10 things I might have done differently over the past decade or two if I knew paying my mortgage would become optional:

1. Buy a house before I had a steady job, with the small amount of money I had saved for a down payment (or maybe none at all – if they would give me the loan)
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2. Buy a bigger house than I could afford (if they would give me the loan)
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3. Buy a house in a fancy neighborhood I couldn’t really afford (if they would give me the loan)
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4. Take extra vacations with the money I didn’t have to spend on my mortgage if I stopped paying it, while living in the bigger house in the fancier neighborhood I couldn’t really afford
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5. Buy extra toys with the money I didn’t have to spend on my mortgage if I stopped paying it, while living in the bigger house in the fancier neighborhood I couldn’t really afford
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6. Buy a second house (if they would give me the loan)
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7. Buy a third house (if they would give me the loan)
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8. Borrow against houses 2 & 3 (if they would give me the loan) to take additional extra vacations with the money I didn’t have to spend on my 2nd and 3rd mortgages if I stopped paying them
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9. Borrow against houses 2 & 3 (if they would give me the loan) to buy additional extra toys with the money I didn’t have to spend on my 2nd and 3rd mortgages if I stopped paying them
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10. Rinse and repeat items 1-9?

In the “old normal” some of the steps above (especially #1) might have been considered “taking a risk”. You know, good old fashioned capitalism, and trying to get ahead. I’d work my ass off to make sure I could get ahead of those payments one way or another, and get on the track to building equity in my home, and eventually, to having a solid piece of wealth I could call my own, and potentially use as collateral or capital for future investments or living expenses. I’ll chalk up that mistake to being timid – I should have jumped in early either way.

In the “new normal” all the steps above (especially #2 – #9) have apparently been backstopped and guaranteed by the Federal Reserve (through QE and zero-interest rate policy) and our government. Who would’ve known you could do all those things with no intention of actually having to pay for them, and without having to take on any risk of losing money?

Apparently other people knew it, just not me. Imagine not having to work for a living – just buy a house and get paid to live in it. It almost sounds too easy. Silly me – always imagining things to be more difficult than they really are. Now I get it. Buying a house (or any levered asset for that matter) with debt isn’t about establishing a budget or a business plan for how you’ll actually pay for it – it’s about banking on a bailout. The idea of paying down debt and using your own judgment on your ability to pay down a mortgage based on savings/income (including allowing for periods of unemployment) while weighing against supply/demand factors (assuming others are using their own similar, rational judgment) as a basis for pricing and valuing an asset? How quaint.

Now I understand why prices keep getting bid up – it’s easy to offer “any price” when you have almost no skin in the game, no intention of making payments when times get tough, and no real sense of obligation to actually pay back the loan balance. In that case, I’ll offer $5 million sir, for your shack, and I’ll pay you next Tuesday.

Some examples of this:

Millions Of Homeowners Have Not Made Mortgage Payments In Years
(June 9, 2011 – The Consumerist)
https://consumerist.com/2011/06/09/millions-of-homeowners-have-not-made-mortgage-payments-in-years/

Should We All Just Stop Paying the Mortgage?
(October 16, 2008 – WiseBread.com)
http://www.wisebread.com/should-we-all-just-stop-paying-the-mortgage

Some homeowners may get a free house: No payments? No problem!
(November 6, 2015 – msn.com)
http://www.msn.com/en-us/money/realestate/some-homeowners-may-get-a-free-house-no-payments-no-problem/ar-BBmSn2H

“mortgage modifications…to distressed borrowers, many of whom have not made mortgage payments in two years.”
(May 17, 2016 – NY Times)
https://www.nytimes.com/2016/05/18/business/dealbook/housing-agency-plans-mortgage-sale-reforms-after-criticism.html

I’m a compassionate guy, generally speaking. You have to feel for folks who genuinely got in over their heads and didn’t anticipate the hardships of making those payments every month. It gets harder to stay compassionate when you realize the reason you keep getting outbid for properties is because so many of these “delinquent” owners are sitting in their homes, not making payments, thereby keeping supply off the market, which is in turn helping to re-inflate prices to artificial levels for legitimate would-be buyers with hard-earned savings, down payments, and incomes to bring to the table.

Combine these factors with the residual “moral hazard” effect from the post-2008 bailout era, and you have buyers with minimal down payments further bidding up prices, knowing in the back of their minds it doesn’t really matter what they pay because they’ll be bailed out eventually (or allowed to live mortgage-free like those who came before them) and have little to lose. How do you compete with that if you’ve worked hard for your money? Why should you have to compete with that? Why should you ever want to? What’s the point of having a home “price” anyway if you take the market forces out of the equation? At a certain point, might as well just go full-on communism and simply assign people places to live based on their rank & status. Sure beats the waste of time spent on artificial “bidding wars” in a so-called “market” – and worse, actually “working” for the privilege.

For those who have come to know the “tea party” as a brand-name for those silly deplorables who know nothing of what they speak, lest we forget the modern incarnation of this phrase was actually first coined by CNBC’s Rick Santelli back in 2008, essentially in response to this very topic of housing market folly (and had little to do with the sentiment that seemed to hijack the movement later on):

http://www.businessinsider.com/rick-santelli-tea-party-rant-2014-2

For guys like me and Rick, some will say “sour grapes”. In reality, I’ll be just fine personally (as will Rick), one way or the other. But for a system that supposedly espouses the virtues of hard work, independence, perseverance, and equal opportunity, there certainly appears to be an ongoing layer of hypocrisy in our approach to the housing market, which still hasn’t really changed a whole lot since the dark days of 2004-2008.

My “equal opportunity” to buy a house at a fair price based on my moral understanding of the obligation to pay back debt certainly can’t be considered “equal” when competing with buyers who clearly don’t share that sense of obligation. Relatively speaking, this is a major economic “fail”.