1) The mortgage-interest deduction, tax-policy heir to the century-old general-interest deduction, serendipitously became social policy and the single greatest contributor to middle-class wealth in human history (not that there's much middle class in human history).
2) Over time, housing investment appreciates, and because it is usually highly leveraged -- via tax-deductible 85% and 90% and 100% loans -- appreciation is very rapid compared with other investments, such as zero-leverage, cash-on-the- barrelhead stocks and mutual funds ...
3) ... provided you don't sell in a down market, whereupon that leverage can absolutely kill you. If you put 10% down on a $500,000 house and the house's value drops 10%, you have zero equity. If the market drops 15%, you owe more than the house is worth.
That, in many markets, is exactly the situation we're in now. The bubble has burst. Hundreds of thousands of Americans are upside down on their mortgages or worse, the economy is shuddering and the real-estate industry -- predictably -- is freaking out.
Yes, your local Realtor -- who in bubble times was too busy raking in 7% commissions to notice all the press hype over the hot, hot, hot housing market -- is enraged that The Media are running doom-and-gloom stories about the burst bubble. How dare they! How dare they report, you know, the news.
So the National Association of Realtors is fighting back with ads reminding Americans of real estate's enduring value. Two TV spots portray cheerful, well-to-do young people moving into beautiful, spacious houses in leafy suburbs as the quintessential bottle-blonde real-estate lady walks around slinging enticing half-truths:
"If you purchase one of the millions of homes that will be sold this year," she says in one spot, "the National Association of Realtors wants you to know that you're making a good move -- for your family and for building long-term wealth. In fact, 60% of the home owner's wealth comes from their home equity."
In another spot, she notes: "Interest rates are low, and buyer opportunities have never been better."
Oh, there's no quibbling with what she says. Presuming the market is near the bottom, this is a swell opportunity for buyers. But where Realtors are concerned, it's wise to focus on what isn't volunteered. For instance, what about sellers, who in most cases are the Realtors' actual clients? If you grab a bargain now, the seller is probably selling in extremis -- an extremis possibly due to having been nudged by their trusty Realtor to bid higher, higher, higher during the bubble when they bought the place to begin with.
The campaign, in other words, is a perfect miniature of the inherent conflict of interest Realtors wallow in, like pigs in the sty, all the time. They have no incentive to perform due diligence for buyers. They don't even have incentive to protect their clients, the sellers. Their only interest is in closing the sale. Seven percent of $500,000 is $35,000, no matter who else takes a bath.
That's why they steer buyers to their own listings. That's why they have cozy understandings with appraisers and mortgage brokers. That's why they sniff the cat odor and declare it a piece of lint in the furnace. They are now and always have been salesmen posing as advisers. Please note that your CPA does not have a magnetized sign on his car door.
So if a slick TV commercial directs you to housingmarketfacts.com, caveat caveat caveat freakin' emptor. For facts you can really bet the house on, you might also check out rottenlyingsleazyrealtors.com.