A New York Times story arguing that the wealthy are walking away from mortgages faster than the rest of us is making the rounds on National Public Radio, social media, and elsewhere.
The article argues:
“More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.
By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.”
From this the article’s author concludes that the rich are therefore abandoning properties with abandon. Why would the rich do this? “’The rich are different: they are more ruthless,’ said Sam Khater, CoreLogic’s senior economist.”
The problem is that the data as reported do not show that the rich are insidious abandoners of property, chewing and spitting our social mores like so much tobacco into the spittoon of decent society. The data, as reported, show that people with massive mortgages walk away from them. Some of those folks may be rich, but it would seem more likely that they aren’t rich – after all, the rich by definition have more money and would be less likely to need such a massive loan to begin with. It seems more likely that those walking away from massive mortgages were the near-rich, or sure they would soon be rich.
In other words the article reports that data demonstrate that people who can’t afford expensive things tend not to pay for them. The data as reported also seem to demonstrate what we already know: people sought, and were given, mortgages they could not afford.
The mistake made in the article and by those who repeat and report on it is a common one. Most of us most of the time seek confirmation of our beliefs in the information we find. We see an effect and assume the cause we find most satisfying. From there we set about finding other effects from the cause we assumed (how long before we see stories on the rich walking away from expensive car leases and loans?). We reason from effect to cause, and then from this found cause to the next effect.
The risk in such reasoning is that we act in response to things that aren’t there – it’s not that we tilt at windmills, it’s that we assume the presence of windmills and conclude the only rational action is tilting at both windmills and lighthouses. For activists this means spending lots of time, energy and money doing things that won’t work or solving problems that don’t exist, while leaving the real problem about which they are concerned untouched.
