Bits Bucket for June 15, 2011
Post off-topic ideas, links, and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Good morning everyone. I have the privilege of sitting at work in the room next to the Democratic congressional candidate for California’s 50th district. Of course, the primary hasn’t come yet, but at this time, there are no other known serious candidates for the democratic ticket in the 50th. As some of you may know, California is going through a redistricting process, and the 50th was just redrawn into a preliminary map that seems to balance the district Dem/Repub split to about 50/50. Long story short, it seems like the man in the office next to me will have a good shot at winning the 50th in 2012.
Now I in no way claim to represent Bob Nascenzi (our CEO and congressional candidate), the democratic party, congress, or anything like that. I am not a member of his campaign, and I am basically in no way affiliated with his campaign BUT, I do speak with Bob on an almost daily basis, and he is quite willing to discuss topics of economics, housing policy, taxation, etc…
Here is my question to you, members of the HBB:
All our years of debate, research, and analysis have (I believe)given us collectively a greater insight into the topic of what *should be* good housing policy than the general population; in regards to housing and economic policy related to housing, what reasonable legislation would you (collectively) propose, and what is the clearest, easiest to support evidence you can provide to indicate that this policy and/or legislation is what should be implemented?
Please really try to be reasonable. What I mean is, while we may conclude that we need to “end the fed”, a three word bomb like that as a policy position is basically untenable. However, something like , “Over the next three years, reduce the percentage of nationwide loans that Fannie and Freddie may purchase to no more than 20% of all loans in aggregate, until such time as they exit receivership of the US Govt ” is a possibly more realistic or achievable goal.
I’ll leave this request alone until the end of the day then go back over all the posts and try to aggregate the main points. Please only do a direct reply to this post if you have a suggestion for a main policy point. If you agree or disagree, please upvote/downvote directly under that post thread, and if possible try to provide simple clear supporting or dissenting evidence (references are great).
I don’t know what can or will come of this, but if I didn’t ask the people that I have come to respect the most regarding housing matters what policy should be when a congressional candidate is in the office next to me, I would feel I have failed as a citizen of both the country and the HBB.
How about the concept of “Pay as you go”?
If a program is really worth the spending then it should be worth paying for.
This business of spending money we do not have has got to stop else we are doomed.
You won!
1. end taxpayer funded bailouts
Constitutional amendment that makes it illegal to use government/taxpayer money to subsidize/fund/bailout private industries, states or municipalities. In particular abuses in banking, big oil and agriculture come to mind. If government wants to fund research it can happen over a grant system with independent reviewers versus direct subsidies to the greatest campaign contributors.
2. housing
Require a 25% down payment where the borrower must document that this is saved and not borrowed money. I believe that’s all it takes to put housing on a long term stable footing. After that, let them securitize all they want.
3. lobbying
The root of all evil. It should be illegal to bribe elected officials. Campaigns must be funded from public funds. That’s what it costs to run a democracy. No entity, public or private, can dirctly contribute more than $2500,- per election. Not even Goldman-Sachs or BoA.
4. reinstate Glass-Steagall. That did a reasonable job keeping banks from gambling away our money.
Legislation to reinforce and update Sherman Anti-Trust Act to break up NAR (and other non-housing related businesses). Without govt. and political protection, NAR is nothing more than an ongoing crime syndicate.
The Sherman anti-trust act should have been used to prevent the banking industry from being ruled by just 8 big banks and 1 Federal Reserve. The Federal Reserve is a government monopoly.
IMO, the richest, most powerful industries are the ones that should be held most closely to the law, since their actions are more consequential. But no, first they are allowed to form a government monopoly, then they are allowed to skirt what’s left of anti-trust laws, then they are given taxpayer-funded bailouts when they PHALE, and THEN they are put on Presidential comittees, where they are asked for their advice on financial matters.
Enough with this special treatment of the banking industry. What we need is a bailout of the industrial industry. The first step of this bailout is to put the brakes on globalism (tariffs on $3 shoes, anyone?). That will ultimately help to put the brakes on banksterism too, since people won’t be so obliged to debt.
I agree with number three.
And number four.
I am number four.
Mike, I agree with all except the down payment requirements. That is because in my own situation, my husband and I were only able to scrape together 10% as a down payment. I was 35 when we bought our house. Our situation was not typical, as we both had been through many years of education and I had student loans to repay. Also, we were at the beginning of our careers in well-paying positions. For us to come up with another $40,000 to achieve a 25% down payment in an expensive area for housing would have taken years. Years that we were able to spend in a house, paying that money to a multitude of service and repairpeople as we replaced floors, doors, windows, appliances, furnace, sump pump, etc.
We did add another 10% when we refinanced a couple of years later, reducing our mortgage and getting rid of the hated mortgage insurance as well as tax escrow. For some people, a smaller down payment works out well.
Eleanor
The point is that housing would cost much less with this requirement thus making it easier to put 25% down.
Also, it doesn’t dictate that there be no loans with smaller down payments, just that the government wouldn’t subsidize them, and banks would have to keep the first 25% of the loan and could only securitize the safest 75%. Sure, that would make 10% down mortgages more expensive, but it would also remove overexuberant loan origination, thus driving down prices and making things more affordable over all.
I got mine with 10% down and owners or heirs carried a 10% second. Where is that now? Sellers have no confidence in the future value of their home/residence/investment property/flip ?
“It should be illegal to bribe elected officials.”
Hear hear! Jail time for those who bribe elected officials!!
As long as they are required to declare it (as they are in Texas), what’s the problem?
They cannot be elected without the voters approval.
Why not cut out the middleman and just jail all elected officials. You KNOW they’re gonna take bribes SOMEHOW, so let’s just get them behind bars. For the children.
Amen on all four (especially number 3) plus aggressive use of the Sherman anti-trust act.
The way we fund campaigns is determining the outcome we get. Number 3 must be done first. Without it, none the other items on that list will happen.
I want to clarify on these 4 points, since I am trying to limit the scope here to only housing.
Item 1) As it related to housing, how could this be legislatively accomplished in a controlled transitional manner (as opposed to just pulling the rug out). What would the effect on the overall economy be? What advantages long and short term would there be? Disadvantages?
Item 2) I’m inferring that you mean to write legislation that requires all loans funded or purchased by Fannie May and/or Freddie Mac have no higher than a 75% LTV. Over what period of time should this requirement be transitioned to? What would the impacts be to the financial markets? What about to homeowners? What about to homebuyers? Why is this a net positive move? What about existing debt owned by these entities at higher than 75% LTV? Who would determine LTV for purposes of compliance? Does this imply a new regulatory body for oversight of Fannie/Freddie?
Item 3) I won’t be adding this. Although I believe it is the case also, I’m interested in direct housing policy related items only at this time. This is a much broader topic that touches all aspects of govt decision making.
Item 4) Please elaborate and expand as this relates to housing policy. What would reinstatement of Glass-Steagall entail? How would it be decided how to split the investment arms back out of banks? Who should the regulator in charge be? Over what time period should this law take effect again? The citigroup relief act or Gramm-Leach-Bliley was the instigating law that began rollback of Glass-Steagal. Should it be repealed?
Tonight it was revealed that Obama appointed over 80% of “bundlers” that raised over $500k for him to coveted ambassadorships and other positions.
Lifelong Democrat leaning toward Ron Paul. Never again, Big O. -
Get the federal government out of housing policy as a way to fund other things, such as universal health care.
If you have state by state health care, people will just move to less generous states (such as Arizona) when they are healthy then back to more generous states (like California) when they get sick. The same is true for income support. The federal government should be responsible for these.
Buildings and infrastructure stay in one place, so the state that invests in them gets the benefits. No reason to route money through Washington and back for those things.
Meanwhile, the U.S. is overhoused.
So replace the mortgage tax deduction, if at all, with a credit.
Scale back Fannie and Freddie to support entry level housing purchases (like the FHA), or to zero.
And have the federal government take over all Medicaid and social services funding, but cut off funding for public housing and Section 8. Etc.
people will just move to less generous states (such as Arizona) when they are healthy then back to more generous states (like California) when they get sick ??
Bingo…It happens all the time…
Remember kidz:
Obamacare “death panels” = gov’t bureaucrats kill granny
Private InsuranceCo “death panels” = invisible hand of free market
Get rid of the mortgage tax deduction.
get rid of prop 13 for commercial property
Hold realtards to higher standards
get rid of prop 13 for more than your personal residence
Agree on both of the prop 13 comments. Limit it to primary residence only.
Why should people not have to pay for the services they receive?
Why should people not have to pay for the services they receive?
Better question: Why should people pay taxes on paper gains? Until you sell the property it’s a paper gain.
“Hold realtards to higher standards”
Hold realtards to any standards. Fixed.
Prop 13 is CA law. I’m talking US congress.
Here’s a fun thing to do when you’re feeling particularly testy towards hypocritical “conservatives”.
Ask them to justify Prop 13 (below-market property tax assessments) as anything besides welfare for long-term residents/corporate interests at the signficant expense of transferees, first-time homebuyers, Mello-roos district residents etc. Prop 13 has nothing to do with meritocracy or “protecting the elderly”, being a “producer” or anything else and everything to do with being a handout for those that least need it.
The canard is that it’s for the “old people”. Then give those folks a simple tax credit.
It’s always welfare for the other guy that is unfair.
Other than the (unintended?) benefit to commercial properties and multi unit owning landlords (who obviously were quite happy for it to pass) Prop 13 was a direct response of the citizens of california reacting to drastically rising property tax rates.
No doubt it is screwing a lot of people right now, but if the legislature had acted responsibly in the first place, prop13 would never have even made it to the ballot.
I rest my case. Do you have a real argument?
Totally agree, cactus.
Prop 13 should only protect people from being “taxed out of their own homes” by the idiot specuvestors who always run up housing prices in California during bubbles.
Taxpayers should not be subsidizing the profits of landlords. Contrary to what they will claim, Prop 13 protection does not generally filter down to the renters. Most LLs will charge “market rent,” so let them pay “market taxes.”
Homesteaders can clearly enjoy the benefits of a more valuable home, through HELOC or selling and moving to a cheaper state. Why should they enjoy the benefits of lower taxes either on top of that?
Here’s something novel for any modern American politician from a Chinese librarian from 2,511 years ago:
“Do nothing.”
Seriously.
If he can’t grasp that, throw the old “running a country is like cooking a small fish” theory of helping people at him.
““Do nothing.”
Seriously.”
The Do-Nothing Plan
How Congress can balance the budget in eight years by literally doing nothing. This is not a joke.
By Annie Lowrey
Slate
http://www.slate.com/id/2291054/
Tankxs!
I have been in favor of that a long time. Get government out of the way. No more social engineering from the point of a government bayonet.
Do NOT require a double digit down payment!!! I’m not sure how old this candidate is, but the next generation has so much less buying power with their money it is unthinkable to ask them to save up 20 or 30 percent just to get a loan.
You’ll hear the argument from the old folks “Well, I put down 20 percent, why can’t you?”. Well, because my wages have flat lined, jobs competition has gone up along with food, fuel, insurance and a number of other things. My money just doesn’t go as far as it would have 30 years ago - believe me I’d LOVE to put down 20 or 30, but it just wont happen for many, many years.
My solutions:
-How about a government backed loan for a median home price of that area. It makes no sense to just spit out a number for the whole country since Bethesda is different than Odessa, which is different than La Jolla.
-Banks should dump their market of foreclosed houses in the shadow inventory to the public. They also should attempt to get any kind of money from foreclosed people who have lived in homes for free for five or so years. People looking to buy a home as a primary residence should have first crack at these homes for at least 90 days before investors come into the market.
-Instead of tax incentives for first time home owners, how about tax incentives for ONE home owner families. The $8,000 credit last year only applied for those who met residency requirement, which I did not meet. I bought a home and now moved for a new job a few years later. Reward owners of one home, and if you want to invest in a second or third rental property then go for it, but you wont get the same tax breaks.
i agree that there should be no government mandated downpayment requirement.
i do not agree with any of your other “solutions”. they all sound like government subsidies to get “you” into a house.
stop all the subsidies and prices will fall to a point where you can save 20% of the purchase price.
I don’t agree, Sean.
Your point of view should be to save what you can, and then force the older generations who are telling to turn that amount into a 20 or 30 percent downpayment.
Do you really want the federal government taking on more debt you will have to pay at lower wages to allow some senior who has been braying for tax breaks and more health care their whole lives to cash in for more?
Sean:
You haven’t been reading this blog carefully enough. Low, or even non-existent downpayments, along with government backing for very large mortgages are among the causes of the bubble. Even in non-bubble periods, such policies make house prices higher than they would be otherwise. Now that the bubble is deflating, saving up a 20% downpayment is getting easier every month. If the government were to end it myriad policies which support house prices, such as the mortgage interst deduction, house prices would fall even further than otherwise.
The idea that the government should be involved in mortgages for houses in places like Bethesda and La Jolla is an especially bad one. Those are rich towns, aren’t they? Why should the government be involved in helping rich people buy million dollar houses?
Nice to be attacked for what I think is a way to get AND KEEP one family into one house.
But you guys are right, I’ll switch my position:
Lets require a 75 percent down payment - Don’t want to have to bail out those banks if they give out a risky loan!
Lets also let the banks hold onto every house in the SI and let people who shouldn’t have had that house in the first place stay there for free. Its the free market, didn’t ya know! Free market means we can control which houses get foreclosed on and which do not.
Lets also cancel MID for families. I mean, GE almost had to pay a dollar in taxes last year! Why should I be so greedy! I might only have enough money to feed my kids 5 days out of the week, but GE, oil companies and others needs its tax breaks!
Also, private companies need to run everything. Zero regulations. None. Who’s to tell Countrywide how to run their business!
You got attacked because it’s a terrible idea and as others have pointed out, as implemented yet another handout to those mostly above the median income.
There is no reason for the gov’t to give people money specifically for residences.
I have no problem with that if Corps and the super rich also lose their tax breaks. Somehow, I doubt that will happen and GE will contine to pay zero income tax while the middle class will once again bend over and grab their collective ankles.
“Why should the government be involved in helping rich people buy million dollar houses?”
If the standard deduction gets big enough the MID could be repealled without hurting most of the middle class.
Of course the truly rich just pay cash for their properties. I doubt Warren Buffet or the Koch Bros. have a mortgage.
Sean,
If no one can afford the down payment, the house prices will have to go down. Prices can only be as high as the market will bear.
If 20% is too much now, imagine how much it’ll suck if your local housing market crashes and you’re underwater 10%-20%. If you want/need to move, you’ll have to put up a lot of cash to get out.
If my wages (and others wages) went up with housing prices, I would agree. My point is that todays buying power, with my current wages living pretty simple is much less.
His point is that housing prices will come DOWN to match your wages. If it’s impossible to buy without skin in the game, you remove a bunch of gamers and gamblers from the system, which removes demand, which depresses prices, which makes your 20% down payment much easier to achieve.
Remember, you’re competing against other buyers who have to have 20% down.
If there really was a free market, this might work. Problem is that there are too many well politically connected players to allow that to happen.
Do NOT require a double digit down payment!!! I’m not sure how old this candidate is, but the next generation has so much less buying power with their money it is unthinkable to ask them to save up 20 or 30 percent just to get a loan.
How do they expect to pay off the loan if they can’t even save a 20% downpayment?
It makes no sense to just spit out a number for the whole country since Bethesda is different than Odessa, which is different than La Jolla.
It’s not the government’s job to subsidize everyone to live in La Jolla, or any other extremely expensive place.
In fact, La Jolla, and everywhere else, would be much more reasonably priced if the government (i.e. we taxpayers) would stop guaranteeing mortgages altogether.
Sean,
With the exception of the last decade, it’s ALWAYS been extremely difficult for most to save up that 20% for a down payment. It takes years, if not decades of hard work and sacrifice to do so.
That’s why homeownership isn’t for everyone. And why making it easier for the uncommitted led to massive fraud and a “flipper” mentality.
Your elders managed to do it in times of inflation, miserable jobs, and high unemployment. So will you–that is, if you really want to buy a house. And when you get it, I’m betting you’ll take that responsibility very seriously indeed, not look at it as a get-rich-quick investment.
Best policy: Never give your CEO any advice that he hasn’t requested.
I fully agree Big V. Thankfully though, he often solicits the opinion of many people who have direct knowledge of specific areas. One of the reasons I enjoy discussing housing policy with him… he asks.
The government has no business legislating anything about housing. Legislation today is all about fleecing the people for the benefit of the corporation. As George Carland said, “Its a big club and we aren’t in it.”
No more legislation and the government parasites need to leave the American people alone. In fact, the feds need to leave the world alone.
Right. It’s not the government’s job to tell banks how much money down to require. The only reason these banks starting taking NOTHING DOWN (with cash back) was because they knew they could push their losses off on government-backed Fannie and Freddie (the supposedly private companies that didn’t have government backing).
If the government would let private industry fail at its own peril, then it would fail more often, but less badly.
You forget about securitization
The gov was but one arm of the banks plan to push all MBS bombs onto someone elses balance sheet.
“If the government would let private industry fail at its own peril, then it would fail more often, but less badly.”
Not.
2 words: Great Depression
a three word bomb like that as a policy position is basically untenable
Boomers are going to start dumping housing units by the millions, and there will be an even bigger glut as they sell off their parents’ homes and then their own in the next 20 years to pay for their retirements.
Housing prices will continue to fall until at least 2020. Trying to sustain current pricing is pointless. The government no longer needs to encourage people to buy houses, as they will only become more and more plentiful/affordable over time.
So we can:
-Eliminate the federal mortgage tax deduction
-Eliminate ALL federal (FHA) mortgage guarantees (with possible exception of veterans. Administer those through the VHA < 250K only.)
And mandate our banks to:
-Require 20% downpayment on verifiable income. Period.
-Require 10% holdback by mortgage lenders.
-Require mark to market on housing valuations.
And our courts to:
-Break up NAR and MLS under Sherman anti-trust statutes.
-Reinstitute Glass-Steagall
There now….
Thanks mathguy. Have a great convo with your candidate!
I concur with ahansen.
I do too. Plus, the risk retained by the loan securitizers has to be the most risky 10%. The banks want to be able to keep the worst x% of each tranche. If we use a very simple example of 2 tranches and my 10% risk retention requirement, then they keep the worst 5% only and their next risk doesn’t kick in untile the subordinated tranche has lost everything. So for them to lose the 10%, the loan pool as the lose 55%. Not good. They need to keep the 10% that gets lost first.
+1,000,000, polly!
I agree as well.
Very good suggestions, ahansen.
Good housing policy? Dirt simple:
Due diligence by lenders
Decent paying jobs
Recourse for appraisers being pressured or blackballed by realtors.
ENFORCEMENT of current regulations regarding fraud
NO government guarantees to Wall St.
Decent paying jobs
This ain’t rocket surgery. But since we live in Idiocracy…
…and what ahansen said.
mathguy, could you put this back up tomorrow? Is there time? It looks as though you have an “in” for some real suggestions for legislation and this is too important to bicker about for just one day.
I also would like to give Polly and perhaps Ben time to weigh in on this; Polly knows the most and would know how to distill the bickering down into viable legislative points.
1. Polly has been suggesting that banks keep the 10% riskiest tranche before securitizing. This will eliminate most of the securitization on the spot.
2. Prevent banks from becoming too interconnected to fail. Banks can now use Main Street J6P and threaten jobs as a human shield to cover their gambling operations. It’s no different than the Italian deli with the mobster bookies in the back — except that at least the deli provided decent sandwiches.
suggestion Structure banks so that if one of them fails, it does not infect the rest to the point of panic. I don’t have the banking background to know how the do this, but there are plenty of people who do know. Make it so that government bailout would NOT be needed, and so that assets can be transferred and tellers can find other jobs and FDIC kicks in. As for pension funds and other stakeholders, let buyer beware and let them diversify in several banks, so that even if a bank goes down, the pensions could still benefit from the assets (when they are sold to other banks).
3. Phase-out Fannie and Freddie to the most drastic of the Obama suggestions: as a glorified FHA for first-time buyers and veterens only. Much of the securitization happened because big banks knew they could bully the government into being the Greatest Fool final buyer.
4. Banks have use of accounting tricks that individuals do not. For example: FB buys a house with an Option ARM from WaMu bank. FB pays the minimum payment, but WaMu books the full amort amount as “deferred interest.” The ratings agencies see all that phantom profit and rated WaMu paper as AAA+. The secondary market snaps it up. FB defaults, and WaMu has to employ even more accounting tricks to pretend they are solvent.
suggestion Disallow deferred interest and other accounting tricks. No mark to market. This will discourage banks from making risky loans just for the upfront phantom profit, and will prevent the secondary market from buying such risky loans.
5. Banks are keeping shadow inventory on their books to prop up assets with a false price. This should not be allowed. A couple ways to disallow it: 1) Rule that housing is a necessary and strategic good, and that holding supply off the market is hoarding and gouging (like ice during a power outage) and should therefore be illegal; or 2) Rule that if banks keep inventory, then they are engaging in a separate gambling business from banking, which therefore makes them monopolistic and contributes to making them Too-Big-To-Fail, and should therefore be illegal [see point 1]; 3) Rule that the last sale price is not considred a valid value for book purposes.
suggestion: Disallow banks from holding real estate inventory unless it can be proved that the inventory is rental investment. This may be too drastic, so how about this: if a bank holds an abandoned property for X amount of time, its book value will revert to its tax assessment (not the last sale price or appraisal) and the State can demand tax payment. Legislation such as this should bring a lot of inventory out of the shadows.
6. Phase out the mortgage interest deduction. Failing that, limit the MID to either first-time buyers, or to house prices under a certain amount, perhaps pegged to a median.
7. No government involvement in second homes or second mortgages (heloc etc). No MID, no backing, no non-recourse. NONE ZERO ZIP help. Second homes are like stocks; you snooze you lose.
This legislation will, I believe, address some of the ROOT causes of the housing bubble. If banks are shown that they will bear their own risk, and pay the consequences immediately (not after the CEO takes his golden parachute) then they will institute standards on their own, such as down payments and income verification. Secondary market will do its own due diligence.
The core of the financial crisis was due to mortgages going bad. It started happening right on cue, with the resets of subprime mortgages, per the Credit Suisse mortgage reset chart.
Then, ask yourself one question: “Why would lenders make loans that they don’t care about having paid back?”
FIX THAT PROBLEM, and you lay a solid foundation for the banking and economic system as a whole.
And the way to fix that problem, is to force lenders to hold on to the loans they make. Forcing lenders to hold on to loans will make them care about whether the loans can be repaid.
All the other criteria - downpayments, etc - will fall into place if you hold lenders accountable for the loans they make.
It’s just that simple. That policy will severely limit predatory lending, and will prevent another massive debt-based economic crisis. And it makes fantastic housing policy. It will prevent people with mortgages from becoming slaves to their houses.
Oh no! More victims…
Renters are next victims of the housing market
Landlords take advantage of tighter market to push through increases
MSNBC.COM
Stephan Metelica, a 24-year old charter pilot, shares a two-bedroom apartment with a friend in Chicago’s Lincoln Park neighborhood. The duo split the $1,525 monthly rent, but they were surprised this month when their landlord lease came up for renewal and their landlord asked for a 5 percent increase, to $1,600.
“I was pretty upset about it,” Metelica says of what would amount to nearly $40 more per month per person. “I thought a 5 percent increase was ridiculous.”
Renters, long happy to sidestep the drama homeowners have suffered in the roller-coaster housing market, are now facing their downside of the real estate market’s correction. With apartment and rental housing construction halved in recent years and a wave of former homeowners competing for apartment space with “echo boomers” and other renters, conditions have suddenly ripened for landlords to raise the rent.
Metelica persuaded his landlord to curb the increase, capping his new rent at $1,550. The roommates and landlord have a verbal agreement for that new rental rate, he says, with a new lease signing imminent. But his ability to talk his way out of a bigger rent increase makes him more of an exception than the rule this year, according to experts.
Something is really screwy here. The housing market is grossly overbuilt yet rents are going up.
Because these two trends are in conflict with each other one trend is going to have to give way to the other. My bet is rent increases will be the trend that gives way.
Rent declines will also be helped along by declines in personal incomes.
There is one part of the country where prices and rent are going up. It’s a boom town called DC. Maybe the author is writing from there?
San Diego and L.A., too.
All of the vacant properties being kept off the market are what’s forcing up rents in places where the supply’s increased and demand hasn’t.
What would happen if there were widespread squatting in those vacant properties?
Rents out here in Flyover haven’t budged in 3 years.
In fact, a nice apartment complex I just checked into is waiving security deposits, of you pass the credit/background check.
You mean “…if they SAY you pass the credit/background check”, right?
And sorry to say, wages and jobs haven’t really budged either.
Rents follow jobs.
“Something is really screwy here. The housing market is grossly overbuilt yet rents are going up. “
As I’ve tried explain in the past, supply an demand does not run our economy and hasn’t for decades.
It is voodoo, er, supply side economics.
What this means is:
When times are good, you raise prices and claim scarcity of product.
When times are bad, you raise prices and claim scarcity of profit.
Meanwhile, the speculators are gaming the market at the same time.
Get it now?
“Recommended” yearly rent increase amounts in Montgomery County Maryland since 1983:
http://www.montgomerycountymd.gov/dhctmpl.asp?url=/content/dhca/housing/landload_T/rent_guide.asp
You are lucky to find a landlord that restricts themselves to these amounts. They don’t have to.
After two years my landlord here in MoCo hasn’t raised my rent and she more than likely won’t. Not because I’m such a slick guy, but there is one secret - I pay my rent on time in full every month and have never been late.
Apparently there were girls who lived here before who called her up every week to fix this or that, then she had to chase down the rent money which was always late and always came with an excuse. Then the HOA got complaints about violations (Parking in the wrong spots, noises, etc..) and they finally left.
I rarely talk to her (No reason to) but every time I do she is complaining about running around from this place to that place to look over her rentals and deal with this or that….and meanwhile Ol’ Sean just pays and stays out of her way.
It’s a shame because she really is a nice lady - even offered up her condo in Ocean City for free for a few days if we wanted it. So, from a business standpoint - is she gonna raise the rent 50 bucks a month to take a chance on someone new or is she gonna keep a nice happy status quo?
My rent hasn’t gone up in four years. We pay promptly, take good care of the place, and fix the minor stuff ourselves. There may be a connection.
We have a good relationship with our long-distance LL and he hasn’t increased our rent in 3 years (always pay on time). We do a good portion of the maintenance, so he only gets calls when a professional is truly needed (which has only happened twice during our tenancy). Our LL is about $60K-$80K underwater right now on this property. Our rent just covers his costs so we don’t feel threatened with foreclosure - yet. However, if we were to move out and he got some PITA tenants in here, with no equity and no profits to be had, he’d likely give this place back to the bank in a heartbeat.
yet. However, if we were to move out and he got some PITA tenants in here, with no equity and no profits to be had, he’d likely give this place back to the bank in a heartbeat.”
yes and he still may even with you paying on time
I am starting to hear about remote landlords giving up on the hope of a bounce back especially with the headlines now ” double dip in housing” they are starting to try and sell if they have any equity left and just bailing if they don’t
Realtard told me this last Sunday if you beleive anything they say , you have to shift out the truth from the sales pitch.
I was able to pulll that off in Brooklyn with a co-op rented from the owner. He was stunned that the rent showed up before the 1st of the month.
My commercial landlord in Jersey City offered an existing tennant the same the rent that they would offer to a new tennant. It was generated by computer based on demand for that particular week. Rent sometimes went down in that unit. They evidently discounted the idea that people would pay more to avoid the hassel of moving. I haven’t found a management company like that here.
Most commercial landlords (particularly ones that have excellent reputations for fixing things promptly, keeping the laundry rooms clean, etc) don’t pander to good tennants. They are dealing with so many people, they have staff to deal with the ones that are annoying. They consider it a cost of business rather than a personal affront. And they have no problem finding another well qualified tennant to fill in an empty space.
I tried to get a condo to rent in this neighborhood from an individual. One place was a disaster from start to finish - textured vessel sink, bad layout in the living room, ugly fixtures. The other had no more than 14 inches of usable counter space in the kitchen. And I looked into a rental with a small landlord who owned a building with a few units. The porch was great, but the rest of the place was tiny and poorly laid out.
In the end, the commercial place was the way to go. My rent was “discounted” $300 from the regular rate for this unit because it was the end of the month and they must have had a policy to keep below a certain level of vacancies. My increases are based on that lower base (they didn’t try to bump it up the full $300 at the first renewal). It is good enough for now.
I’ve found that no matter how corporate the property manager is, you can usually avoid increases. They will try to take advantage of you not wanting to move and try to get an increase every year. Funny how if you simply refuse to sign the new lease and keep paying the old rent–and have been a very low-maintenance, good-paying tenant–they will not evict you. They will offer to work something out at flat or maybe a very nominal increase just so they can feel like they won something.
You’ve got to be kidding. That’s a good way to get my stuff thrown on the sidewalk.
Not kidding at all. This is why rents go up more than fundamentals would suggest they should. Spineless tenants. In negotiations, when someone makes an offer, it’s okay to say no. Of course, you have to be reasonable and know how far to push it.
As has been discussed here before, ASKING for more rent isn’t the same as GETTING more rent. The rental market adjusts more quickly to supply and demand than the sale market does. Experienced long-term landlords know the benefit of tennants who pay on time conisitantly. Inexperienced landlords (especially failed flippers) often don’t realize just how hard it can be to get a good tennant. ISTR a story here a few years ago about a landlord who tried to raise the rent on an HBBer who then moved out and the landlord was stuck with an empty rental for months until the finally filled it, at a rent for less than he wanted from the person posting here.
You got a good point there. People who buy properties strictly to rent out will keep someone in there vs. the accidental landlord who adjusts as much as he/she can.
Plus the emotional attachment. Someone buying a condo to be rented out next month doesn’t have any emotional attachment - its all finances, versus someone who lived in a place where Addison or Jacob walked for the first time and doesn’t want to see it go downhill to a ‘bunch of lousy renters”.
My tenant oversees 32 commercial units. We appreciate and deeply understand our mutually beneficial relationship.
The question is whether single family houses will be rebuilt as multi-family properties to reduce the shortage of apartments.
How many singles and couples, young or empty nester, could live in that 17,000-square-foot house we read about here yesterday, with the addition of more kitchens?
(They may already have all the bathrooms they need).
landlord lease came up for renewal and their landlord asked for a 5 percent increase, to $1,600.
If you are in a relatively strong job market welcome to Ben Dover…They are not going to stop either…Get ready for 5% a year for many years…You can’t or won’t buy a house for any number of reasons…What are you going to do sleep in your car ??
Of course there are literally millions of homes sitting empty, which will neither be sold or rented. Doing either would crash the housing market… This is the unintended consequence of liberal policy - good intentions with a nasty bite…
“Liberal Policy”
This is the policy being pushed by the banksters, to save the banksters. Any help/support that this policy gives to anyone else is just an accidental byproduct.
Since they own both political parties, I really don’t see how you can refer to it as “liberal” or conservative”
Exactly.
Wall St. is run by liberals? When did this happen?!
Not defending either side, but if I recall the lowering of lending standards was to “help” minority groups become homeowners and increase home ownership. That does not seem like conservative policy, buy what would I know?
Now the bailouts. That was both sides and was plain wrong.
No, the lowering of lending standards was asked for by, and given to, the lenders to created more churn for the lenders and associated fees.
But most of it was just plain fraud, which has been shown time and time again on this very board.
In fact, there is an article and link below about a $3 million worth of fraud BY ONE LENDER ALONE further down the page.
It is also possible this was a huge gambit by the FED and PTB to pump massive amounts of cash into the economy. If you think about it, it was virtually a helicopter drop…
“If you are in a relatively strong job market welcome to Ben Dover…”
Ben Dover, a pipe-fitter turned landlord?
That’s an insult to pipe fitters!
After a slight dip last year, rents have come back up and are holding at 2007 rates. Some places are higher, but they are the higher end places as well.
However, there are some excellent bargains on houses in my neighborhood, but only if you plan to live in. Still not much market for flipping. The job market is far worse than is being told.
IPOs Boost Demand for Silicon Valley Mansions
By Dan Levy - (Bloomberg)
A surge in wealth from technology stock sales and initial public offerings is spilling into the Silicon Valley real estate market as newly rich workers bid up home values in suburban cities south of San Francisco.
The median price of single-family houses sold in Palo Alto, home of Facebook Inc., climbed 20 percent in May from a year earlier to $1.63 million, the biggest jump since 2008, according to preliminary figures from research company DataQuick. In Mountain View, the base of LinkedIn Corp., prices rose 3.1 percent to $957,500, the ninth year-over-year gain in 12 months.
The advances are defying a U.S. housing slump that has sent national values to an eight-year low. Share sales such as the IPO of LinkedIn — which doubled on its first day of trading — and an expected offering from Facebook will fuel a boom in some Silicon Valley cities into 2013, said Kenneth Rosen, an economist at the University of California, Berkeley.
“It’s just the beginning of the story and I suspect we’ll see an explosion in the next couple years,” Rosen, chairman of the school’s Fisher Center for Real Estate and Urban Economics, said in a telephone interview. “You’ve got young people with real money, and it’s not surprising they want to have a house.”
Almost 300 companies have filed for IPOs in 2011, the most for any year during the same period since 2000, and more than 10 percent of those are in California, according to data compiled by Bloomberg. Silicon Valley is the U.S. hub for early-stage companies, receiving almost 40 percent of the $23.3 billion in venture-firm investments last year, estimates from the National Venture Capital Association show.
I travel out there quite a bit for work (MV and Palo Alto) and, let me tell you something, if you get a few million bucks from an IPO, the best thing that you can do with that money is to use it to find a job somewhere else. I was in a friends “multi-million” dollar house and it was a total POS. Very close to downtown, but, other than that, I’m not sure I would live in that house if you GAVE it to me.
A few M dollars almost anywhere else would buy a mansion (on the water, if that’s your thing); prices are so stupid in that area that, honestly, your best financial move in many cases is probably to quit your job, buy a house in FL (or AZ, or any other hard hit area), for a million bucks, put the other 2M you were planning to spend (for a nice house in the valley) in the market, and work at MCD for the next 15 years. You’ll be better off financially, and probably also have a much better quality of life.
1.63M median, MEDIAN, home price in Palo Alto. That’s absolutely beyond stupid.
+1
And I’ll add a +10. What Overtaxed is describing is a version of my pet “Oil City” plan — a plan that many millionaires would be wise to take.
and probably also have a much better quality of life ??
I would have to disagree with this last sentence…The quality of life for the people that can afford these houses are pretty damm good..
1.63M median, MEDIAN, home price in Palo Alto. That’s absolutely beyond stupid ??
You could say the same for any number of places both in the United States and the world…There’s a reason that they sell for this price…
I got a friend to sell his Palo Alto home “bought” for 1.2M for 1.8M. An absolute POS. Just an awful house. He bought a solid, small 1904 in SF on bedrock for ~1M. Over-paid for it, but he did pocket a bunch of cash and he and his wife plan to shuffle off this mortal coil in the house.
The sale was thanks to the HBB. I couldn’t talk him out of buying. Prices in his SF nabe (Southern Noe Valley) have been sticky.
MrBubble
Noe Valley is one of the nicer non-NobHilly neighborhoods. I’d live there if I wanted to live in SF (which I don’t).
I’m not surprised the prices are sticky there still, but I’m sure it’ll get hit pretty hard, just like everywhere else.
“I’m not surprised the prices are sticky there still, but I’m sure it’ll get hit pretty hard, just like everywhere else.”
Same here. You don’t know how difficult it has been to convince him of this future.
“Noe Valley is one of the nicer non-NobHilly neighborhoods.”
It’s quiet and kind of boring where he is with a long walk up to 24th. Takes me 30 minutes to bike to my work from his place with all of the lights and 80 minutes to bike from my place in Marin (on the fast bike). We rent for much cheaper with a view of Mt. Tamalpais and a quick walk to the shops. Definitely the ‘burbs, but with the bambino, we don’t get out much anyway. To each his own…
Marin is very nice! My wife grew up there. I agree that Noe wasn’t ‘walkable’ to the main areas of San Fran, but it’s great for those that live in SF and work down the peninsula. I was on 23rd and Church for a few years. I had a motorcycle when I lived in Noe, and would get to work in Menlo Park in about 40-45 minutes down 280.
Now that I have 2 kids, I live in Redwood City to try and minimize existing commute (4 miles) and future commutes (mid pen is commutable to just about everywhere.)
I would love to ‘retire’ to either mid or northern coastal cali later in life.
He and his wife do that commute. Definitely the neighborhood for it.
Didn’t realize that you were on the peninsula. I did it once ten years ago. A little too much traffic for me. Marin is pretty nice but many of the people are pretty horrible.
Traffic is pretty bad on the peninsula. We live close to 280, which helps. Avoiding 101 increases sanity dramatically.
Wife works off of 101, so she has a heck of a jaunt through town at the end of her commute. I take surface streets.
My wife’s parents currently live out near the horrible people instead of the nicer older neighborhoods. There are definitely some jerky entitled people. Fortunately, they live right next to one of the local ‘weirdo’ characters who raises chickens on his property, and he’s much more fun to talk to than the snobby socialite crowd.
“I would have to disagree with this last sentence…The quality of life for the people that can afford these houses are pretty damm good.”
Let me get this straight:
They live in a house that would cost less than 200K in most of the country, in other words a modest, ordinary house, probably built 40-50 years ago.
They commute to work in round the clock traffic jams.
Everything costs more.
Just because they have a BMW in the driveway, does that mean they live better?
It’s that “diversity” that makes it so attractive.
Although I don’t see how you can call it “diverse” if nobody else in the country can afford to move there.
True story…..Pilot buddy of mine was given the option of transferring to the Bay area with his airplane, or quitting. Got a 10% pay raise if he transferred
Currently lives in a really nice 3500sf house out in the country.
Same money in the Bay Area gets you into a 800sf dump in Oakland.
So he found a new job locally, taking a 20% pay cut (funny how that stat keeps cropping up).
He can still afford the house, but spending on other stuff that might help out the economy? Can’t afford it.
The Rules of Gravity must not apply in the Bay Area.
Or else the Bay area and NYC are where all of the “creative, productive” types are going to build their bunkers.
What I can’t figure out is why people pay billions of dollars for Groupon, LinkedIn, Facebook, IPOs. It’s like “Pets.Com” all over again.
What I can’t figure out is why people pay billions of dollars for Groupon, LinkedIn, Facebook, IPOs. It’s like “Pets.Com” all over again.
I know I’ve mentioned this a kajillion times before, but I volunteer at the community radio station here in Tucson.
A few months ago, during a meeting that the station’s general manager was chairing, Groupon came up for discussion.
The GM’s opinion of Groupon? Well, let’s just say that he considers it to be way too expensive for our little station that could to get involved with. So, we’re not going there.
The ’social media’ sites are WAAAAAAAAY over-hyped and way over priced when the IPO.
“What I can’t figure out is why people pay billions of dollars for Groupon, LinkedIn, Facebook, IPOs. It’s like “Pets.Com” all over again.”
They don’t call it “Web 2.0″ for nothing.
This is a perfect example of what I’ve often said; if you pay attention, the PTB will tell you, in plain English no less, when they are about to screw you. But you have pay attention and you have to realize they ARE going to screw you. Often and hard.
Groupon has a model that is incredibly easy to copy. Entertainment.com, the LATimes, and others are already on the bandwagon. Plus, they have received a lot of (deservedly) bad press. IPO No NO!
SC,
I disagree. Mostly because I don’t think that the people buying these houses can really (in a normal usage of the word) afford them. I would guess they are making about 300-400K/yr (household) and buying a 1.6M dollar house. And that house is probably 2500 sq/ft and likely needs improvements. And is probably not in the best neighborhood. So, they buy a very “normal” house and live like normal people do, except that they need a tremendous income to keep their heads above water.
If you have a few M burning a hole in your back pocket I guess there are worse ways to spend it. But I think most would be much better served buying a tremendous house in a depressed area (FL, AZ, etc) and finding another job (or just investing the savings from purchasing somewhere else).
Yes, Palo Alto is nice. But, for the “uplift” of being in Palo Alto, I can live in 3X the house in FL and afford to vacation for 2-3 months a year where ever I want (including Palo Alto). That seems like a much better deal to me.
Just more evidence (as we needed any) that when they throw money into the financial sector there’s little control of where it ends up. There’s little reason to believe that this sort of one-time surge of money should have much lasting effect on either the stock or real estate markets. Since most of the money that housing is bought with is borrowed, only an increase in SALARIES and WAGES is likely to have a major, lasting effect on prices.
Silly-con Valley is about as out of touch with reality as it gets.
UK government to back separation of banks
LONDON (AP) — The British government intends to force banks to insulate their retail operations from their more volatile investment banking, a Treasury source confirmed Wednesday.
The policy is intended to help prevent a repeat of the financial crisis of 2008 and resolve the problem of banks which become too big to be allowed to fail.
Treasury chief George Osborne will announce the decision Wednesday evening in a speech to financial executives, the source said on condition of anonymity.
Shares in Britain’s big banks fell Wednesday, with Barclays down 1.8 percent, while bailed-out Royal Bank of Scotland and Lloyds Banking Group fell 1.4 percent and 0.7 percent, respectively. HSBC was also down 0.7 percent.
I’ll believe it when I see it.
Piece of cake for the fed, they can “hit” any target/number they want. Who would know, the difference for main street is that we live in the real world.
Fed Officials Discuss Explicit Inflation Target
(Bloomberg)
Federal Reserve officials are discussing whether to adopt an explicit target for inflation, a strategy long advocated by Chairman Ben S. Bernanke and practiced by central banks from New Zealand to Canada, according to people familiar with the discussions.
The talks coincide with Fed efforts to spur growth and reduce unemployment without fueling higher prices. An inflation target could help quiet critics of record monetary stimulus and anchor public expectations for consumer prices should the Fed in coming months try to spur the recovery by keeping interest rates close to zero for longer.
“My sense is that this may be a done deal, though not one likely to be implemented soon, and perhaps not until economic conditions return to closer to normal,” said Laurence Meyer, senior managing director and co-founder of Macroeconomic Advisers LLC and a former Fed governor. “The chairman is obviously for it, and it is hard to find anybody on the FOMC who now is really opposed to it.”
Calls by policy makers for an inflation target have grown in recent months, with Fed bank presidents in Atlanta, Richmond, St. Louis, Philadelphia and Cleveland supporting such a move. Atlanta Fed President Dennis Lockhart said on June 7 said it’s time “to reaffirm in explicit terms the central bank’s commitment to delivering its piece of the package of fundamentals needed to assure a durable and lasting recovery.”
I wonder if the reporter threw up trying to complete this piece, or is just brain dead. Your inflations are being exported Mr. Bernanke. Hungry people do not make good neighbors.
+1. China’s state rating agency noted that the Fed’s uncontrolled money-printing is a form of US default. Let’s just inflate those debts and obligations away, and since the dollar is the world’s reserve currency, places like China will bear the brunt of the resultant hyperinflation. Until they start refusing to accept Bernanke Bucks for actual goods and commodities, that is.
It will be poetic justice when the lemmings who voted for hope ‘n change, or the sheep who voted for McCain/Palin - both votes enabling the Federal Reserve-Wall Street looting syndicate to escalate their pillaging of what is left of the productive economy - feel the full consequences of the destruction of the dollar and collapse of our financial system due to years of massive, accumulated, systemic fraud.
And just how do the Chinese expect us to pay back those debts when they steal every job they can while we run near trillion dollar trade deficits? They want lopsided trade? They got it, along with the inevitable currency debasement.
Steal?
The Chineese did not steal our jobs. They did not have to; These jobs were freely and willingly given to them.
Well I don’t want to ascribe to the Chicoms greater ability to plan for the future than I think is warranted. In general the rulers there seem just as capable of short sighted seeking of immediate gain as ours do. But conceptually we could pay them with the sort of productive assets (mines, oil drilling leases etc.) that we have been reluctant to part with so far.
And you’re right combotechie, we gave them the jobs. Instead of a few blankets an an alarm clock we got cheap clothing and plastic tchockies in exhange.
TheseThose jobs were freely and willingly given to them.“TruePatriotCEO™” + “TruePatrioticCorpoorationInc™” = “we care about you!, …yes, you peon…we care about you 1st!, Ameica 2nd, our $hareholder$/$takeholder$ do not even enter into our “bidne$$” equation$.
Comng $oon to America…human organ tran$plant$ to the highe$t bidder$. An apple a day keep$ you alive fer another…day. De$ire evidence do you?
Exactly. They stole nothing. The Repubs did.
http://www.reuters.com/article/idUSTRE68R40I20100928
FYI: American companies have been selling us out since the 1980s. Not just jobs, but intellectual property as well.
Currently, it’s solar cell manufacturers. They are buying and moving our solar cell factories wholesale.
BOTH parties are wholly owned corporate subsidiaries. The corporate cartels want to build “shareholder value” by off-shoring jobs to whatever country offers the lowest labor rates and most “permissible” environmental and regulatory environment (read: slave-like conditions). The corporations sold out America, and their Republicrat hirelings made sure it was all perfectly legal. And if you vote for Establishment GOP or DNC candidates, you are a huge part of the problem.
Sammy, if you get right down to it, our government is one big corporation and has been for decades.
Look up CAFRs. Goverment at all levels is heavily invested in Wall St. and has been an influence in offshoring our jobs so they could get better returns.
The lemmings can vote however they please and their numbers can cancel out the votes of those who vote differently.
But consumers vote each time they buy a product or service - and they also vote when they choose not to buy a product or service.
The best way to overcome the PTB that run games on us is to learn just what their game is and then choose not to play.
These guys spend a lot of money setting up their games, jacking us around, screwing with us - and they need our money to make these games profitable. Which is reason enough not to play.
They only need us to borrow.
“They only need us to borrow.”
Which is reason enough not to.
I’ve been fighting them from hill to hill and tree to tree this way for a long time. They’ve got a lot more volunteers on their side than we do though.
What? Who’s on American Survivor Dancing with the Idol this week? I missed it.
China can complain all they want about US money printing, but until they (or we) decide to pursue more balanced trade with the USA, they really have no choice but to keep stockpiling dollars.
They can launder it through the UK to make it look like they’re not buying any US debt, but it doesn’t matter. They can try to play hot potato with the dollar by dumping it onto other trading partners, but those countries will get wise to the trick (IIRC, China was trying to pull that off with Chile, and Chile declined).
For the past five-ten years, the government has been sending trade reps there to try to work something out on trade.
Like buying stuff like cars, diesel locomotives (made by GE, of course), etc., direct, instead of requiring that overseas manufacturers set up “joint ventures”.
They basically told us to go pound sand. All they want from us is raw materials, and technology transfer.
Screw them. I’ll take the inflation, as long as it screws them worse.
Screw them. I’ll take the inflation, as long as it screws them worse.
It will. Their treasuries will be worthless and we won’t be able to afford their crap. And maybe in the process we’ll learn that smart phones and other toys are not necesary to live a fulfilling life.
Maybe the Chinese have figured this out. I seem to recall predictions a few years ago of Chinese cars flooding the US market. It hasn’t happened.
I think smartphones are a good thing. You don’t *need* one, but it can sure replace a lot of more expensive stuff in a pinch.
“And maybe in the process we’ll learn that smart phones and other toys are not necesary to live a fulfilling life.”
That’s just anti-capitalist socialeest/commie talk!
…or, in the words of the immortal OlyGal, “I think you need to report to the re-education mall, buster!”
…or, in the words of the immortal OlyGal, “I think you need to report to the re-education mall, buster!”
Rest in peace, Oly! May you continue to kayak the eternal seas while wearing your tiara.
““My sense is that this may be a done deal, though not one likely to be implemented soon, and perhaps not until economic conditions return to closer to normal,” said Laurence Meyer”
Which will be a long time off, and it will be disposed of at the first sign of economic trouble.
They already HAVE an explicit inflation goal. Whenever anything less than 2% is reported, they comment that it is “below the desirable range”.
Along with explicit unemployment goals as well.
Greeks rage against austerity while EU argues
ATHENS/BRUSSELS (Reuters) - Striking Greeks raged against a new wave of austerity on Wednesday after euro zone finance ministers failed to agree how to make private creditors contribute to a second bailout for their indebted country.
As workers staged a national strike, thousands of protesters — some chanting “Thieves, traitors! Where did the money go” — massed at parliament to try to prevent lawmakers enacting more tax hikes, spending cuts and sell-offs of state property.
Socialist Prime Minister George Papandreou must push through a five-year deficit reduction and privatization program to continue receiving aid from the European Union and International Monetary Fund and avoid default after Greece fell behind on its first 110 billion euros ($158.1 billion) rescue plan.
While Greeks are fighting Austerity, Salaries are going UP again this year 10-13% in India. Looks like they can still borrow and are enjoying all the outsourcing $$$. There salaries have increased 10-15% every year for the past 10 years. People have more than doubled or even tripled their salaries there. A lot of Manager positions at IBM-India, Accentue-India etc. pay more than $120K in India.
http://www.samachar.com/Salaries-to-go-up-1013-this-year-Kelly-lgppLHebhdi.html
“A lot of Manager positions at IBM-India, Accentue-India etc. pay more than $120K in India.”
Not first tier managers, at least not at HP (from what I heard through the grapevine they make more like 40K). And the worker bees at HP ride HP buses to work, so they aren’t all that well paid as few can afford even a subcompact car.
I’m sure that USD debasement is making their rupee based salaries look bigger, but at the end of the day India’s value proposition is still that their wages are much lower than ours. A contract that we were bidding on a twork was outsourced to India for about $15/hr, so yes, their wages are still pretty low, or have we already forgotten about the riots there over onion prices?
Whatever it is. Here in US my salary has gone up 4% in the last 10 years and there the salaries have gone up 300%. Here the RE has dropped 40-50% in many areas and there RE is 300-400% of their 2005 price. People there are floating in money unlike Chinese. Be it QE money floating there, or their RE bubbles or bloated stock markets. But people there feel very rich and here I don’t. Here we work hard but get subject to 0.5% savings rate whereas there the interest rates are more than 10% for savings. A person can easily double their savings in 8 years there and here we lose value due to hidden inflation and dollar depreciation.
They also have 10% CPI increases to deal with in India. Kind of takes the shine off of the savings interest rate. The US is exporting its inflation.
Let’s not also not forget that the overwhelming majority of India still lives in grinding poverty and that only a tiny minority is benefitting from the IT boom there.
As for rising Indian salaries: Once they get too high the business will go elsewhere. The race to the bottom has not stopped and our Indian colleagues are not exempt from it, as they will soon learn.
US inflation has no bearing on Indian CPI which as you say is 10%. US inflation does have a bearing on the Chinese inflation because of the suicidal interdependency between these economies.
Yensoy, I’m thinking that our “stimulis” of various forms is spilling all over the place raising commodity prices globally. Would you say that is not a factor in costs going up in India?
US companies pay in $US. Wouldn’t the increase in dollars in India cause the companies with US contracts the ability to buy more buildings, hire more employees, etc ?
BlueSkye: True, but inflation is not new to the average Indian. The Indian government is a deft printer of money and has over time mastered the fine balance between stalling the economy and overprinting. So, regardless of what the US does, inflation in India is going to run anywhere between 5 and 10 percent per year and it’s been that way for a long time.
Steve: Again basically true, but the number of companies with US contracts is small compared with the overall size of the Indian economy. So some companies have more money with which they build great campuses, but on the hiring front any extra money is used to pay for the typically large raises.
On the topic of raises, a lot of Americans are amazed to see the large raises in India and China. Here is one explanation - raises are a function of both one’s experience (seniority) and performance (both of the employee and the company). As I had noted earlier, someone senior enough on the totem pole will be paid roughly the same (at most a factor of 2 difference) whether in India/China or US. On the other hand, newbie payscales are hugely different. Now do the math. If the Indian newbie starts out at $6k per year and hits $120k in, say, 15 years - what’s the average yearly raise got to be? 22 percent! Now not everyone starts as low as $6000, and not everyone even makes it to $120k; besides the newbie making $6k per year would have been unemployable in the US - he/she is going to get “remedial education” for the first 2 years to bring them to some kind of fighting shape because they learnt nothing at school. On the other hand, the American grad starts of at $80k and hits $120k in possibly a shorter time, say 10 years. That’s an average annual raise of 4 percent. And then there is inflation, which is much higher in India than the US CPI, rigged though it may be.
There are reasons behind the numbers and if you dig deep enough you’ll see what’s really going on. Even with 20 percent raises and 8 percent GDP growth, India remains for the most part a poor country.
The turnover rate in India among the outsourcers is extremely high as well. I think that has a lot to do with raises.
Now not everyone starts as low as $6000, and not everyone even makes it to $120k; besides the newbie making $6k per year would have been unemployable in the US - he/she is going to get “remedial education” for the first 2 years to bring them to some kind of fighting shape because they learnt nothing at school.
When you put it that way it sounds better than our system of high pay for a few but everyone else can deliver pizza.
Now not everyone starts as low as $6000, and not everyone even makes it to $120k
What? You mean not everyone in India gets promoted to director or VP? Say it ain’t so!
On the other hand, the American grad starts of at $80k and hits $120k in possibly a shorter time, say 10 years.
Gee, where do they pay these sorts of salaries? At HP we paid our newbies in the 50 K range and the raises were small for them. Very, very few engineers in my organization were paid over 100K.
In Silicon Valley, $80k is a pretty typical salary for an entry-level engineer. A few years of experience will easily translate to $100k+. The average salary in my group of engineers is probably around $130k, and our company is known to low-ball on salaries. Stock compensation nearly doubles that, though.
I too, can vouch for the HP pay rates… and anything else Chindia IT related.
The only real raises are going to the employed relatives of the owners of the companies.
Martin, why are you bursting the myth? Don’t you know Indians work for slave wages of a dollar a day? They’re happy to answer the phone for a loaf of bread, and a middle manager is thrilled to have a slice of cheese to go with it.
Fact is, for some industries, middle managers (depending on how you define middle - someone in the IT industry may be a “middle” manager with just a few people reporting to them but may be very senior in terms of their payscale) make roughly the same salary wherever in the world they work.
As you climb the ladder the pay differential is definitely reduced. But I do know that my engineer colleagues in India were paid a fraction of what I was.
India’s GDP per capita is $1,265 USD. The USA’s GDP per capita is $47,123. To say that India isn’t rife with poverty just because a college educated minority is paid about 1/4 to 1/3 of US wages is disingenous.
Remember the onion riots in India?
Remember the onion riots in India?
Sorry I can’t recall its name, but I recently watched a documentary in which a laid-off American went to India to try to get his job back. He managed to land a job in a call center.
One fine morning — and this was very early in the morning — the call center had to be shut down. The reason? Some Bollywood star had died, and the nation had erupted in riots. That’s right. Riots. Over the death of a movie star.
I know what you’re talking about Az. Like Reagan, he was more than an movie star and well, people gave in to their overflowing emotions… Calling Rajkumar a bollywood star would probably trigger a riot
At least here we only riot over MLBA or NBA championships.
Slim, this guy.
The name of the documentary was “30 Days”
http://www.imdb.com/name/nm1041597/
(lucky bast#$%d)
Realtors Are Liars
OK. I think I got it now.
Nope, slipped away again.
Not to worry — he’ll remind you again tomorrow, and with each and every post.
Republicans dodge farm subsidy cuts
WASHINGTON (AP) — Republicans have quietly maneuvered to prevent a House spending bill from chipping away at federal farm subsidies, instead forging ahead with much larger cuts to domestic and international food aid.
The GOP move will probably prevent up to $167 million in cuts in direct payments to farmers, including some of the nation’s wealthiest. The maneuver, along with the Senate’s refusal Tuesday to end a $5 billion annual tax subsidy for ethanol-gasoline blends, illustrates just how difficult it will be for Congress to come up with even a fraction of the trillions in budget savings over the next decade that Republicans have promised.
Meanwhile, the annual bill to pay for food and farm programs next year would cut food aid for low-income mothers and children by $685 million, about 10 percent below this year’s budget.
The farm subsidy cuts won bipartisan approval in the House Appropriations Committee two weeks ago, but as debate on the House floor began Tuesday, Republicans turned to a procedural maneuver to drop that language.
Rep. Frank Lucas of Oklahoma, the Republican chairman of the House Agriculture Committee, won an agreement from party leaders to strike the cuts in direct payments if just one member objected on the floor. Some Democrats hope to force a vote but aren’t sure they will be able to.
“The takeaway from this is that nothing has changed with regard to farm subsidies, it’s the same old, same old,” said Rep. Jim McGovern of Massachusetts, a Democrat who has pushed to restore the money cut from food aid.
Direct payments to farmers have been a frequent target of fiscal conservatives and other critics of farm programs because they are paid regardless of crop price or yield. They have survived for years, along with tens of billions annually in other subsidies for farmers, because a powerful coalition of farm state lawmakers in both parties has protected them.
Those poor old farmers need our help. Maybe the million $ subsidies will help buy a new mule.
lol
do as we say…not as we do.
“do as we say…not as we do.”
There it is. The essence of hypocrisy.
The GOP move will probably prevent up to $167 million in cuts in direct payments to farmers, including some of the nation’s wealthiest.
“TruePurity™” + “TrueReducetheDeficitNow!!!!Today™” + “TruePaththProsperity™” + “TrueFiscalConservative™” = “TrueKeepyourhandsoffMY$tackanddon’tdraftMYkidsforMYgov’tpolicyidea$$$$$$$$$$™”
The poor, poor wealthie$, they’re $uffering…$uffering, if you can’t give ‘em per$onal tax cut$, at least America should reduce their companie$ Inc.$ corpoorate taxe$…hurry, hury,…they’re $uffering $o!
Actual fiscal conservatives need to get themselves a new political party.
Probably based in the Blue States, because the Red States are all on the dole on a net basis. Give the Democrats a little competition.
“Actual fiscal conservatives”
you mean ron paul?
Maybe this answers itself, but if one supports subsidies for corporate ag, ethanol, big oil, and a bloated military, and supports tax cuts for the most privileged, do they really have a commitment to cutting the budget deficit?
(cough, Iowa primary, cough)
+1
“Meanwhile, the annual bill to pay for food and farm programs next year would cut food aid for low-income mothers and children by $685 million, about 10 percent below this year’s budget.”
I truly hate to see this; there are people in this country that are deeply in need of food assistance.
But I _would_ be in favor or much more strictly defining what constitutes food that can be purchased with food-assistance; some of the cr*p that I see people loading up on and paying for with electronic benefits turns my stomach. We already restrict them from purchasing alcohol and tobaco (which is why you frequently see them check-out in two separate batches, with cash for the latter items), so it would not be that complicated to apply a nutritional standard as well.
I think that the poor do need to be able to purchase ready-to-eat foods, as some of them lack facilities for cooking. But cr*p like twinkies is definitely not food.
Twinkies are one of the major food groups. Along with Moon Pies, and Dr. Pepper.
Where do people get these urban legends?
I’ve used SNAP (Supplemental Nutrition Assistance Program (SNAP)) and you are SEVERELY restricted on what you can buy and deserts/snacks AREN’T on the list.
NOT an urban legend. Ok, the twinkies comment was a touch of hyperbole perhaps (I don’t recall twinkies specifically), but my comment was based on a very recent personal experience:
I was in line at Wal-mart, and I got the joy of watching the grandma/young-mother/wee-one check out almost three time—e.g. the food got run through the check-out scanner once, then they tried to pay for it (whereupon they realized that they had less money on their electronic-benefit card than they had previously thought), and then the ran the majority of the “food” through the scanner in reverse. Then they checked out the alcohol and tobacco products, paying cash.
The food that I got to look at as it went by TWICE was almost entirely overly-processed, low-nutritional-value garbage that I would not choose to eat even if it were free.
Note that they did not choose to buy less alcohol/tobacco when their balance was lower than expected. Nor did they choose to pay cash for any of the “food”.
Who are liars again? I am having trouble with my memory.
Real tors.
Not the fake tors or the phony tors, but only the real tors.
Stagflation: it’s what’s for breakfast
What’s for lunch?
Structurally high unemployment?
Don’t forget under-employment, as an example: Very Large Mutual Fund Company located in Cherry Creek, Denver hiring new college grads at $11.50/hour as contractors with no benefits
This sounds like a case where the company is treating the people like contractors, but they’re expected to work regular hours under supervision. Which is what employees do.
BTW, the IRS is getting very interested in the tax evasion aspects of these arrangements. This IRS web page has some interesting whistle-tooting information.
Yay! More under $500/week jobs! Yippie, we’re all gonna be poor!
And heaven help you if you are lucky enough to have a good paying job, as you will be hated and envied by the masses. The things I hear from people when I tell them I’m an employed engineer: “must be nice to be overpaid!”
It’s not a violation of tax law if they are employees of a temp company like Kelly or Manpower.
“It’s not a violation of tax law if they are employees of a temp company like Kelly or Manpower.”
And that is probably what they are. We did it all the time at HP. You could tell who they were because their id cards had a red stripe on them, and they were legion.
The IRS is dreaming if they think that anyone is going to narc on a employer for illegally using “contract labor”
Not when jobs are so few and far between. And pay half what your contract rate pays.
No lunch. Stagflation ate your lunch. NO SOUP FOR YOU!
(cheesebugger, cheesebugger, cheesebugger, Pepsi,Pepsi,Pepsi,chips, chips,chip. NO Coke. Pepsi)
“All Aaaaboard! Amtrak!”
A related question: does Neil still have popcorn?
oops, that was meant to be in the previous thread.
What is a worse investment than overpriced housing, based on the past 15 year’s experience?
New Dot.com IPOs. It that’s what you’ve got, best to shift some of it to housing.
http://noir.bloomberg.com/apps/news?pid=20601087&sid=aE723mrDeCHE&pos=6
“A surge in wealth from technology stock sales and initial public offerings is spilling into the Silicon Valley real estate market as newly rich workers bid up home values in suburban cities south of San Francisco.”
“It’s just the beginning of the story and I suspect we’ll see an explosion in the next couple years,” Rosen, chairman of the school’s Fisher Center for Real Estate and Urban Economics, said in a telephone interview. “You’ve got young people with real money, and it’s not surprising they want to have a house.”
We don’t need to build stuff in Amerikwa, we can just tweet our way to prosperity.
“Volatile” food and energy excluded from core, cheaper i-Pads = no inflation, right kidz?
Don’t forget to exclude falling wages as well in that non-inflation formula!
“A surge in wealth from technology stock sales and initial public offerings is spilling into the Silicon Valley real estate market as newly rich workers bid up home values in suburban cities south of San Francisco.”
Thats correct. I hear google wants to build employee housing on a old Navy Base up there
I could be wrong, but I strongly believe the new dot-com bubble will pop a lot more quickly than the last one. It seems like almost everyone is calling “BS, bubble” on this one. See any recent issue of The Economist, for example.
WEB 2.0! It’s different this time!
Not.
So if you were in your late 20s, married, with two young kids, what would you do to protect your financial future? We currently rent (but may buy in the winter) and have zero debt. I went to college but wan never able to find a real job, so I have no back-up career. Now I stay home with my kids. Husband is already on his second career and is doing well.
At “zero debt” you’re already doing it. That and save a little bit every month until you have a decent size emergency fund.
As for house shoping I’ll go off on a limb here and say that in many markets this probably ISN’T a terrible time to buy. Once you figure out what the asking prices are for houses that you’d be willing to live in for the next ten years calculate the payments on that 30 yr FRM. Subtract your rent from that number and put that in separat account, possibly at a differnt bank to save up your downpayment. That way you’ll know that you can live on that ammount and you’ll be putting money away.
1. Figure out potential backup careers you could pursue on short notice, in case your husband loses his job.
2. Save up at least six months living expenses in a liquid form which won’t get hammered in a period of economic turmoil (and good luck figuring out exactly what qualifies!).
3. Take savings off the top of your husband’s paycheck, ideally through 401(K) or other employer-subsidized savings vehicle.
4. Enjoy your kids.
5. Don’t buy a home until prices reach a level which makes owning cheaper than renting the kind of housing that meets your family’s needs.
Problem is, that time may never come. In a normal market home ownership isn’t competetive with renting if you’re only there for a short time. But after several years of paying off a 30 yr FRM, the rents for equivalant housing would normally have gone up enough that ownership starts netting out ahead. Of course with a huge bubble, a gigantic bust, a large oversupply of housing and wages pretty stagnant, predicting the future is real difficult now.
N.C. has a terribly high unemployment problem, IIRC. I wouldn’t be in any hurry to buy something that comes with long term payments. Learn to control your impulse behavior; patience really is a virtue.
I think the bigger unknown is employment and wages. As long as renting is cheaper than owning, there’s a strong argument for renting versus owning unless one is very confident of being able to maintain their wages in their current location.
“unless one is very confident of being able to maintain their wages in their current location”
Ah, that’s the kicker these days.
Before the kids start school is an excellent time to go back to college, and train for something that’s more lucrative, pay-wise.
Now what that would be, given the current state of the economy, and the “free-pass” corporations are getting to outsource? Your guess is as good as mine.
I hear the medical field is short of people (snark off)
A local state U has a waiting list for its school of nursing, as in years long. Those kids are going to be disappointed (welcome to our world).
“So if you were in your late 20s, married, with two young kids, what would you do to protect your financial future?”
Seriously? Move to another country.
Yet another anti-science GOP turd who wants to drag US energy policy back to the 19th century:
http://www.denverpost.com/politics/ci_18274713
Cus renewable energy is for sissies (don’t be economic girlyman) and real Amerikans burn coal and drive big azz truckz
Science. You keep using that word. I don’t think it means what you think it means.
21st Century Energy Policy in the US has so far been a cornucopia of negative EROEI project subsidies that line the pockets of favored business elites without improving our energy conservation one iota. Golden Lab is a huge sinkhole of unsuccessful, uneconomic, impractical politically correct whimsy.
That must be why local wind turbine maker Vestas is doing brisk business selling turbines around the world.
No doubt Government Cheese programs create jobs. Sometimes lots and lots of them.
So you’d prefer that the Chinese to benefit from the global chesee?
I’m sorry, are you saying that wind power provides negative EROEI or just stupid, stupid, stupid ethanol? Let’s not conflate a hatred of subsidies (or pushing through economic barriers of entry) with science.
Our wind turbine makers and solar cell plants are doing monster exporting.
Domestic market? What domestic market?
While many states are using large amounts of wind, many wind farms are being blocked by both environmentalists (hows THAT for effing irony?) and wealthy landowners who refuse power lines to the wind farms.
Solar? People still think solar is non-competitive and doesn’t work on cloudy days.
You can’t fix that kind of stupid.
Regarding the “dismal science” that is the meat and potatoes of HBB, increased rates of childhood asthma resulting from burning non-renewable (yet cost-efficient) fossil fuels should be dismissed as a mere externality, right kidz?
Cus everybody wants to live in Foxconn City, don’t we…
Foxconn city, coming soon near you:
1. Lifetime employment
2. Live with your friends (bunk bed for you)
3. Sundays off
4. Play with the latest gizmos (sorry, you can’t afford to buy one)
5. Be at the cutting edge of technology (just don’t inhale the aluminium dust)
6. Food delivered to your desk (got to meet your quota now)
7. Onsite medical services/counselling provided by Dr Kevorkian (rip)
1. Lifetime employment
Because you’ll commit suicide when fired?
U.S. Rep. Doug Lamborn was likely following the recommendation of his lobbying constituency; these elected peeps read little if anything as their office becomes a mail forwarding facility for their corrupting benefactors.
Yes because we want to make sure that CHINA kicks our a## in renewable energy as well.
Like that is even logical. If we provide subsidies for loss leader programs, China will get in the game to reap the subsidies, and we will still keep the loss. Is that getting our a$$ kicked by them?
They already are…
China IS kicking our butts in renewable energy… and buying and moving our mfg plants that make renewable energy equipment, as well.
That’s called, all the way up the butt.
Thank god our high speed trains are better than theirs.
Oh wait.
Well out Internet is faster at least.
Oh wait.
Of course it was only when he realized that the money was going to HIS district that he started thinking that it might, possibly be worthwhile.
Exactly. I imagine he figured that out about the time he started getting hate mail from thousands of constituents.
But what’s he going to do with all the love letters from his corporate benefactors?
Makes Jimmy Carter sound like a nuclear scientist! Oh, he was.
No he wasn’t. He couldn’t even pronounce “nuclear.”
Mathguy
1. Federal legislation to force mortgage holders / servicers to pay realty taxes / condo fees / security / and household maintenance costs upon “starting foreclosure”. The existing stock of housing should be looked after better to help with area pricing.
2. Federal law (FL) to ensure provable down payment starting at 10% and then going to 20% within five years on all housing.
3. FL to require Lendor to pay for the appraisal of residential property which cost cannot be charged to the Purchaser.
4. Sell Fannie and Freddie to private industry once and for all under FL.
5. Under FL force the Lendor to document in prescribed form his (their) relationship with the Servicer for better tracking purposes. If they are going to open up another type of stock market it should be regulated.
6. FL should require the Servicer to have skin in the game - just like Polly said she saw at her old place of employment. Say 10% and require, under FL, that this Servicer is the Controlling Mind.
7. FL to force the Servicer’s to place all of it’s Shadow Inventory before the world. If they are not going to foreclose but just continue to dangle the feet of the homeowners, then their feet should dangle too. This would have quite an effect on their balance sheets. But it would be in a contingency rather than in a reserve. Shareholders / depositors need to have more accurate information.
8. FL that once an Arrangement Request has been entered into, as long as the mortgagor continues to pay their requested reduced payment, that no further action can be taken by Servicer until disposition of the Request.
9. Forget about any grants to housing. It is still overheated and the problem still is to remove the heat from the industry. Pent up heat even still exists. There are two ways to ameilorate this: jail and penalties. Anyone caught forging documents to do with housing, or creating false appraisals should be sentenced to jail for five years mandatory. The homeowner who acquieses in such behaviour should be fined a minimum of $5000 jailable for six months if not paid.
10. FL to require any housing not occupied and not being maintained by the Servicer be titled to the city within 60 days (if not maintained) who will be required to knock the property down. Mold will probably destroy them anyway. This would only apply if taxes not current and maintenance not down (vs I think three years on taxes currently).
11. Require all appraisers, realtors, and persons signing documents to attend a refresher course in their discipline wherein new penalties would be explained, etc.
12. FL for rent controls should be considered for a period of five years.
13. Housing lobbyists should be hung, drawn, and quartered right after - - - -
14. Lack of jobs will force the market down provided it is not tampered with. We should only hope that these people can get back to work before the housing value does slip below it’s “real worth” - which has not yet been decided.
15. Energize private sector companies (those in business more than five years and with 20 to 200 employees). This is the sector that has always created the biggest bang for the gov buck.
16. Ensure the stop of QE. With 40% less stock volume the Dow went up a record amount - now it threatens to take away the largesse because it isnt being fed anymore. Good. Can you imagine what good those extra dollars could have done probably used?
17. Fire BB and Timmy. History will prove that these two clowns couldnt have goofed up worse. Instead of putting money unto main street they put it in banks and wall street - and into municipal govs. Can you honestly think of more lamer areas in which to stimulate an economy? Failure of banks in GD actually pruned that period to a shorter time frame.
18. I don’t know if the states have a new house insurance program paid for by the builders. This should be for unfinished new houses, or ones with mistakes, etc.
Back to work -
That’s not marketable change we can believe in. We need the free stuff for everyone kind, its much easier to sell. You just can’t buy mass idiot votes with your brand.
Patrick, thanks, that is a good complete list. I have some follow ups. I’ll start with #1 on this list and add more replies as I get the time.
1) a) Define “starting foreclosure”. I know in general why you would say this, but again, I want to have specific points when I discuss these things. Why should we do this instead of status quo? Why shouldn’t the states regulate this individually (I’m thinking interstate commerce on big banks, local banks could be exempt and subject to state law.)
b) What should the penalty be for failure to maintain a foreclosed property? In places like Detroit, how should banks deal with properties that need to “revert to the mean” (be bulldozed)? Is current law sufficient to deal with this situation?
c) I believe this is a better way to deal with maintaining neighborhood house value than propping up bad mortgages and bad mortgage lenders. In addition, it seems like the loan originators should maintain some responsibility, and the loan servicers should also have some skin in the game. A servicer shouldn’t be able to just deliver a foreclosure notice, then avoid all responsibility for responding to borrower actions with “we’re just the servicer, you’ll have to speak to the note holders.”
1. (a) “starting foreclosure” Whenever the homeowner is served notice of delinquency of three payments outstanding then the lendor should be responsible for payment of any costs to maintain the home and be able to add them to the mortgage outstanding. By waiting until the actual process is over with (450 days) there are severe maintenance issues and possibly mold.
You cannot keep the status quo. Think of all of the accumulated housing damage that has been done. I would wager that the total damage to date to USA housing could equal the damage done in any of your wars. With four years damage done now how much longer can it go without serious health effects?
I don’t think you can lay it at the banks, state or otherwise. I think ALL Lendors have to understand that this is a “Housing War Measures Act” and war is federal. I don’t think your states have the power. This has to come under control quickly, and only the feds can co-ordinate it effectively. Do you want good and bad neighborhoods burning in the night? Do you want rats wandering your streets? Etc. Mold can really hurt you.
(b) Ordered maintenance should be forced after the third missed payment by the Servicer / Mortgagor not years later after foreclosed.
Banks in Detroit (or the city) who are forced to revert the property to the mean should be allowed to dispose of that property, upgrade it’s zoning, etc as the market will allow. On this note, a Canadian / USA lawyer friend said he felt it was.
(c) I agree. You have the laws, with some tweaking you just need to enforce them. Create employment - hire some housing police !
Regarding #2)
Federal law (FL) to ensure provable down payment starting at 10% and then going to 20% within five years on all housing.
Do you mean only for Fannie/Freddie based loans, or are you saying you think we should have a national law requiring 20% down on even in-state private transactions? If so what constitutional backing justifies this kind of regulation of contract law? Or do you mean this would apply only insofaras the interstate commerce clause of the constitution would apply to the transaction when large interstate (or international) corporations or entities are involved? How would you propose enacting whatever version of this you envision?
MATHGUY
As a Canadian accountant and it being the deadline for filing proprietorship business returns tonite I will have to ask you to forbear until Friday (travelling tommorrow). Very sorry.
Regards,
Patrick
Mathguy
I have now finished your request. It was interesting. I hope my grammar was readable - you see I too am math oriented !
And now, as in Sound of Music, “and so must I” - -
20% down looks good on paper, but with half the workforce making only $500 a week for less (most, less) this will kill the house market.
Forever.
Because frankly, if you aren’t making close to 50K a year or better, you should not buy a house. Only about a third of the workfarce (yes I spelled that right) makes that much.
Respectfully, that is not true. A house costing $60,000 would need a down payment of $12,000. If two people were working at $500 a week why wouldnt they be able to save 23% of their combined income for one year?
The trick is to get the house prices down to an acceptable level. Not everyone needs to live in a McMansion.
Mathguy
didnt finish, hit the wrong button
(c) Loan originators should keep Polly’s 10% whom I believe are acting as the Servicers. Their 10% should be the first 10% lost.
I would think that an orginator who fleeced his investors will eventually be hung drawn and quartered.
I cannot believe that all of this problem was founded on flipping mortgages. This is not rocket science yet people make it seem like it is.
2. The USA is in a housing meltdown and prices look like they will return to an acceptable amount. Not all homeowners need nor want a McMansion. $60,000 houses with two young persons saving $12,000 within a year is entirely possible (assuming 50% of Americans make $500 or less a week). (Buffalo’s average house cost is $60,000 right now).
Mathguy, I am an accountant, not a lawyer, and a Canadian not an American so I am not familiar with your state vs federal laws.
I do know that when Canada modelled it’s federal state it tried to give the feds the greater power because of what had happened in the USA.
In Canada we have a continued housing boom that seems to be losing a bit of steam. Don’t know if it will continue. We all hope that our American cousins (yes we all have a lot of them) will be able to pull out of this housing mess.
Good luck
News from Tucson:
Tucson men admit their scheme caused nearly $3 million in foreclosure losses: Mortgage fraud case brings two guilty pleas
It’s yet another case in which the renters get screwed. Bigtime.
Here’s a bit of backgrounder on the above-linked story:
Terry Goddard Announces Settlements in Real Estate Fraud Case
Key point:
Defendant Silverstein, a real estate agent with Re/max All Executives, told investors they could legitimately purchase multiple investment homes and obtain 100 percent financing. Silverstein then said he and other co-defendants would find rent-to-own buyers to purchase the investment properties, and some investors would receive their rent every month regardless of whether rent was actually collected. Defendant Volpe was the Re/Max broker for part of the time Silverstein engaged in this conduct.
Silverstein and other co-defendants then solicited rent-to-own buyers to enter into purchase agreements for homes for which they could not qualify. Eventually, investors no longer received rental amounts sufficient to cover the amount of the investors’ increasing mortgage payments. Consequently, many of these homes were foreclosed, causing harm to the investors, lenders and rent-to-own home buyers. Defendants profited from this scheme by collecting fees and commissions.
A few paragraphs later, this story continues with:
This agreement follows a $60,000 settlement earlier this year in the same case with four other defendants: Tucson Mortgage Co. L.L.C.; WGA Enterprises, L.L.C., and William and Jane Doe Anastopoulos.
To which I say:
Mr. Anastopolous owned Tucson Mortgage, which was the originator of the mortgage when I bought the Arizona Slim Ranch back in 2004. I wish I’d known how bad this company’s reputation was before I signed on with them. But I soon found out.
I didn’t personally deal with Mr. A, but the guy I did deal with tried in every way possible to get me into an ARM. I refused. The mortgage on this place is fixed rate. At my insistence.
As a result of the above settlement, Tucson Mortgage is no longer in business. And Mr. A can no longer own a mortgage company in Arizona. (He is allowed to be employed by one.)
Rent-2-Own should set off the klaxon horn.
It would be really difficult to be a renter with children in school, and have to move on short notice. We rented for five years until the housing dip arrived late in 2002 in our market, and we were lucky to have a good landlord too.
Damn FBs!
Oh wait.
The MSM is coming around, as seen in this article, which suggests affordable housing prices are no longer a catastrophe.
June 15, 2011, 5:01 a.m. EDT
The 10 most affordable U.S. home markets
Weak local economies take toll on home prices in these cities
By Amy Hoak, MarketWatch
CHICAGO (MarketWatch) — Niagara Falls, N.Y. is well known for its beautiful views and its popularity among tourists. But here’s something you might not have known: It also has the most affordable housing market in the country.
That’s according to a report released by Coldwell Banker on Wednesday.
The Home Listing Report considers average listing prices of four-bedroom, two-bathroom homes on ColdwellBanker.com. The report looked at 2,300 markets in North America, analyzing properties listed between September 2010 and March 2011.
Some of the most affordable markets in the country are suffering with weak economies, and include Midwestern cities that never experienced very high housing prices during the boom but saw prices fall as their local economies deteriorated, said Jim Gillespie, CEO of Coldwell Banker Real Estate. Other affordable markets include areas of the country dealing with an overabundance of new housing supply.
There were 775 U.S. markets where listing prices for these homes averaged $200,000 or less, Gillespie said.
…
Suburbs of Hot-Lanta, Rust Belt cities, and a few out near BFE.
All with “weak local economies” (All economies are local?)
Yeah, I’ll start loading the moving van tonight.
I took a look at that list but then realized I’d feel more fulfilled w/a list of the ten most affordable communities by price per sq foot.
Or better still, price per square foot divided by median income in the region.
“Some of the most affordable markets in the country are suffering with weak economies, “/i>
Read: lack of jobs.
I would have never guessed.
Which means that perhaps their advertisers are starting to give ground on the issue, willing to accept lower house prices for more sales. Price X Quantity = Revenue I believe is the formula. High price plus low quantity can result in a lower revenue than a lower price and higher quantity (area of the rectangle under the Price X Quanity point is the revenue).
This article points out that the HMI hasn’t been above 50 since April 2006, but the situation is really far worse, as it has been stuck below 20 for month after month with no respite.
June 15, 2011, 10:42 a.m. EDT
June home builder index falls to nine-month low
By Steve Goldstein, MarketWatch
WASHINGTON (MarketWatch) — Home builder confidence deteriorated in June, hurt both by the glut of cheaper existing homes on the market as well as rising building material prices, a trade association said Wednesday.
The National Association of Home Builders/Wells Fargo Housing Market Index fell to 13 in June from 16 in May.
The HMI is a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor — which hasn’t been the case since April 2006. The worst-ever reading was 8 in Jan. 2008.
Economists polled by MarketWatch had expected a 16 reading, continuing Wednesday’s string of disappointing data, notably the figures on Empire State manufacturing.
…
Imagine being the MSM journalist that has to try to make a living hyping the monthly single digit oscillations of an index that hasn’t seen daylight in five years.
At least he HAS a job.
The new single-family housing starts do a pretty good job of telling the story of the bubble:
- Long term average back to 1985 was about 1.1m; this can be taken as a rough gauge of the sustainable long-term replacement rate of the U.S. single-family housing stock
- They bottomed out at roughly 600K in January 1991, at the trough of a recession
- By January 2006, about the time when many had concluded that “real estate always goes up,” they bubbled spectacularly to roughly 1.8m
- They bottomed out below 400K in March 2009
- They had a stimulus-fueled bounce to near 600K in April 2010
- After the first-time buyer tax credit expired, they subsequently have dropped off to under 400K
Petra Ecclestone ‘to buy most expensive home in the US’
It is one small step up the property ladder for 22-year-old fashion designer Petra Ecclestone — but a giant leap for anyone else.
By Nick Allen, Los Angeles
Miss Ecclestone, the daughter of billionaire Formula One boss Bernie Ecclestone, has reportedly put in a bid on the most expensive home listed for sale in the United States.
The sprawling 57,000ft French chateau-style uber-mansion in Los Angeles has more than 100 rooms, including 14 bedrooms, and has been on the market priced at $150 million (£92 million) since 2009.
The offer price has not been disclosed, according to the Wall Street Journal, which reported the proposed sale. Celebrity news wesbite TMZ reported the sale had not yet closed.
If it goes through the purchase would allow the heiress, who already owns a six-storey Grade II listed house in Chelsea, purchased for £56 million, to divide her time between London and America’s West Coast.
Miss Ecclestone, who started her first fashion label at the age of 19 and is an ambassador for the Meningitis Trust, is reportedly marrying her long time boyfriend, businessman James Stunt, 28, in the summer.
Her new home would be on the doorstep of Hollywood and close to the fashion shopping mecca of Rodeo Drive. It would also have significantly more parking space than Chelsea, with room for 100 cars.
The property, which is called “The Manor,” also features a barbershop, a wine tasting area, several gift-wrapping rooms, a flower-cutting room and a silver storage room with specially controlled humidity.
There is also a tennis court, a koi pond, a citrus orchard, the obligatory swimming pool, and the “Prince Charles suite” where the heir to the throne once stayed.
It is being sold by Candy Spelling, widow of Hollywood producer Aaron Spelling who died in 2006. He was behind television shows including Dynasty, Charlie’s Angels, Starsky and Hutch, and Beverly Hills 90210.
Mr Spelling completed building his dream home, on what used to be Bing Crosby’s estate, in 1991. It includes a main staircase reminiscent of the one used in Dynasty.
His widow once described it as the “greatest entertainment house ever” with a “kitchen where you can cook for two or 800.” Representatives for Miss Ecclestone and Mrs Spelling have declined to comment.
The highest known price paid for a family home in the US so far is $100 million (£61 million) by Russian entrepreneur Yuri Milner, who purchased a property in Silicon Valley earlier this year.
“gift-wrapping rooms”
Who knew you needed such a thing?
And to think that, when my parents were wrapping my presents, I had to get the heck outta Dodge until they were done. But that wasn’t a big problem. I’d just go into my room and read for a while.
Who knew you needed SEVERAL of these?
Seriously, WTF?
The only thing to do with a ‘house’ that size is turn it into a hotel.
Or a bordello!
What got my attention on this is that she did not buy it herself. Daddy bought it for her and it’s not the first house he’s bought for her either. As a designer and a model I’m thinking she could afford a nice litte place all by herself. I’m wondering how Bernie got the idea his 22 year old princess had to have what Aaron Spelling worked years to have right now.
Can’t wait to see how Bernie’s “guest room” is decorated.
The good news is that she’ll probably piss away all of that inherited wealth within her lifetime. This house purchase was a great first step in that direction.
2 words: Marie Antoinette
Shiller: Housing Could Fall Another 25% But Is Harder to Predict Than the Weather By Aaron Task | Daily Ticker –
The housing bubble of the early 2000s was “unprecedented” and the “biggest in U.S. history,” according to Yale professor Robert Shiller.
As a result, he says “it’s very hard to forecast” where housing goes from here, now that it has officially fallen into double-dip territory, based on the S&P Case-Shiller Index.
Housing “might fall [another] 10-25% in the next few years,” but forecasting housing today is harder than predicting the weather, Shiller says. “I don’t see how anyone can quantify a forecast because it’s such an unusual event.”
In his latest books, The Subprime Solution and Reforming U.S. Financial Markets, Shiller argues the path to recovery is paved with financial innovation; 11 million homeowners under water is proof “they weren’t protected and need a way to hedge their housing risk.”
But “the economy is sick right now [and] I don’t have any miracle cure,” he admits.
Best known for his earlier works, Animal Spirits and Irrational Exuberance, Shiller is arguably the world’s foremost authority on financial bubbles. So if he can’t predict with any certainty where housing is going, what hope is there for the rest of the punditry?
Shiller argues the path to recovery is paved with financial innovation; 11 million homeowners under water is proof “they weren’t protected and need a way to hedge their housing risk.”
—————–
Wow. Sounds like he’s trying to pimp his housing derivatives.
No, we don’t need any more “financial innovation.” That’s exactly what got us into this mess in the first place.
The only thing this housing market needs is LOWER PRICES.
Knauf Insulation closing, 146 jobs lost
Atlanta Business Chronicle June 15, 2011
Knauf Insulation, a manufacturer of fiberglass insulation and other products used in new home construction, is closing its plant in Lanett, Ala., eliminating 146 jobs. The plant is 40 minutes from Columbus, Ga., and draws workers living in the city and nearby communities. Company officials said the closing is being forced by the “extreme decrease” in home construction, the Columbus Ledger-Inquirer reported.
Officials with the German-based company told the Columbus newspaper they do not plan at this time to sell the 800,000-square-foot facility. The Lanett plant was opened in 1988.
But, but. but … Alabama is a low wage, right to work state, right? I thought those places were supposed to be job creation dynamos.
Alabama is a low-wage, right-to-work state like Arizona. And, like ‘Bama, this state has a crummy education system.
This is starting to get the attention of business leaders like Craig Barrett, head of Intel. His company just opened a new plant up in the Phoenix area, but he’s holding off on opening any more. Why? Because of our state’s education system.
This is not to say that the system needs more money. It gets quite a bit. The problem is that quite a bit of the money is not being spent in the classroom on student instruction. It’s an allocation problem, not an amount of funding problem.
“Alabama is a low wage, right to work state, right?”
Very low taxes too, a Jim Crow redux according to many. I spent lots of time in the south while in the military, and corrugated-tin style poverty was abundant as were the babies. I’d never seen anything like that growing up in California.
Do NOT get me started on the Repub plantation mentality wet dream known as “The South.”
Officials with the German-based company
heheeeheeeheehaahaaahaaheeehaahaaa… (Hwy50™)
(Maybe them foreigner Inc.’s got mint-juleps & city-county-Alabama State tax-payer-citizen’s monie$ too?)
Wasn’t that one of the companies that sold the Chinese-made drywall?
Not according to this story.
The rich get richer…The old moonbat did very well.
Pelosi’s wealth grows by 62 percent
By Kevin Bogardus - 06/15/11 The Hill
House Minority Leader Nancy Pelosi (D-Calif.) saw her net worth rise 62 percent last year, cementing her status as one of the wealthiest members of Congress.
Pelosi was worth at least $35.2 million in the 2010 calendar year, according to a financial disclosure report released Wednesday. She reported a minimum of $43.4 million in assets and about $8.2 in liabilities.
For 2009, Pelosi reported a minimum net worth of $21.7 million.
Speaker John Boehner (R-Ohio) also remained a multimillionaire. He reported that his minimum net worth in 2010 was close to $2.1 million, with zero liabilities. His 2009 minimum net worth was more than $1.8 million.
Forms disclosing the assets and liabilities of lawmakers for the 2010 calendar year were released Wednesday. The forms give a good estimate of lawmaker wealth, though they show ranges and not precise values for stocks, pension plans, vacation homes and other assets of lawmakers.
Pelosi saw her wealth rise due to some stock gains and real estate investments made by her husband, Paul.
Apple stock owned by Pelosi’s spouse rose from at least $500,000 in 2009 to $1 million in 2010. The minority leader’s husband also took a bigger stake in Matthews International Capital Management — worth at least $5 million last year, compared to $1 million in 2009 — and his investment in some undeveloped residential real estate in Sacramento, Calif., jumped to at least $5 million in value.
“his investment in some undeveloped residential real estate in Sacramento, Calif., jumped to at least $5 million in value.”
Undeveloped residential real estate in Sacramento increased in value?
I would guess that most of our political types are real estate owners. Perhaps that is the driver of their desire to maintain property vaues.
It’s certainly a large part of their portfolio. That’s just SOP.
There is no “perhaps” about it.
It’s also a large part of Level 3, FIRE assets. In other words, not worth anywhere NEAR what they say it is an neither are their companies.
“……his investment in some undeveloped residential real estate in Sacramento……$5 million in value.”
Says who? Maybe he’s getting investment advice from Hillary.
Should We Care if People Don’t Pay Their Debts?
theatlantic
There has been a meme going around for a while that you don’t really have a moral obligation to pay your mortgage, because the contract contains embedded options for the lender: you can pay them back, or they can take the house. I’ve long thought that this was rather silly. Go look at your mortgage documents. You will notice that the contract does not specify any option for you to give them the house in lieu of payment. The note you signed includes a promise to pay, period. It also specifies what will happen in the case of breach, but you have specifically promised to avoid breach at all costs.
Maybe you think there is no moral obligation to keep your promises. Try it in the context of your personal life: it’s okay for my boss to stiff me out of that raise they promised, because I can always quit. It’s okay for my wife to cheat on me, because I can always get a divorce. It’s okay for my roommate to neglect to pay her half of the rent on the first of the month, as long as she’s willing to move out. It’s perfectly fine for my son to default on that car I cosigned, because the lender has the option to sue me for the balance . . . hey, wait a minute!
Suddenly it turns out that you think promises create a moral obligation–as long as those promises are made to you.
Nonetheless, I see that this idea seems to be spreading outside of the mortgage context. From the comment thread on my student loan post
GPurcell: It’s ridiculous to talk about morals in this context. What’s in the contract is all that matters.
texan99: Is there some ambiguity in the contract about whether the loan is supposed to be paid back?
gpurcell: The contract and the law governing the contract contain provisions for non-performance and any risk is priced into the interest (or should be). What I object to is imposing an additional moral obligation on a borrower beyond the terms and conditions of the loan.
This argument makes even less sense outside of the mortgage context. At least there, people could argue that commercial borrowers do it (sort of, except that non-distressed borrowers don’t stop paying their mortgages; they negotiate a giveback of the property. if they just stopped paying, they’d be in default, with all sorts of repercussions for their other debt.) They could say that shady lenders had tricked people into awful loans–though there’s not much evidence that the strategic defaulters got shady loans, rather than perfectly normal loans for homes that subsequently lost value. And they could point to the bailouts–they hosed us, so why shouldn’t we hose them? These aren’t great arguments, but at least they’re arguments.
http://finance.yahoo.com/news/Should-We-Care-People-Don-Pay-atlantic-227332842.html?x=0
If there’s no moral obligation to pay a debt off, then where is there a moral obligation for lenders to lend at low interest rates (as many politicos imply)?
It is not good for business with moral involved, the loan need to be backed by collateral. I personally would not lend my money to anybody without his backing up collateral unless I am willing to give up the money I lend, like the money I lend to my friends, I would never ask for my money twice.
In the mortgage case, the collateral is down payment, under current economic condition, 20% is the minimum I lend my money.
All the messes are created by the lack of collateral, with them, you simply foreclose and sell the house to next buyer, problem solved.
“Caring” has nothing to do with “…can’t pay ’cause ain’t got no job and no money.”
Let me tell you, businesses stiff vendors, employees and customers every damn day. It’s only fair J6P can’t pay his debt because he’s been effed over.
There’s a difference between a promise and a contractual obligation between two contractors.
With the mortgage default - there’s a remedy built into the contract - the house is collateral. If you don’t pay, they take back the house.
That’s not a promise, it’s a contract, with one clause being exercised.
Attention all PPT staff: Report to battle stations!!!
this is not a drill!
No worries, we’ll be getting some “unexpected, better than expected” news any day now. DOW 12,000 will rise again!
The Greeks will calm down because a magic bailout wand will wave over their country.
The good news is we don’t ever have to worry about any stink’n austerity clap trap over here. We have this thing called the electronic printing press, with B.B. at the keyboard!
Greece is smal potatoes, so they can be bailed out. What happens when Spain or Italy need a bail out? Or the USA?
I think that is why Greece is so worrisome. If Greece gets bailed out, how many other countries will follow and who will do the bailing? By itself, Greece is small potatoes, but where it leads is significant.
Dive! Dive! Dive!
More small businesses plan to reduce jobs: report
cnnmoney Aaron Smith, On Wednesday June 15, 2011
Small business owners have a grim outlook on the economy, with a gathering number planning to reduce jobs over the next three months, according to survey results from an industry group.
The percentage of independent businesses planning to increase employment in the next three months fell to 13% in May, compared to 16% in April and 18% in March, according to the National Federation of Independent Business.
At the same time, the percentage of small businesses planning to reduce their work force has increased to 8% in May, compared to 6% in the month before, the group said.
The group said that, on a seasonally adjusted basis, the businesses see a small net decline in employment.
The survey’s index of small business optimism slipped 0.3 point in May to 90.9, the third consecutive monthly decline.
The chief culprit appears to be weak sales. Some 23% of small business owners reported that sales were higher in the last three months, but 36% said that sales were lower, according to the survey.
“Corporate profits may be at a record high, but businesses on Main Street are still scraping by,” wrote NFIB chief economist Bill Dunkelberg in the report. “The failure to understand why small business owners are not hiring or investing has resulted in a set of policies that have not been very effective, and Main Street is suffering.”
“Corporate profits may be at a record high, but businesses on Main Street are still scraping by,” wrote NFIB chief economist Bill Dunkelberg in the report. “The failure to understand why small business owners are not hiring or investing has resulted in a set of policies that have not been very effective, and Main Street is suffering.”
Last year, I went to a small business forum hosted by a member of Arizona’s congressional delegation. Much of the talk was about loans and tax credits of various sorts.
One guy, whose business was hurting badly, shouted out, “I don’t need this stuff! I need customers!”
Quite a few people agreed with him.
Now, you may be wondering who the host of this meeting was. Her name should be well known to all of you by now: Gabrielle Giffords.
And I might add that this event was held in an auditorium on the University of Arizona campus. I was sitting next to a lady I’ve known for a couple of decades, and I kept nudging her elbow to point out the lack of security. The lady, who’s been active in this state’s movement to legalize medical marijuana, knows plainclothes surveillance when she sees it. But she didn’t see any security either.
One guy, whose business was hurting badly, shouted out, “I don’t need this stuff! I need customers!”
Sorry pal, your customers used to be paid “lavish” middle class wages, but a bunch of them have joined the under $500 a week crowd and can no longer afford to patronize you.
Everybody complains about our “consumer economy”
Okay……..but what other kind of economy is there?
Is the plan sending us all back to the 19th Century hunter/farmer/forager model?
If I understand it used to be that you grew and sold food, I repaired shoes and another person made clothing. So we traded some shoes for some potatoes clothes etc.
Come money the universal trading tool to provide an abstract layer between the act of trading. It was great, I could trade with so many more people and could buy when I wanted.
Then someone figured out they could game the system and invented credit, futures, options etc. One guy would bet that in the future potatoes would go up and another would bet shoe repair would be in oversupply and lack demand driving down the price etc…
Today the money we trade in is gamed to such a huge extent, it no longer fills the basic function of trade, but in fact acts against us. I still repair shoes and you still need your shoes repaired. We are all hungry and you are loaded with rotting potatoes you cannot sell, because all of us are waiting for a supply of money to be made available which will never come. I reckon we need to organize and get back to basic trading (bartering). To do this we will need some kind of currency (not bitcoins) to act as barter chips, but there are lots of folks willing to work and lots who need what they have, but all are waiting… and waiting … and waiting for the economy to improve so we can get back to work…
Wait. So jobs were created but nobody is hiring and unemployment climbed a little bit higher?
Ye…ah.
My up-to-the-minute personal experience with my small business says… unemployment is way worse than is being said.
Perhaps you are forgetting the unemployment is just for those collecting benefits. Hey, if they end the FedGov extensions this fall, unemployment will drop like a rock, right?
The Carousel Mall Expansion which once was supposed to be all high end stores now is going for outlet store tenants.
http://www.syracuse.com/news/index.ssf/2011/06/congels_outlet.html
Syracuse, N.Y. — With nearly 1 million square feet of retail space to fill in a bad economy, developer Robert Congel has jettisoned his more grandiose plans for the Carousel Center expansion and is trying to turn the empty Syracuse mall addition into an outlet center and entertainment venue.
A list of the first 14 tenants signed up for Destiny USA, the name given to the expansion, is a mix of high-end outlet stores, restaurants and a 34-lane bowling center.
Stores slated to go into the addition are Saks Fifth Avenue OFF 5TH, BCBG Max Azria, Max Mara, Michael Kors, Hickey Freeman HMX, Hugo Boss, Lenox, Hartmann, Salvatore Ferragamo and a store called Pet Fashions.
Three restaurants are signed up for the expansion — Melting Pot, a fondue restaurant; Cantina Laredo, a Mexican restaurant; and Gordon Biersch, a brewery and restaurant.
Thanks for the update Carrie. Bowling alley and Pet Fashions. The mall that would transform upstate. A few years ago I posted about how many stores were empty, sounds like it isn’t getting any better. I haven’t been back. Conventional cars park across the hwy, is that still going on?
Hunkered-down America
…
Economists suffer from what one of them (Ricardo Caballero of the Massachusetts Institute of Technology) calls “the pretense-of-knowledge syndrome.” They act as if they understand more than they do and presume that their policies, whether of the left or right, have benefits more predictable than they actually are. It’s worth remembering that the recovery’s present slowdown is occurring despite measures taken to speed it up: the two-percentage-point cut in the payroll tax; and the Federal Reserve’s QE2 program (i.e., the purchase of $600 billion of Treasury securities).
So modern economics has been oversold, and the public is now disbelieving. The disillusion feeds stubbornly low confidence. Because psychology is so important, the good news is that if the economy surprises on the upside, the boost to confidence could accelerate the recovery. The bad news is that if the recovery continues to disappoint, the discrediting of mainstream economic thinking will grow. The resulting intellectual void will summon forth new ideas. Some may be good, but others — though superficially appealing — will be fringe or lunatic.
“They act as if they understand more than they do and presume that “…
And this makes them different from most Americans, how?
“the pretense-of-knowledge”
That pretty much describes my whole generation!
OK, we’ve already suffered the lunatic. What’s after that?
“What’s after that?”
Fear and trembling, perhaps?
The resulting intellectual void will summon forth new ideas. Some may be good, but others — though superficially appealing — will be fringe or lunatic.
—————-
LOL!!!
Yeah, I’ll bet anything that suggests taxing the rich (especially the financial sector) so that the workers can keep more of their pay will be labeled “fringe” or “lunatic.”
Not everyone has lost faith in the creditworthiness of Uncle Sam.
Updated: Today
Topic:China
Wednesday, Jun 15, 2011 15:19 ET
China increases U.S. Treasury securities holdings
Country is the biggest buyer of Treasury debt, and has boosted its holdings to $1.15 trillion
By MARTIN CRUTSINGER, Associated Press
China, the biggest buyer of U.S. Treasury debt, boosted its holdings in April, the first increase after five straight declines.
The Treasury Department said Wednesday that China increased its holdings by $7.6 billion to $1.15 trillion.
Total foreign holdings of Treasury securities rose 0.2 percent to $4.49 trillion.
Japan, the second largest buyer of U.S. debt, trimmed its holdings slightly by $1 billion to $906.9 billion. There had been concerns that the March 11 earthquake and tsunami would lead Japan to sharply reduce its purchases to use the money for reconstruction.
The government hit its $14.3 billion borrowing limit on May 16. Since then, Treasury officials have been making various bookkeeping maneuvers to clear room to continue normal borrowing operations. Treasury Secretary Timothy Geithner has said he will run out of maneuvering room by Aug. 2 if Congress has not passed a higher debt limit by that time.
…
“..$14.3 billion borrowing limit..”
I think Mr. Crutsinger slipped a few decimal places.
Fannie Mae offers bonus to Realtors to drive sales of its foreclosed homes
By Kimberly Miller Palm Beach Post Staff Writer
Posted: 5:15 p.m. Tuesday, June 14, 2011
Federal mortgage backer Fannie Mae hopes to energize sales of its repossessed homes with a new $1,200 bonus to Realtors and an extension of closing cost help to homebuyers.
Tuesday’s announcement came as a June 30 deadline approached for homebuyers to earn up to 3.5 percent of the final sales price on a home to put toward closing costs. That offer is now good on contracts closed by Oct. 31.
The $1,200 bonus to the selling agent only applies if the buyer plans to live in the home. Investor sales are not eligible.
“I think it will make a difference,” said Joe Bettag, broker/owner of Coastal Properties in Jupiter. “Anytime you provide incentives in the market place, it creates a sense of urgency.”
Last year, Fannie Mae offered a $1,500 inventive to agents who closed deals between late September and Dec. 31.
Some Realtors said Tuesday the new incentive is an effort to clear inventory before more foreclosures hit the market.
http://www.palmbeachpost.com/money/foreclosures/fannie-mae-offers-bonus-to-realtors-to-drive-1539588.html - -