacrifice your entertainment or vacation budget to achieve the goal of homeownership?  It is reasonable to expect that your house, purchased the "old fashioned way," will not be trashed when the time comes for it to be sold. 

When quality homes are destroyed because its occupant feels betrayed or angry because the market declines, the taxpayers who financed this fantasy lose multiple times.  Their hard-earned dollars are wasted when those dollars are invested into a system that cannot support its own promises and then wasted once again when a resale must occur at a minimal price after the home has been stripped of much of its value.  The undesired consequences of this ill-conceived notion of homeownership  "fairness" spread throughout the housing market and result in conventionally-purchased homes also having to be sold at significantly less profit to responsible homeowners.

When common sense conservative economic principles are abandoned in favor of utopian fantasies,  the recipients of these massive amounts of redirected largess, as well as those taxpayers who have foot the bill, both suffer the unintended consequences.

We are familiar with the Biblical  quote: If a house is divided against itself, that house cannot stand.  Likewise, if a house is not earned by homeowners working within a market economy, that house will not be cherished, respected, and valued.  It will not "stand" as the dream home it once was and the consequences of its well-meant but ill-conceived construction will spread like wildfire throughout the neighborhood and beyond.

Analysis of  the housing debacle is a timely and incontrovertible illustration of how the use of conservative principles and practices, such as conventional risk assessment and mortgages, benefit all Americans by preserving value, while the replacement of those practices with creative financing underscored by utopian illusions result in undesired, detrimental, wasteful and expensive consequences.

Work Cited:  Hanley, R.  (July 30, 1990).  After Heady 1980's, Homeowners Face a Hangover of Foreclosure, The New York Times,  Retrieved from:

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