Media overplay real estate bubble

Linda calls it “the zoomer,” and delights in finding something to run through it almost every day. Most folks refer to it as a paper shredder, but in our house things frequently acquire different names. Whatever she calls an item when she first uses it is the name that generally sticks. The vacuum sealer is a sucker-upper, the leaf blower is a whoosher, and from Rich Hall’s book, “Sniglets,” anything that is placed on the stairs to be taken up at a later time is an ascendo.

But I digress. The point of all this is supposed to be not how to name items, rather to encourage you to use a zoomer. Just as a recent column warned of the ubiquitous Internet phishing that attempts to steal individual and business financial account data, now comes the warning to shred any documents that you are going to throw away rather than simply putting them in the trash can.

Here’s why.

Dumpster divers, the sobriquet often used to describe the snoops that go through one’s trash looking for personal data, are adept at gathering scraps of information that they can use in such nefarious ways as opening credit card accounts in your name and running up huge bills for which you might be liable. That’s only one of a number of ways that they have created havoc for individuals and businesses.

A study by Gartner Research and Harris Interactive indicated that there are approximately 13.3 victims of identity theft per minute. Worse, the average victim of identity theft doesn’t know about it until some unpleasant event happens – a denial of credit, a call from a collection agency, a police notification – you get the picture. Correcting these damages averages about $1,400 in out-of-pocket expenses and approximately 600 hours of an individual’s time, not to mention the embarrassment.

And where do most of the criminals get your personal financial and Social Security information? Through Internet phishing that I wrote about in March, fraudulent phone calls from supposed financial organizations and the aforementioned dumpster diving.

It will come as no surprise that seniors are the preferred targets of these methods, so although we all need to be aware of the dangers of identity theft, we strongly encourage you to share this information with elders.

Back to the zoomer. Linda bought one at Kmart for under $60, a cross-cut model that we prefer to the kind that cuts the paper into more easily pieced-together strips. Now she shreds darned near everything, especially expired credit cards, Social Security correspondence, old cancelled checks, unsolicited offers for credit – you name it. Her motto seems to be, “Don’t trash it, zoom it.” We suggest you do the same.

Now, to the bubble. The media are having great fun discussing the housing bubble and how it might burst and impact America. Some are being at least a bit logical in recognizing that the rapidly inflating price of homes is actually a spotty matter, occurring primarily in the West (think of that paragon of weirdness, California), the Northeast and Florida. Those areas have experienced bursting bubbles in the past and might well again. But in those past bubble-popping times national home prices did not decline. As a matter of fact, with the exception of the Depression years, national home prices have never declined.

Not noted by the doomsday writers is the fact that the national median home price has historically correlated closely with per capita disposable income, and disposable income increased faster from 1984 through 2003 than did home prices. It is possible that the recent increase in the average home price is merely catching up. It’s food for thought.

It seems to me that a home is a place you own to raise a family, a place in which you are comfortable, a place that meets your needs for peace and quiet. Unless you initially chose a bad area in buying your home, it should appreciate in value as a result of inflation, replacement costs, etc.

Here’s the dilemma for the long-term homeowner who, after the place is empty of children, figures that a four-bedroom, two-story place is more than a couple preparing for retirement needs: the price of the home to which they wish to down-size is more than they can get for the home they want to sell.

Hmmm. Evidently appreciation in value of their place didn’t keep up with the increasing costs of new construction. So, was it a good investment? Probably not, but how does one value the years in which it was the comfortable, safe place in which the family grew – a home, not simply a house?

Clark Davis is a 34-year investment veteran and CEO of Saint Louis Investment Advisors, a specialized money-management company.

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