Federal Reserve: Finally, Going Broke Has Become Affordable

I don’t want to believe that I am the only one amused by this article: “The Return of the Affordable Starter Home.” The opening paragraphs from the article are exactly what I would expect from a story in The Onion. But it’s real, and very serious in its tone.

Surging prices have almost closed off the new-home market to young buyers like Brandon and Quincey Lindemann. But the Denver-area couple has found a way in.

The Lindemanns paid $350,000 in October for a three-bedroom house at Tri Pointe Group Inc.’s Terrain, a new Castle Rock, Colorado, community designed for first-time buyers. While the home has press-board kitchen counters and a yard too small for the children the Lindemanns plan to have, it’s almost 30 percent cheaper than the average for a new house in the area.

“We were willing to sacrifice some luxury to have some solid equity in a home,” said Brandon Lindemann, 25, an auto-repair shop manager who plans to install tile flooring himself. “We couldn’t afford much more than the basic, but I’m a pretty big do-it-myself person.”

What stands out, first of all, is that a $350k home is even tagged as a starter home, let alone being hailed as “affordable.” Furthermore, a $350k home has press-board counters and a yard barely capable of sustaining a child’s plastic pool. Also, the buyer is 25 years old and an auto mechanic. An auto mechanic buying a $350k home? The glorification of false prosperity has become so unrestrained and routine that the bubble mentality is the accepted orthodoxy. Decades of conditioning the masses on the virtues of living in debt to live beyond one’s means has made a permanent mark on American society. The “American Dream,” as it is currently defined, is being doled out equitably to all who apply for their fair share of affluence.

A “homebuilding analyst” from Bloomberg is quoted in this article, and it is almost as comical: “The recovery in the move-up segment is getting long in the tooth — there are only so many buyers who can pay $400,000 and above.” This is written as if $400k is the point where home prices are considered to start getting a bit pricey. Inflation is not to be feared, but revered. The conditioning of the American mindset triumphs over the realities of prior experience. The meltdown of 2007-2008 and beyond never happened. It passed, therefore it ain’t.

This article is so full of ‘money’ quotes, with this being another one to point out.

Most builders continue to chase larger profit margins by catering to move-up and luxury buyers. Large builders such as Lennar Corp. and PulteGroup Inc. continue to focus on wealthier customers rather than first-time homeowners.

The words “affluent” and “luxury” and “wealthy” are tossed out without regard as to their actual definitions. Actually, the vast majority of these buyers are not wealthy at all, but it is true that they are luxury buyers, thanks to the Federal Reserve’s monetary policy, the US government’s political policies, and the political manipulation of financial markets. These are middle-class, high time preference buyers who have been conditioned to accumulate debt to live beyond their means in a home they believe represents an “investment.”

I found numerous articles on the Internet that describes this Castle Rock community in Colorado as breaking new ground to make homes affordable for millennials. These $300-$500k homes are described as “low-cost,” and of course, the millennials who mortgage their future away are referred to as “affluent.” Welcome to Meltdown, Part II.