WSJ reported in May 2009 that more than 20% of US home owners now owing more than their houses are worth. If houses were stocks, they probably would have exited the long position by now. Why should houses be so illiquid?
The value of a company is extremely difficult to calculate, especially when intengibles are involved. In comparison, the value of a house should be much simpler. Why can't we operate a residential house ownership the same way as a corporation?
1. Let's have quarterly and annual reports. Fixed the roof, upgraded the appliances, or new carpets? Put it in the report. Let's have some debt, equity and cash flow numbers to back it up.
2. Partially separate the ownership and the right to live in it. Split the ownership into pieces so that anyone can purchase and invest.
3. Have a board of director and let the board decide major upgrades and home improvements. Of course, if you own more than 50%, you pretty much have the say.
It doesn't have to get so complicated by inviting thousands of share holders. In fact, issuing 20 shares can probably do the job.
Yes, this will likely cause some rapid fluctuation of home values, but no, it should be much safer than the hyper-leveraged mortgage-debt-equity derivative manipulations, which had disrupted the financial system in the first place.
photo credit seier