The Pastor's Half-Million Dollar Home

The letter came in the mail yesterday, one of the few dead-tree items that wasn't just materially manifested spam.

It was Fairfax County's annual assessment of the value of our home.  It's not much to look at, really it isn't.  Our domain sits on barely a quarter acre, just a tick over 1,300 square feet of finished space, a squat and ivy-covered four bedroom and three-bath bit of suburbia.  It's brick and cinderblock and over-braced, sturdy and solidly built, representing state-of-the-art 1961 homebuilding.  The bedrooms are small, and the bathrooms are tiny.  But really, honestly, how large does a bathroom need to be?  It gets 'er done.

When we bought in, fourteen years ago, it stretched us.  Two part-time nonprofit salaries adding up to the equivalent of one and a quarter full jobs, as we juggled work and babies and sanity?  That meant that we really pushed to get our way to the $249,000 asking price of the house.  

Then things went crazy, and prices soared to wild levels.  In late 2005, houses exactly like ours were selling for $600,000.  Then...like everything else in that debt-fever housing bubble...they crashed, and hard, dropping back into the mid three-fifties.  It was not an easy time for those who came after us.  At the top of our street, a home still sits abandoned, where underwater peak-purchase owners fled and left it after their insane mortgage proved unmanageable.

And now, the values are up again.  According to the county, our home is worth sixty thousand more dollars this year than it was last year.  Four hundred and sixty four thousand, to be exact.  Not sure if that's oversharing, but hey, the data is out there.  My Zillow Zestimate is even higher, at just about five hundred thousand even.  Half a million dollars.

According to the values of our culture, this is supposed to be a good thing.  That's a minimum of another sixty thousand dollars of home equity!  And fifteen percent in a year?  Thats a pretty solid annual ROI!

But I can't see it that way.  Perhaps I'm just stubborn, or insane.  Most likely so.  I just can't help but remember being in my late twenties.  I have not forgotten the self that I was, when a home was something we were striving for.

That means I can't look at the resurgent price of real-estate with any joy.  The housing market has recovered, chirrup those who tell us what we're supposed to believe.  But it smells wrong, and tastes wrong.

Sure, I benefit, I guess.  But my own profit is meaningless to me ethically.  Like I said, perhaps I'm just insane.

I know two things about home prices.  Because I follow the markets, I know that the rise in prices now is not being driven by new homeowner demand.  Houses are selling, sure, particularly given the still-low cost of borrowing.  But they are being sold to wealthy investors and business concerns.

And I also know that salaries continue to be stagnant for all but the aforementioned wealthy investors.  If most of us are seeing one-to-two percent increases in salaries annually...if we're lucky...and home prices are soaring?  All that means is that houses become more and more inaccessible to the young people who are where my wife and I were a decade ago.

So the rise in home prices is like the rise of the price of gas, or of milk, or of bread.  Something we all require to live is now more expensive?  Hardly a cause for celebration.

And that I benefit from it, in my own self?  Again, irrelevant.  Meaningless, particularly if I attend to the teachings of my rabbi.  As he clearly taught, compassion is not the friend of profit.

Over A Barrel

This was intended to be a short, vaguely smug post about just how awesomey awesome it is to be a Prius-owning/motorcycle-riding pastor type in this era of high gas prices.

I was also planning on noting that what really matters is "person-miles-to-the-gallon," my way of encouraging folks who have larger vehicles to take heart in the ability to carry more than one person at a time.  

Thinking in PMPG, for example, means my schweet eco-ficient motorbike gets on average 55 PMPG.  A Chevy Suburban with one passenger?  Only 13 PMPG.  But wait!  Before we get all self-righteous, let's add someone.  With two passengers, you're at 26.  That's subcompact efficiency.  With three, you're at 39.  That's hybrid efficiency.  Max it out at eight, and you're rocking it at 104 PMPG.   Of course, the Prius with four gets 220 PMPG, but still.  Sharing is efficient.  Those moms with their kid-transport-pools are doing their part, eh?  And carpooling with four in an Escalade is just as efficient as one in a Prius.

But as I got into thinking about gas prices, and looking at historical trends, I encountered something of a fuddler.  Back in 2008, as we all remember, gas prices soared to record highs, hitting 140 dollars for a barrel of light sweet crude and spiking at around $4.12 for refined go-juice at the pump.  At the end of last week, gas prices are at about $3.88 a gallon at the pump on average nationally, and just about $102 dollars a barrel on the market.

Take a look at these charts, side by side:

They're similar, but not identical.  A barrel on the market is 42 US Gallons.  In 2008 during the price-spike, $140 a barrel meant a market price of $3.33 per unrefined gallon, which means the differential between market and pump price was $0.79 per gallon.    In 2012, $102 a barrel translates into a price of around $2.42 per gallon of light sweet crude, which means the differential between crude market and refined pump price is $1.46 per gallon.

This is a very different margin.

Key cost factors for a gallon of gas are production, taxes, distribution and marketing, and station markup.  It's not taxes at the pump.  It's not less refining capacity, because refining capacity has not decreased.  It's not higher costs for drilling, because that would be reflected in the market cost of the crude.  It's not increased real-estate values over 2008 for gas station owners and franchisees.   It can't be distribution costs for transportation, because that would have been mirrored in the 2008 price surge.  Station markup remains low.  That's just not where your average service station franchisee or independent small business owner makes their money.

On some rather basic level, meaning that of addition and subtraction, this doesn't seem to work.  Somewhere in the system, transaction costs have gone substantially up.   Not so much that the graphs aren't similar.  But there's variance there.  It seems significant.  At 9 million barrels a day consumption in the US, that's around a $200,000,000 dollar drain from the economy.  Every single day.  Even by Washington standards, that's real money.

Huh.  Odd thing.  Anyone out there more informed than I about this?