My brother's comment on my ranting yesterday rang true with me. And so, prompted by his comments, here's some more grumbling:
When Nancy and I were looking to buy our first house, interest rates seemed to be climbing on an almost daily basis. In late February of 1980 we found the house that we wanted and began the process of applying for a mortgage. I had been working for a state university since September of 1976, originally as a computer operator and then as a programmer/analyst, and Nancy had been working as a software engineer for a local aerospace defense company since the summer of 1978. Both jobs with decent pay and benefits and stability. It took weeks to get the loan approved -- more than two months passed between our original application and the actual closing of the purchase. Fortunately we had been able to lock in an interest rated of "only" 12 3/4 percent. I said "only" because by the time we closed the interest rate had hit 14% (and would climb even higher). So we were delighted to only have to pay 12.75% (although they also insisted that we had to carry mortgage insurance which I believe cost us another half a percent).
And you know what? There were no politicians weeping tears (crocodile or otherwise) over our struggles. No sob-sister journalists (of any gender) wrote heart-wrenching stories about the plight of first-time home owners. Oh, sure, there were stories about the effect of the high interest rates on home sales (and car sales and any other big ticket items) but no hand-wringing and tear-jerking over the plight of potential home buyers complete with wrenching stories about how people had to continue to live in apartments because they couldn't afford to buy a house.
In anticipation of buying a house, I had gotten rid of my car in '79 and commuted to work by bus, leaving us Nancy's battered several year old AMC Gremlin (which she had bought used when she had graduated from college). We couldn't have survived our mortgage payments if we had had car payments for a new car or credit card payments from buying a lot of fancy crap. Our television was an old set of her father's that didn't work and had been stashed in his garage. He gave it to us and we took it to a repair shop that was able to get it working again.
Well, we did okay with that vintage 1917 house. Over the years we put money into it (a new roof on the house and the garage, insulation, electrical work, a new stove and new gas service for it, a new floor in the kitchen, wall-to-wall carpeting in the living room and den, remodeled the attic, new dormer windows on the attic, had work done on the front porch, new electrical service and a lot of rewiring, a new furnace, a new hot water heater, new basement steps, etc.) When interest rates fell, we refinanced, switching to a fifteen year mortgage. At one point in the early nineties our homeowner's insurance company (which, along with other insurers, had lost a lot of money when Hurricane Andrew hit Florida in 1992 and the damage and the replacement costs proved to be higher than expected) insisted on reviewing the current-day replacement cost of completely replacing houses and determined that our house was worth two-and-a-half times what we had paid for it in 1980.
That was a high point in the value of our house.
The area where we were living was struck a double blow. There was a decline in the fortunes of IBM, which first was moving people to other locations (a process that dumped hundreds and hundreds of mid-market range houses on the market in a relatively short period of time) and then began to do what once would have been unthinkable for IBM, they began to have massive layoffs. In the meanwhile, the collapse of the Soviet Union caused a collapse in the fortunes of the aerospace and defense industry and General Electric and Link Flight Simulation and other defense contractors began to have layoffs and cutbacks. By the time Nancy and I attempted to sell our house to move to Rhode Island, the Broome County real estate market had crashed, stripping away a greater percentage of market value than the current real estate slump, the difference then being that the crash was localized, not nation-wide. That, of course, made it even worse for us -- the value of the house we were attempting to sell had crashed, but the price of housing where we needed to buy had been higher than the Broome County area to begin with, and was heading upward.
We put our house on the market in 1995 for about sixty percent of what it was insured for and did not get a single offer. (Looking back, we should have put it on the market immediately at half its value or less.) We ended up renting it (for less than what we were paying each month for mortgage and insurance and taxes) and then when our tenants left in 1998 we sold the house for four thousand dollars more than we had paid for it eighteen years earlier. Given the inflation over those years (plus all the money we had put into it), that means we actually took a significant loss. (The government, of course, taxed us on that "profit" anyway.)
And I bet you can guess that there was not one single politician worried about how we lost all of those tens of thousands of dollars. Not one. Nobody wrote any tear-jerking stories or gave a damn. That's okay. I really can't stand that crap anyway. Don't want a handout, never did.
It would, however, have been nice to have been treated as a valued customer when we were shopping for a mortgage in Rhode Island, but it felt as if they thought we were very untrustworthy characters who were, at best, only marginally creditworthy. I had thought that dealing with a local bank would be better than dealing with one of the megabanks, but I was sure wrong about that. A few years later, as interest rates had dropped, we refinanced (again going to a fifteen year mortgage), moving our business elsewhere (including our checking and savings business) and to this day I cannot see an ad for Washington Trust without cursing them for the shoddy way they treated us.
Like Charlie said, you work hard, you don't ask for any free lunch, you try to be sensible and responsible. (Until Jeremy got his 1999 Ford a couple of months ago, my 1999 Toyota was the newest car in our driveway -- Nancy's driving a 1996 Toyota and Jill's Honda is of similar vintage.) And then you end up paying through the nose to bail out Wall Street fat cats who gambled with fancy derivatives that they didn't really understand, with paying for pork projects pushed by pandering politicians who were the ones who demanded that mortgages be given to applicants who were not capable of handling them, with bailing out every company that is too incompetently run to compete with better run companies, with paying for earmarks and pork projects and outrageous payoffs to what are really special interests and political supporters. I know Nancy Pelosi has publicly proclaimed that her party won the election and so they are going to write the laws, but supposedly we did away with "to the victor belong the spoils" as a principal of government a century ago. And, in this case, we and our children and our grandchildren will be paying for this hogfest for decades to come. (And some of the payment will come in the form of inflation that will eat away any savings that they haven't been able to tax away.)
Ah, but spring really is coming...
And look below and see if we can laugh at them all...