Real Estate — Market Forces or Government Manipulation

I was griping a bit today to a coworker that rides the same bus to the same office building downtown.

My story. Bought a house 10 years ago for $116K with a city down-payment grant. Put new siding and windows on it — $20K. got it assessed at around $125K when we considered putting in a new driveway, but couldn’t get anyone to refi us because the down-payment grant sits on the deed  for 10 years like a second mortgage.

So we wait all these years, watching rates go down, counting down the time and hoping the rates are still down when our 10 years elapse. They are, and we search to refi. First assessment we get is $104K, and the terms are bad. So we do a second one. The assessment is $96K but the package is better.

I do an online search, and find out that while housing rates in the metro went down 10% in the last 5 years. the 10-year trend of our residence is up 3%. Yet our house is assessed for a decrease of 17%.

Then my coworker starts telling her story.

She and her husband bought their house for $96K. When they wanted to qualify for an energy efficiency grant they had it assessed — at $54K. They live just off the Chouteau Greenway being developed here in the Northlands these last two years. They received a $5K grant from the city, which only covered a part of the $20K in improvements they had to make to prevent the city from foreclosing on their house via eminent domain. The other option would have been to sell to the city — for 14K.

She then went on to tell about some other forces in the city affecting the property values in my area.

I started out feeling sorry for myself, like I was somehow the exception to the local trends. But then I realized there was a bigger picture, and we are part of another trend, one that involves government influence and manipulation.

Everything from the down-payment grant to quantitative easing and the use of eminent domain is just one example after another of the government’s attempt to manipulate the market forces, make its own choices of winners and losers, rather than let the market rise evenly on its own and make everyone winners as it floats all boats.

No intense logic in today’s post. More intuitive and anecdotal warnings.