Tag Archives: Housing

The Single Best Method to Stabilize Home Prices

Here’s a note to Obama:

The single best method to stabilize home prices—-

Do nothing:

(Reuters) – Single-family home prices dipped in July, and are seen stabilizing near the lows without the homebuyer tax credit that ended in April…

This is surprising.

When left alone, people will normally buy and sell things at some market level.  When you pay people $8k to buy a house, don’t be surprised when the price of houses fluctuates between $1 and $8,000.

Econ 101.

What Did They THINK Was Going to Happen?

We are seeing–living–the impact of government intervention in markets.  Most notably, the housing market.

Not only has the housing market largely been responsible for the current economic  conditions we’re seeing, but it’s also responsible, in large part, for the slow and anemic recovery.

The sad part?

It didn’t have to be this way.  And THAT, gentle reader, is a text book lesson in markets and external impacts.

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Context

Wherever the oil went, the damage done to the area is horrific.

Industries are impacted.

Families are impacted:

LAKESHORE, Miss. – Pete Yarborough, a trucker who hauled seafood until the BP oil spill hit, and about 800 other households are under pressure to buy or get out of the state-owned cottages they’ve been living in…

I can’t imagine.

If I’m in a position where I’m in government housing  the last thing I wanna hear is that my only means of making a living is ending.  AND I’m facing a deadline.

But there’s more than meets the eye.

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Living Hasn't Been Cheaper

Apparently this is bad news:

NEW YORK, Jan 7 (Reuters) – The U.S. apartment vacancy rate rose to an almost 30-year high of 8 percent in the fourth quarter, and rents dropped in the biggest one-year slump in 2009, according to real estate research company Reis Inc.

The report reflects the job market, which so far has stubbornly refused to follow positive economic indicators such as the stock market rebound and improved manufacturing demand.

But that’s only 1 way of looking at it.  Another, of course, is to report that it hasn’t been cheaper to rent in years!  I find it strange that we report falling home prices as bad, when, in fact, it results in allowing more and more people to afford a home of their own.

The world is a funny place.

Government Preventing Entire Class of People From Buying a Home

The State of North Carolina claims that it is serving the people.  It claims that by relieving my money from, well, from me, they are helping other people in need.  Never mind for a second that I already help people in need through my various charity giving and other activities.  Or that the people I help are people that I think need help.  Or that, in any case, this decision on what to do with my money should be mine to make.  The State is helping an entire class of citizens, or so they claim:

Raleigh, N.C. — A program launched a year ago has helped more than 2,500 North Carolina homeowners avoid foreclosure, officials said Monday.

Birdsong will now receive mortgage assistance, including payments for property taxes and homeowner’s insurance for at least the next nine months and could benefit for as long as two years.

That’s one way of looking at it.  The other way, of course, is to look at it this way:

Raleigh, N.C. — A program launched a year ago has prevented more than 2,500 potential North Carolina homeowners from attaining affordable housing, officials said Monday.

Their goal of home ownership has been prevented because select citizens will now receive mortgage assistance, including payments for property taxes and homeowner’s insurance for at least the next nine months and could benefit for as long as two years.

But serious.  I’m sure that all the people who are in danger of losing their homes are good, hard-working people who almost certainly bought a home that was within their means and needs.  Right?  No?

She said she’s most relieved that her three children will be able to spend the holidays at home.

“Each one of them has their own room. They’re like, ‘It’s mine,'” said Birdsong, a widow. “I wouldn’t want to take that from them. They’ve had enough problems already.”

So, a single mother with one revenue stream over reaches, buys a FOUR BEDROOM HOME surprisingly finds herself in a financial pinch.  And because of that, the government takes my money, thereby preventing me from giving to who I think is deserving, props up this family and keeps what would otherwise become a more affordable home from falling into the hands of more responsible home owners?  Unbelievable.

For the record, I grew up in a house that had TWO bedrooms.  Sure, after a bit we added a bedroom, but that was when my family grew from 3 to 6.  That’s 2 rooms for 4 kids.  If only I could have had my own room.

Merry Christmas.

The Most for the Least

If you aren’t careful, you will be told that American’s have it pretty bad; especially right now.

Unemployment is up, health care is up.  All of it, is up.  Except wages, and they are down.  It’s all bad news.

Except, well, maybe it’s not from Mark Perry:

when you factor in the fact that the typical new home built today (average of 2,519 square feet) are more than 50% larger than the typical new home in 1973 (1,660 square feet, see bottom chart above, data here), Americans have never had it better when it comes to housing costs.

Just another example that we are living in the best to live.  Ever.

Average Monthly Mortgage

Compared to:

Average New Home Size

The Law of Supply and Demand is Proven Again!

If we ever had any doubt, there is a new real world example of the law of supply and demand:

Raleigh, N.C. — Home sales in the Triangle area shot up 44 percent in October from a year ago, but the good news was offset by a 12 percent decline in sale prices.

As prices decrease, demand increases.  Very soon, if left to its natural devices, the housing market will be dangerously close to equilibrium.

Oh, yeah.  About that pesky decline in sale prices?  Yeah, 2000+ families have now found buying a home affordable.

New and existing property sales hit 2,009 in October, up from 1,397 a year ago, according to the North Carolina Association of Realtors.

Go capitalism!

Where Brad and Britt Are Wrong

The boys over at WZTK are at it again.  This morning they are talking about Obama reducing the pay of executives whose companies took money in the bailout program.

Responding to the growing furor over the paychecks of executives at companies that received billions of dollars in federal bailouts, the Obama administration will order the companies that received the most aid to deeply slash the compensation to their highest paid executives, an official involved in the decision said on Wednesday.

Under the plan, which will be announced in the next few days by the Treasury Department, the seven companies that received the most assistance will have to cut the annual salaries of their 25 best-paid executives by an average of about 90 percent from last year. The executive’s total compensation — including bonuses and retirement contributions — will drop, on average, by about 50 percent. The companies are Citigroup, Bank of America, the American International Group, General Motors, Chrysler and the financing arms of the two automakers.

The conversations mostly centered on the fact that it was these big companies executives fault that the economy has gone through this latest recession.  And, as such, these executives should “suffer”.  Or, at the very least, should not continue to reap the rewards of their position by continuing to make all of this money.

I completely resonate with the concept of reward by performance.  I think that bad teachers should be fired.  Bad lawyers not be allowed to pass the bar.  Bad soccer players not make the team etc etc.  But the idea that we somehow cede this normal working of things to the government to satisfy the political need of the day is very very dangerous.  Very.  Not to mention it may be illegal.

However, the part that really got me going was the inevitable conversation surrounding the cause of this whole mess; the housing bubble.  The boom and bust.  The left just SCREAMS when anyone suggests that government regulation is responsible.  That somehow, by passing laws and creating rules that force people to do what they normally would not do, isn’t going to disrupt the market, always in ways that are unforeseen and undesirable.

For example, if a friend or family member asked to borrow $100 I would enter into that arrangement.  And prolly for free.  That is, I would give them 5 twenties and if they gave me a hundred bucks later, we would be “even.”  No juice or interest.  Now, if I were in the business of selling money, I would want to see some reward to hand money out.  This comes in the form of interest.  Soo I begin to borrow money to people.  Sometimes I get all of my money back with interest.  Sometimes I get most or some of my money back and then sometimes I don’t get any money back.  I begin to try to figure out what characteristics trend to me getting paid back.  I really want to lend only to those people who are going to pay me back [crazy talk, I know!  Wanting my money back.]  However, I am not the only money seller out there so I have to compete, in terms of lower interest rates, with other firms.  This keeps my profits down.

Now, a guy walks into my office and says he would like to borrow $100.  I say nope, the 5% interest isn’t enough to overcome my doubts that you’ll repay.  He looks at me and says, well, how high of a rate do I need to agree to before your fears are overcome?  I say 8%.  He says okay.  And now I sell money to another group of people for 8%.  And so on.  However, there is a group of people who I will not sell money to under any condition.  Just won’t do it.  Will not.

Enter the Libtard.  They claim that it’s not “fair” for me to deny lending opportunities to those people.  And because they have the power of law and fiat, they create rules and laws that force me to make a set % of my loans to these people.  Because I enjoy paying my mortgage and feeding my family, I comply out of fear they will put me out of business.  And low and behold, these people begin to default and I start losing money.  No one is surprised.  I sure ain’t.

And this is the beginning of the crisis.

Because It Worked So Well The First Time

Unbelievable!

People often forget the lessons that history serves up to us.  We are destined to relive the errors of our past.  This happens in war, in love and, it seems, it politics.

You would think that with a recession just ending, an economy that won him the election and a financial crisis “the biggest since the Great Depression” Mr. Obama would know not to take these history lessons to heart.

But he isn’t, he’s going right back to the well that put us in this situation to begin with.

WASHINGTON (Reuters) – The Obama administration on Monday launched a program to help the depressed U.S. housing market by effectively allowing state and local housing finance agencies to borrow from the U.S. Treasury.

The initiative, announced as new data showed a downturn in homebuilder sentiment, aims to restart a source of mortgage financing for first-time and low-income buyers that has been largely shut down by credit market gridlock.

Described as temporary by the U.S. Treasury, the Department of Housing and Urban Development and the Federal Housing Finance Agency, the program will allow state and local agencies to issue bonds through government-sponsored mortgage finance giants Fannie Mae and Freddie Mac. Those bonds would then be purchased by the Treasury.

“Through this initiative, the administration aims to help … jump start new lending to borrowers who might not otherwise be served and to better support the financing costs of their current programs,” U.S. Treasury Secretary Timothy Geithner said in a statement.

At the very root cause of this most recent crisis is the fact that it was easy for people to borrow money to buy houses.  Many of these people would not have been able to afford to borrow that money in the past.  With the added demand on the housing market, the price of homes sky rocketed.  This in turn caused further investment in that market and so on and so on.  Finally, when those folks who borrowed money they couldn’t afford failed to pay that money back, the wheels came off.  The rest, as they will say, is history.

So what are we doing?  Ignoring history and doing the exact same thing; borrowing money to people who can’t afford it.

But I Voted For Him

And now I want me money.  Or so goes the general consensus if you read the Reuters article describing the Home Rescue Plan.

Obama, grappling with the worst U.S. housing crisis since the Great Depression, pledged to help as many as 9 million families keep their homes by reworking their mortgages.

Let’s not forget that the whole reason those 9 million families are struggling is because the government “pledged to help as many as 9 million families keep obtain their homes by reworking cheating* on their mortgages.

Eight months later, the plan is plagued by delays, red tape

delay and red tape?  A government program defined by delay and red tape?  Come on!

some critics say, a reluctance by banks to do their part.

Riiight.  Cause last time the banks “did their part” a housing bubble was created, then burst and we were plunged into this problem.  After which the banks were rewarded for “doing their part” by having themselves taken over, vilified, their CEO’s fired and then their pay limited.  Honestly, why wouldn’t the banks “do their part?”

Just 17 percent of eligible borrowers have had their loans modified and monthly payments cut. Hardly any have been given a cut in the amount they owe on homes which are now worth less.

Huh.  Weird.  It doesn’t seem that banks want to lend money to people who demonstrate that they can’t pay money back to banks that lend them money.  Bitches!  Oh, especially hard hit are the owners who have negative equity-who would have guessed?

For homeowners like Jeff Latta, there was no help at all.

Latta, a 53 year-old retiree, pays $1,600 in monthly home payments that eat up 93 percent of his pension and he struggles to make child support payments.

So, a 53-year-old man decides that he wants to quit working at 53 [at least] and discovers that he is having trouble paying the bills.  Unbelievable.

To help pay his mortgage, Latta has slashed his bills by hunting for food in the wooded hills around his town of Albany in southern Ohio, and growing his own vegetables.

Serious.  I wonder if “slashed” means the same thing in Reuters talk as it does in Pino talk?  However, to his credit, Mr. Latta is doing a lot more than many other folks in his condition.  But let’s be honest here, if $1600 is 93% of his pension, he has $120 left over.  No vegetable is going to cover that gap.

In March, Latta heard about Obama’s Home Affordable Modification Program, or HAMP, that allows mortgage payments to be reduced to 31 percent of a homeowner’s income.

Awesome.  Because you can just legislate away the annoying aspects concerning the laws of Economics.

Latta applied for a loan modification but was rejected. His bank said his income from selling pumpkins and firewood — a net of $906 in 2008 — was too high.

Serious.  Even HAMP must know on some level that this is just silly; it’s designed to fail.

That banks lent irresponsibly in the U.S. property boom is irrefutable. As San Diego-based realtor Steve Rodgers says: “If you could fog a mirror, they’d give you a mortgage.”

While this is true, it is also true that banks were forced to carry a required portion of their lending portfolio in this low income high risk demographics.   To say that they did this on their own is disingenuous.

Look, in the end I feel bad for Mr. Latta.  But check this out, if you make $1720 a month you can’t afford to live in a house.  Move to an apartment.  Or a smaller house.  Or something.  And more advice?  Give up on the pumpkins and firewood and move to Raleigh; they have work there.