Real estate’s happy horror stories

As a homeowner, I know it’s counterproductive to take delight in the real estate misfortunes of my neighbors. But massive price reductions on a house down the street from me have left a lot of us in the neighborhood gloating. A hulking McMonstrosity that’s jaw-droppingly out of place among the modest bungalows that surround it, the house was clearly intended by its owner/builder to be a cash cow. But it’s been sitting empty for nearly two years since it was finished, and the price just continues to drop.

Are we total jerks for enjoying the show? Well, sort of. But we can’t help it: We have debtenfreude. A sub-category of schadenfreude, that ever-useful German word that means taking pleasure in other people’s suffering, debtenfreude is among the latest outgrowths of the economic meltdown.

Characterized by self-righteous finger-wagging at over-mortgaged neighbors, and downright glee at the site of luxury car owners power washing their own tires at the coin-operated carwash, debtenfreude is at once utterly despicable and utterly human. And though it’s not exactly new -- people have been judging the acquisitions of others since the first caveman envied his neighbor’s stone tools -- the current strain of debtenfreude seems particularly virulent and widespread.

I think debtenfreude may have started to gain momentum during the Bernard Madoff scandal. Despite public sympathy for the duped investors, you also got the sense that some people were feeling decidedly smug. For all the outrage directed at Madoff himself, there was also a sense that his victims should have known better. “Just about anybody who actually took the time to kick the tires of Mr. Madoff’s operation tended to run in the other direction,” Joe Nocera of the New York Times wrote in March.

But for all the debtenfreude floating around the Madoff story, the petri dish in which the virus best thrives is the one labeled Other People’s Real Estate Fiascoes. Whenever I need a fix of this special blend of callousness and cluelessness, I visit the real estate blog Curbed, which has editions in several cities and provides data and (frequently cantankerous) opinions about local real estate trends. One of the site’s regular features, PriceChopper, involves showcasing a property that’s had a recent price reduction and asking readers to weigh in on whether it’s still overpriced.

Recent PriceChopper remarks on Curbed L.A. have run the gamut from the smug and delusional (“$899,000 is still too expensive. It will sell for $450k”) to the smug and obnoxious (“L.A. has 10 million people, and a huge population of very dumb and very rich people and NOT A SINGLE ONE OF THEM has been dumb enough to buy that loft.”) Some users look up the amount the home last sold for so they can speculate about how much the current seller stands to lose in a post-bubble market.

As charming as this chatter is, the most intense debtenfreude is saved for those foolish enough to admit their financial missteps. The pariah du jour on this front is New York Times writer Edmund Andrews, whose May 14 Sunday Magazine cover story about his personal journey into debt and mortgage default (an excerpt from his new book) sparked so much collective tsk-tsking that money now appears to be the least of his problems.

Atlantic Monthly blogger Megan McCardle, after initially lauding Andrews’ article as “the bravest thing I’ve read for a long, long time,” revised her assessment after digging into court records that suggested Andrews’ troubles, which he characterized as “not all that unusual,” were actually fairly aberrant (his wife had twice filed for bankruptcy).

The blogospheric response to this news has ranged from sanctimonious (“He could have lived in an inexpensive town ... and had his wife home school his kids”) to dismissive (“That gurgling sound is his journalistic credibility going down the crapper, forever.”).

Even without the added wrinkle of Andrews’ sin of omission, I think it’s fair to say that the stir his story created has less to do with the story itself than with the contagious effects of people’s anxieties (and attendant judgments) about money. Whether we’re talking about desperate real estate sellers, rich people who lost everything or ordinary chumps who believed the hype instead of doing the math, debtenfreude, like schadenfreude, is ultimately in the eye of the beholder.

The greater our urge to scold someone else, the more likely we fear winding up in the same predicament. And given how much fear is going around, it’s hardly surprising that we’re scolding our neighbors rather than doing what used to be considered the neighborly thing: saying “there but for the grace of God go I.”

Not that anyone in his right mind would go near that McMansion down the street.