A friend who has been in the mortgage business for over 15 years recently made an interesting point about purchasing homes. "Why do we call it a 'starter' home?" he asked. "Why can't we just buy a 'home?'" Of course, we both suspected that the term probably has its genesis in some marketing corner of the realty industry. Though I could not locate the exact origin of the term, I find it an interesting term nonetheless. As my broker friend intimated, the term used to address the first purchase acts as a proleptic assumption of the "upgrade home," "bridge home," "dream home" and "retirement home." "Why," he asked me, "can't people just buy 'a home' with no expectation of moving on and up?"
It's a fair question--and one that I suspect is being examined these days in the minds of many. I recall on a recent ride with my daughter (who is in college) as she pointed out a simple little bungalow in a "starter neighborhood" and said, "That would be my dream house right there, so simple and small, but elegant in a way." I wondered to myself if that sentiment will hold with the next generation. Or have they seen their boomer parents stretch for more and more and question the chase--already coming to one of those whipsaw conclusions that seem to swing from generation to generation. "Bigger," "better" and "more" have been unquestioned cultural drivers for millions of people. Some from the "chasing" generation are also now calling those ideas into scrutiny, just as their offspring are.
Five to 10 years ago, I would find myself somewhere between amazed and aghast whenever I would see a newbie in the financial services world putting on pretenses of wealth--thinking it would somehow attract wealth to them. They drove luxury cars, with payments sometimes equal to a two-week check, joined country clubs where they couldn't pay their tab, bought McMansions with empty rooms and orange crates for furniture. These people looked impressive as long as they were being viewed from a distance. They were following a central rule for money-centered living, "To attract wealth, give the appearance of wealth." But there is a price to pay for keeping up appearances.
RealtyTrac reported that more than 36,000 $1 million-plus homes were in some stage of foreclosure in 2011, a much bigger share of foreclosures than in the past. It is also interesting to note the relative surge in foreclosures of the $2 million-plus home market. This luxury group's foreclosure rate had grown faster than any other income group. Biting off more mortgage than one could handle was not excluded to the working class neighborhoods.
These luxury foreclosures weren't just the mini-mansions that proliferated in many upscale suburban communities. These homes were often on waterfronts, behind exclusive gated communities and in tiny towns where such financial embarrassments rarely occur. The disease that created this crisis was thinking we needed better, bigger and more, coupled with an enabling credit system that paved the path to ruin with all-too-easy money.
Entire industries exist for the purpose of propagating the belief that we need more than we have. And the "better, bigger, more" bug doesn't run its course and leave your system once you get all the money you need. Experience proves the phrase "all the money you need" oxymoronic when put to the test. There simply is no amount that leaves people satisfied if they buy into the world's system of being "really rich." There is no end of wanting more. Simply wanting will always leave you wanting.
Billionaire500.com was launched as an ultra-exclusive luxury magazine. It's a weekly updated look at all things mega-luxurious, aimed at the time-poor but megarich individuals that roam the world in search of their next yacht, jet or perhaps supercar. The publisher, Derek Gregory, says, "Our readers want to read about the new £850,000 Bugatti, but they also want to read about superyachts, private jets and expensive watches, because that's the world they live in." Gregory concluded by saying, "Our aim is simple. To produce a worthwhile weekly magazine aimed at the billionaires of this world. If along the way we pick up a few thousand millionaire readers and a few thousand aspiring millionaires who also enjoy reading about the most exclusive products and services available--then that's great too."
Gregory is assisting the "more-minded" in studying the lifestyles of those richer than themselves so they can imitate the nuances, the habitats and the wines they drink. These chroniclers and purveyors of wealth understand completely the importance of looking richer than one really is. This particular publisher is banking on millionaires wanting to look and act like billionaires--the view is always upward. Do we really understand what is going on in this game? The game has no end. There is no stopping point. No place of contentment. It's all about appearances and getting noticed. No matter what rung of the ladder you're on, it is still a ladder and is designed for climbers. And the higher you climb, the greater the risk of falling.
No one really knows where we are headed. With global markets and currencies in vulnerable states of trepidation, with the USA at unprecedented levels of national debt and with uncertainty filling the welkin above us, it is probably as good a time as any to examine how much we really need. All the pundits and experts say we need to spend our way out of the recession we are in, but a lot of the people I talk with are thinking about decreasing their obligations and lightening their loads. How much house, how much car and how much of everything we need is a part of that conversation. The markets will adjust to the realities. The real estate market isn't going to fall apart if we decide that we don't need a bigger, more expensive home.
The bigger, better, more ideology played no small part in getting our economy to this place, and I suspect it will be a more contented and realistic ideology that will bring us back to solid footing, both individually and corporately. Have you ever met people who spent their lives in one house and were still happy to be there? They understood the meaning of contentment and were simply grateful to have a place of their own. Being more focused on the noun than the adjective, instead of seeing it as a "start," they saw it as a home.