by Calculated Risk on 9/26/2009 08:33:00 AM

From Peter Hong at the LA Times: Don't bank on your home as an ATM (ht Ann). A few excerpts:

For generations of Americans, a home was seen not simply as a dwelling, but as an engine of personal wealth. That view was promoted by the home-building and real estate sales industries as well as the U.S. government, which subsidized home loans and provided tax deductions for mortgage interest.
...
Now, however, the worst housing crash since the Great Depression may mean that a home purchase ought to be considered with the same warning issued to investors in securities: Past performance is not indicative of future results.
...
Leslie Appleton-Young, chief economist for the California Assn. of Realtors, said that the state's median home price used to rise and fall roughly in line with the national median. ... "It didn't really get out of whack until about four or five years ago," she said. "It was tied into financing."

With lax mortgage standards a thing of the past, at least for now, Appleton-Young said, home price increases will be more moderate in the future, which should lead people to "a much more realistic assessment of why they're buying a home. They'll do so more for the consumption value; it's a place to raise your family, not your nest egg."
...
"In the period post-World War II, you bought a home, gave your family a great place to live relative to the alternatives, and if all went well, in 20 years you didn't have a mortgage," said [Thomas Lawler, influential housing consultant and a former Fannie Mae official]. "That's what people ought to go back to."

It makes sense for people to buy houses as a place to live, not as an investment.

Perhaps Leslie Appleton-Young has lost track of time, but four years ago was 2005 - the peak of the housing insanity. She probably meant four or five years before 2006 (when prices peaked) as to when house prices in California started to detach from fundamentals.