An Emotion-Laden Aspect Of Happiness
Readers suggested a topic on renting. “The other day I saw another warning notice of rent non-payment on the door of an apartment in my building. If that person doesn’t pay up, they’re out in 30 days. Or less, since I’m guessing they missed the current month’s rent. But we never hear about the plight of the renter. If a homedebtor gets behind in their payments or goes into foreclosure, it is years before they’re forced to move. If a renter misses a payment, he’s evicted in 30 days. But you know what? Both are humans. Both may have families.”
“What exactly is it about the homedebtor going non-current in their payments or facing foreclosure that evokes such sympathetic howls of grief and agony from the media, the Fed and the government, whereas nary a peep is heard about renters being evicted in 30 days if they miss a payment? Why is that?”
A reply, “It’s really simple. An apartment can easily be rented out again after an eviction, whereas a foreclosure usually represents a massive financial loss to the creditor (the banksters). So they lobby for programs to help keep FB’s in their houses, with the bailout money ending up in the bankster’s pockets. It has nothing to do with whoever is living in the property.”
And finally, “I think people see renters as inherently more footloose and mobile, not attached to any one place. A move for them is seen as no big deal. People see ‘homeowners’ as people who have ‘put down roots’, are raising a fam, the whole American Dream thing. It’s not always accurate, but that’s the perception.”
My West Texas. “In some areas of the United States there is still a long way to go to reach a healthy state in the residential real estate market (and prior peaks may not be surpassed for decades, if ever). When the housing downturn began, homeownership had reached almost 70 percent nationwide. The total market value of all U.S. homes more than doubled between 1999 and the peak in 2006/2007, with prices for individual homes up an average of about 50 percent. The jump in value was uneven, with the east and west coasts generally rising more than the center of the nation. For some metropolitan areas, prices more than doubled.”
“There is some empirical evidence (such as a study by economists at the Boston branch of the Federal Reserve Bank) that only those who suffered from the housing crisis directly or through someone close to them are likely to change their behavior based on it. For people who have merely seen the news stories and statistics, the decision of homeownership is far less likely to be affected. Age is also a factor, with younger people less confident that buying a house is a good idea than older individuals who may be more apt to see the recent pattern as an aberration in an otherwise known trend.”
“A survey supported by a major real estate firm (Coldwell Banker) concluded that Americans now have more respect for homeownership, and pointed out that a home is far more than a financial decision, but an emotion-laden aspect of happiness that isn’t easily measured by dollars.”
“Over the past several years, the housing market saga has been played out in the media with stories of displaced families, foreclosures, and bankruptcies. Against this backdrop of bad news, the natural question has arisen regarding whether homeownership is still ‘the American Dream.’ The answer is as much psychological as it is economic.”
The Chicago Tribune. “Among the many aftereffects of the popped housing bubble is the perception that a generation of young adults has been spooked into doubting that they’ll ever own a home — or even aspire to own one. Not true, says a new survey from a major real estate company, which contends that 18- to 35-year-olds do indeed like the idea of owning homes, and they’ve learned a thing or two from watching their parents struggle with the housing market.”
“Sherry Chris, CEO of the Better Homes & Gardens real estate brand talked about what her company gleaned about 20- and 30-somethings (in edited form): Q: Why did your company recently survey a broad group of young adults, generally known as Generation X and Generation Y? A: When you look at nationwide demographics, about a third of the population is baby boomers — that’s my generation. We’ve driven the economy for 30 years, and we’re starting to slow down our buying of real estate.”
“Another third of the population is echo boomers, which are a combination of Generations X and Y, and they’ll drive the economy for the next 30 years. It was important to find out what’s on their minds, because there’s been a lot of chatter about how they’re going to remain renters and don’t have a clue about home ownership. It was important for us to get this firsthand.”
“Q: So, are they gun-shy about real estate? What did they tell you? A: What we found was the opposite of all the chatter and noise. This group of young adults is very much in tune with owning real estate…Nearly all of them said they were willing to adjust their lifestyles to save for a home. Sixty-two percent said they’d eat out less. Forty percent said they’d work a second job. And 23 percent said they’d move back home with their parents to save money.”
“Q: Of course, confidence in the job market is no small indicator these days, which I think might slow their entry into the buying market, even if they want to buy. Then there’s the evidence of huge amounts of student debt they’re likely to be carrying. What did they say about student debt? A: We didn’t get into that.”
“Q: What would you have done if young adults had said, ‘No, thanks, I think I’ll remain a renter’? A: Well, as an industry and certainly as a brand, we’d have to step up our campaign to show young buyers the importance of real estate as a long-term investment and lifestyle.”
The Victorville Daily Press. “The Victor Valley has been one of the epicenters of the housing market’s boom and bust during the past decade. The median home price in the area dropped from $323,000 in July 2006 to $103,000 in July 2009, according to Caroll Yule of Shear Realty. Investors flooded into the market after the housing bubble burst as they looked for opportunities to make money off cheap foreclosed homes.”
“Some of these investors refurbished the purchased homes and resold them quickly with a markup, in a practice known as flipping. But as inventory of foreclosed homes depleted and prices began rising recently, many investors are holding onto their properties and renting them out. ‘Investors are creating an environment where the rental market is going to be flooded,’ said Tony Smith, a real estate agent at Century 21 Fairway in Apple Valley. ‘It’s the next wave we are seeing.’”
“Cash buyers accounted for nearly 40 percent of all home sales in the Victor Valley during September, according to Larry Trombley of Century 21 Rose Realty. ‘This is basically cutting regular home buyers out of the market,’ said regional economist John Husing of the Inland Empire Economic Partnership. While some strongly oppose his view, Husing warned that the recent expansion of rental properties is ‘destructive’ to the Victor Valley communities for the following three reasons:”
“1) Rental properties are generally not wellmaintained and will bring down property values in their neighborhoods. 2) Calls for police service tend to increase in neighborhoods with a high volume of rental properties because they attract low-income earners. 3) Schools suffer from a high concentration of renters in one area because some of these families move their children around to find the cheapest property.”
“‘There’s a close relationship between the housing market and the crime rate,’ Husing said. ‘My instinct is it’s getting worse, not better. The share of underwater homes is extremely high.’”
“Ben Lamson, founding partner of Bluestar Properties which manages rental homes pointed out a cultural shift among Americans, who are often forced to move around to get a job. ‘I think you are seeing more demand for rentals as the society becomes more mobile,’ Lamson said. ‘We are seeing young people today wanting to live in different places and not tied to mortgages and loans.’”
“Tony Card lost his Big Bear home when the housing market collapsed and is now renting a house in Apple Valley. Card, a real estate agent, said people have different reasons for renting. ‘They have to live somewhere,’ Card said. ‘That doesn’t make them a second-class citizen.’”
“If a homedebtor gets behind in their payments or goes into foreclosure, it is years before they’re forced to move. If a renter misses a payment, he’s evicted in 30 days. But you know what? Both are humans. Both may have families.”
Since Democrats are back in power, and they have traditionally viewed caring for low-income households as one of their assumed responsibilities, it’s worth mentioning that a renter household is poorer, on average, than a homeowner household.
Ergo policies which favor homeowners over renters disproportionately discriminate against poor people.
‘the banksters…lobby for programs to help keep FB’s in their houses, with the bailout money ending up in the bankster’s pockets.’
I don’t agree with this, and don’t think it explains the difference in viewpoints on owner/renter evictions. I can’t recall a major initiative by lenders to make foreclosures more difficult.
Consider the multitude of sob stories in the press about foreclosures. There has to be many thousands just in the past few years. The media and politicians latched onto this victim/villain thing, but rarely mention renters, unless there’s a foreclosure involved.
So what is it? Is it a concerted push to demonize lenders? If so, why not go after mortgage brokers or used house salesmen?
True concern for home-debtors plight? Why not separate speculators and refi junkies from people who got sick, etc?
I have another theory; this victim/villain thing excludes renters because it doesn’t serve certain interests. We can’t have people feeling foolish for borrowing insane amounts for a house. That would cast doubt on prices; the ultimate future of prices. You can’t sweep the mania under the rug and get people to buy houses if they think they might be dumb for doing so. You have to have a theme that explains it away. Makes people feel good about borrowing gobs of money for a house.
Making renters out to be victims spoils this little story. It might crowd out the preferred plot-line. It raises the question of affordable housing. And what if renters became victims? Stopped paying rents? Occupiers in tents on apartment lawns? Kinda brings up the idea you have to pay for a roof over your head, again spoiling the preferred victim/villain story.
Besides, these renters should be buying! Notice that’s just about the only mention renting gets; when will these dummies buy a house? Rates are low; prices are lower than they have been in recorded history; there’s never been a better time; hurry!!
Never mind that the current lenders are doing the same things; artificially low interest rates, low down payments, no real concern if people are getting in over their head. These loans are ‘designed to fail’ too.
Why not separate speculators and refi junkies from people who got sick, etc. ??
I would have…
Seems like journalists have never appeared dumber as a group than they have on housing boom and bust coverage.
I don’t think it’s journalists, it’s editors. Let me retell a story; I noticed the big shift in coverage during the 2008 presidential campaign. When the candidates started putting out ’solutions to the foreclosure crisis.’ I was asked to do an interview with Time magazine. Most of the questions were about competing ideas on this ‘crisis’. I stubbornly insisted the crisis was when house prices went too high and the solution was lower prices. The reporter then asked, ’so you wouldn’t DO anything?’
I said, there was lots to do. Policy makers and regulators should start prosecuting criminal acts, hold hearings on what parts of the system failed and why, and act on the findings. This might prevent another episode like this in the future. But the most pressing issue was to turn the economy away from a dependance on unsustainable, non-productive housing toward real wealth creating jobs. The reporter went quiet on the phone and that was pretty much the end of the interview. When the story ran, I wasn’t in it.
Here’s a thought exercise; what do you suppose would happen if I put out a press release saying ‘housing has bottomed! Buy now!’, and repeated all the talking points we hear everyday? I suspect we’d see yet another ‘housing bear turns bullish’ story pretty quick.
Seems like journalists have never appeared dumber as a group
I would argue that we have a lot fewer real journalists now than we have had in a long long time; now we have instead people who can make slight edits to a news-wire story and re-print it.
That’s not journalism.
I suspect we’d see yet another ‘housing bear turns bullish’ story pretty quick.
Indubitably.
“…it’s editors.”
Perhaps the responsible decision maker is typically even higher up the socioeconomic food chain. For instance, the San Diego Union Tribune was recently renamed UT-San Diego by its new owner, a local real estate developer. This change of ownership seems quite likely to increase the newspaper’s pro-real estate bias.
What editor would be foolish enough to go against the owner’s bias in favor of more objective reporting?
“The reporter went quiet on the phone and that was pretty much the end of the interview. When the story ran, I wasn’t in it.”
It seems like there is a great abundance of peops who just don’t listen unless you say what they want to hear.
In your case, the reporter apparently had already decided that those facing foreclosure were victims of a crisis who deserved some form of government assistance. Pointing out how they came to the nuisance, and that the nuisance in question may have involved criminal acts, didn’t fit their preconceived notion of what their story was about.
When the facts don’t fit, you’ve gotta omit.
When the facts don’t fit, you’ve gotta omit.
LOL…
What editor would be foolish enough to go against the owner’s bias in favor of more objective reporting?
Local newspapers are way too beholden to RE advertising to be objective. Local TV news is worthless. Some national news outlets have done a pretty good job of reporting, not so much the newsweeklies (which are also becoming worthless), but Rolling Stone, Vanity Fair, The New Yorker, and the like, have done some good coverage of the bubble. But Joe6Pack doesn’t read them.
“Seems like journalists have never appeared dumber as a group than they have on housing boom and bust coverage.”
Umm…well…not so sure about never.
I have another theory; this victim/villain thing excludes renters because it doesn’t serve certain interests. We can’t have people feeling foolish for borrowing insane amounts for a house. That would cast doubt on prices; the ultimate future of prices. You can’t sweep the mania under the rug and get people to buy houses if they think they might be dumb for doing so. You have to have a theme that explains it away. Makes people feel good about borrowing gobs of money for a house.
And who does that benefit at the end of the day? The bankers.
‘And who does that benefit at the end of the day?’
IMO it’s bigger than the investment banks on Wall Street and in London. The Federal Reserve says it’s to revive the entire consumption model with the US as the worlds ‘economic engine.’ Who benefits from that? The global central bank system, almost all of the worlds multinational corporations and globalism itself. Maybe even what some call the ‘new world order’ which is really just the same order in modern form.
My suspicion is that it is not the comsumption model quite, as much as it is the renting money streams of revenue, the interest. After decades of snaring individuals into the loan racket, it has become ensnaring nations. The next level of this game is what?
“IMO it’s bigger than the investment banks on Wall Street and in London.”
Bingo.
How many times have I stated here that the true evil axis is US/UK….. and our friends on the east shore of the Mediterranean.
“The next level of this game is what?”
WW3
And that’s not hyperbole.
I think we won WW3 when the USSR collapsed. WW4 started on 9/11/2001 (or maybe on 8/23/1996 when OBL declared it) & is still unresolved. It may end if/when the world economy goes south & stays there for a few decades. That would be the next level.
Hot war>cold war>currency war
“And who does that benefit at the end of the day? The bankers.”
Last year I saw something, it was a picture of a family sitting around their dinner table eating a nice meal. Under the picture it said… Unemployed Homeowner
The picture next to it showed a family sleeping in a car. Under the picture it said… Unemployed Renter.
Disgusting, but true.
Maybe being a homemoaner isn’t such a bad thing after all. I recall people here who are renters bragging about well they slept at night, not having the millstone of a mortgage around their necks.
So which is better? Being a homedebtor or a renter? The consensus here is that it’s better to be a renter: you don’t have to mow the lawn, you don’t have to fix anything, you’ve got tons of cash left over for fancy cars and trips to Europe, etc.
“…you’ve got tons of cash left over for fancy cars and trips to Europe, etc.”
True confession: I have been working full-time now for a quarter of a century, but it was not until I became a renter that I enjoyed a trip to Europe or a purchased a new car for my personal use.
Since we started renting, I have been to Europe once, and bought two cars and a violin. Renting does has its advantages, in that it is cheaper to rent comparable housing, and you don’t have the underwater problem of losing north of $100K, as our landlords did on their investment home purchase.
One thing to realize about violins versus houses: Violin prices always go up, and they are far cheaper to maintain than a house. Further, if you are a free lance musician with Sch C income (like my wife and I are), you can write off purchase and maintenance costs on a string instrument.
The consensus here is that it’s better to be a renter: you don’t have to mow the lawn, you don’t have to fix anything
From my point of view, I rent my paid-off home from the county government for $2000 a year, plus a rent paid to the city of about $400 for mandatory services. I have to mow the lawn & fix everything that goes wrong. It is not appreciating in a value that I can reasonably expect to get if I were to sell it, although its ‘appraised value’ for tax purposes is expected to rise indefinitely.
I knew a doctor many years ago who jumped from renting a home to buying a home, without ever being a home debtor. He simply moved from Fairfield County CT to Mayberry country in NC & bought a house for cash using a portion of the money he had been saving for a down payment in CT.
“Makes people feel good about borrowing gobs of money for a house.”
Hell… we see that everyday right here on this blog.
It’s the modern version of the self-flagellation which monks enjoyed during the middle ages.
“I can’t recall a major initiative by lenders to make foreclosures more difficult.”
OK, but there was an historic initiative to make not foreclosing more easy.
No flattery intended BJ but you are one smart dude. I read your post 4x in order digest all the nuance and connections you’re making. And there is alot of nuance to it.
I’ll simply ask…..
From your perspective, what is the fallout if there is widespread doubt about prices paid for housing?
“And what if renters became victims? Stopped paying rents? Occupiers in tents on apartment lawns? Kinda brings up the idea you have to pay for a roof over your head, again spoiling the preferred victim/villain story.”
It’s somehow quite a stretch to imagine renters sharing the sense of entitlement which many owners seem to feel.
“If a homedebtor gets behind in their payments or goes into foreclosure, it is years before they’re forced to move. If a renter misses a payment, he’s evicted in 30 days. But you know what? Both are humans. Both may have families.”
Most local government policies regarding real estate are likely aimed at keeping the property taxes coming in. A timely eviction allows the landlord to get a paying tenet into the property, and it limits the losses claimed on the landlord’s income taxes.
And a speedier foreclosure process could mean a more accurate mark to market. I say could because it seems that none of the holders of the paper want a true valuation assigned to the debt. Value is what FBs will pay and by dragging things out I bet there is a hope that we’ll get past this little recession thing and those house prices will just magically pop right back into the stratosphere where all this debt was initially written.
Like Carlin said, it’s all BS.
“…but an emotion-laden aspect of happiness that isn’t easily measured by dollars.”
How do you measure the misery of being hundreds of thousands of dollars underwater on your mortgage?
Grampa was once heard to say: “Money doesn’t bring happiness, but the lack of it brings misery.”
I add: The borrowing of it brings slavery.
And they enforce it via a trick known as your “credit rating”
“…people have different reasons for renting. ‘They have to live somewhere,’ Card said. ‘That doesn’t make them a second-class citizen.’”
It was only a few short years ago that ‘everyone has to live somewhere’ was one of the reasons that everybody had to be a homeowner.
More odd still; the phrase coined on this blog: “Somebody has to own the house.”
What exactly is it about the homedebtor going non-current in their payments or facing foreclosure that evokes such sympathetic howls of grief and agony from the media, the Fed and the government, whereas nary a peep is heard about renters being evicted in 30 days if they miss a payment? Why is that?”
I think this is due to generational-memory: in the really really old days of our parents and grandparents generations, foreclosure frequently meant that a family had fallen on hard times. Often this was a cash-flow problem, such as loss of a job, or death of a bread-winner. And often there was actually equity in the property, which the family would lose in foreclosure—equity either put down in a down-payment, or built up over many years of payments.
I think the emotional associations can outlive the reality; today, the reality is very very different, but the emotional associations linger in our collective psyche.
Today, the reality is that there was effectively no down-payment to begin with, any payments made (assuming any actually WERE made) probably resulted in no equity, since they were likely paying interest-only.
And yet collectively as a society, we still feel that the family should be pitied.
Yes, people are strange animals.
“And yet collectively as a society, we still feel that the family should be pitied.”
Even stranger is that some people seem to feel homeowner households are more worthy of pity than renter households.
Even stranger is that some people seem to feel homeowner households are more worthy of pity than renter households. I agree with your basic premise: “homeowner households are more worthy of pity than renter households”. I don’t find the overriding attitude one bit strange. The meme of one group of Americans looking down at another because they feel richer goes back to the Pilgrims & Jamestown settlers.
There was a trenchant comment on this attitude from an old Okie who had migrated to California in the 30’s, about the prejudice he encountered there. It was in Part II of Ken Burns recent program on the Dust Bowl.
Found that comment here:
See 1:18:33 — 1:19:26
Calvin Crabill’s father John had rescued his family from the dust of eastern Colorado..the hard times followed him to Southern California…a Colorado cowboy far from the plains he loved.
“My father was called an ‘Okie.’ He was a gentle, quiet man, so I think he could take it pretty well. It made me with a chip on my shoulder that I probably carry to this day…I was the poorest kid in high school…We rented a little house on the alley in Burbank…we were the poor people on the block… So if you’re down, fella, they push you down, they push you down. And that’s what happened to him, over and over and over, over and over.” — Calvin David Crabill, retired UC Davis professor, age 87.
“And often there was actually equity in the property, which the family would lose in foreclosure—equity either put down in a down-payment, or built up over many years of payments.”
I challenge this statement. While it could happen, I suggest this would be the unusual situation where the family couldn’t put the house on the market once the first or second mortgage payment was missed and could at least get something out of escrow which is hopefully enough for a deposit and first and last month’s rent on a rental. I’m thinking the majority of the foreclosures were due to HELOCing, 2nd and even 3rd trust deed loans allowing the ponzis to live beyond their means. My parents lost everything in 1981 when interest rates skyrocketed and the loan spigot got shut down. The 70s were lots of fun for us living beyond our means; going back to reality paying rent again in 1982 sucked.
My parents lost everything in 1981 when interest rates skyrocketed ??
Your parents weren’t alone by a long shot….
Your parents weren’t alone by a long shot….
+1.
I was in school at the time, and woefully ignorant of matters financial and economic. A friend of mine, who was ignorant in most areas where I was smart (maths, musics, etc) tried to talk me into buying CDs, which were yielding 8%+. I didn’t know quite how to process the information: For one thing, I had no cash, while my friend obviously had wealthy parents, as we were both students with subsistence income at best. Secondly, I didn’t understand why banks were suddenly giving 8% — seemed too good to be true.
I took out a mortgage in 1980 at 11.5%. Fortunately it was a cheap house. My accountant inexplicably advised me not to pay the mortgage off early, but rather invest my excess income. I was never able to make anything like 11.5% on my investments — I have special skills in that. I paid it off in 1991, and wished I had done so years before.
“I’m thinking the majority of the foreclosures were due to HELOCing”
Actually, prime mortgages are the leaders of defaults.
That may have recency changed, but was true from 2010 thru 2011.
+10. everything hearkening back to those good old days.
Today there are still some with high equity, some who have paid for many years on the home they are in. And a job loss or death could cause a foreclosure. Probably not a large percent - but some.
Here’s an example of how the establishment press approaches this:
‘One year and one month before President Obama won reelection, he invited seven of the world’s top economists to a private meeting in the Oval Office to hear their advice on what do to fix the ailing economy…Nearly all said Obama should introduce a much bigger plan to forgive part of the mortgage debt owed by millions of homeowners who are underwater on their properties.’
http://www.washingtonpost.com/business/economy/economists-obama-administration-at-odds-over-role-of-mortgage-debt-in-slow-recovery/2012/11/22/dc83f25e-2e87-11e2-89d4-040c9330702a_story.html
We see here the usual banks as villains thing. But the banks didn’t loan most of this money. The Post doesn’t bother pointing that out. Anyway, from the comments:
‘What the author doesn’t realize is that any proposal to “pay down mortgages” would just be another bailout of the banks. There are only two ways the Government can do this. Alternative 1: Give the homeowner money so he can pay off part of the principal of the loan. Alternative 2: Give the bank the money directly in exchange for writing off part of of the debt. Either way, the bank gets a bailout. Is that what the Really Smart Economists Advising Obama(tm) think we should do?’
‘Do you want to avoid a bank bailout? The only way to do that is to encourage, strongly encourage, the banks to foreclose. That requires them to recognize the loss - which in a foreclosure averages around 40% of the loan amount. Foreclosures do no harm to borrowers who are underwater and in default. They are losing nothing. All they are doing is moving from a home that they pretended to own, even though they had no equity in it, to a home they rent. Aside from the costs of the moving truck, they are losing nothing.’
IMO, this is closer to the truth, except instead of ‘Do you want to avoid a bank bailout’ I would say, do you want to reduce household debt and revive the economy? Purge the system of bad loans. These FB’s have nothing to lose but their debt. So why are we on the road we’re on?
Let’s consider that Obama could write all these loans down, by say, executive order. Let’s pretend the Federal Reserve would pay for it, just to make it easy. What would happen? You would probably see 5 million houses come on the market the next week, followed by millions more.
Prices would plunge. Lot’s of debt would go away. It wouldn’t mean jobs would spring up, but it would be a big change.
Now let’s consider the reality of such a move; there would be all sorts of unintended consequences; the govt/Fed never seems bothered by that. But what it would mean for the economy is deflation; lots of deflation. The Fed hates deflation. Deflation makes the govt debt a bigger problem. Maybe we have to have the Fed erase our treasury debt too? Pretty soon, this monopoly money system (MMS) is exposed for the joke it really is. And there are some powerful interests that depend on this MMS for their very existence.
This is speculation on my part, of course. I’m trying to understand why these people instead decided to try and revive the housing bubble. IMO, it’s bound to fail, and probably make things a lot worse. But for politicians and the ‘financial elite’, being foolish and shortsighted is standard practice.
‘All they are doing is moving from a home that they pretended to own, even though they had no equity in it, to a home they rent. Aside from the costs of the moving truck, they are losing nothing.’
Aren’t they losing their free rent when they move to an actual rental home where they will face eviction if they stop sending in a monthly check?
But for politicians and the ‘financial elite’, being foolish and shortsighted is standard practice ??
because of there financial position and inside connections they never pay a price for being foolish….
I would say, do you want to reduce household debt and revive the economy? Purge the system of bad loans.
Basically this is what needs to be done. As best I can tell, getting the bad debts out of the system without a huge burst of real economic growth, would amount to a collapse of the US & world economy, worse than in the early 1930’s. Almost certainly the US government would fall. Abroad there would be all sorts of negative consequences, some predictable, some not.
I don’t see any huge burst of real economic growth coming any time soon.
a collapse of the US & world economy, worse than in the early 1930’s. Almost certainly the US government would fall. Abroad there would be all sorts of negative consequences, some predictable, some not.
And yet you think this needs to be done? Heck, I ‘d rather QE to infinity than have what you map out happen.
An interesting remark.
When I lived in Mexico in the 70’s and early 80’s Mexico kind of did its QE thing too. We had lots of inflation, which produced curious situations. People spent heir cash as soon as they got it, often to purchase inflation safe assets (like rebar or bags of cement). If you needed to buy a car the only way to finance it was via credit circles, which meant that you might not take delivery of your car for years.
Now Mexico has licked the inflation monster. Yet Mexico was a much safer place during the bad old 70’s than it is now, in large part because most people had jobs, and the jobs paid better back then than they do now.
“…and the jobs paid better back then than they do now.”
+1 DJ, check out the back to back use of then and than. Nice!
I ‘d rather QE to infinity than have what you map out happen Same outcome, either way.
Ever heard the story about teaching the king’s horse to sing?
Sure, if this is the one you mean: http://www-personal.umich.edu/~jlawler/aue/sig.html
I’m 65, and have outlived many predictions that did not come to pass.
‘Same outcome, either way’
The Fed already announced QE infinity as policy.
“The Fed already announced QE infinity as policy.”
Which raises the question, how are they going to jawbone future potential stimulus measures when the current one is already supposed to be the stimulus to end all stimuli.
November 20, 2012, 1:50 p.m. ET
Bernanke: Cutting Interest Rate on Reserves to Zero Would Provide Little Stimulus
By Michael S. Derby and Kristina Peterson
NEW YORK–Cutting to zero the interest rate the Federal Reserve pays banks to park excess reserves on its books wouldn’t add much stimulus to the economy, Federal Reserve Chairman Ben Bernanke said Tuesday.
Cutting this rate is “something we’ve considered, and continue to consider, and I don’t rule it out as an action in the future,” Mr. Bernanke said in response to a question at a gathering of the Economic Club of New York.
But as a new avenue of stimulus, Mr. Bernanke said it is unlikely that lowering this rate, which currently stands at 0.25%, to zero would do all that much.
The ability to pay interest on reserves is a relatively new power for the Fed. Throughout its relatively short life, this power has mostly been considered in the context of a monetary-policy-tightening campaign. By raising this rate, the Fed can keep bank reserves out of the economy and limit their inflation-creating potential. Central bankers see the tool as a cornerstone of the tightening campaign they will one day embark upon.
But as a persistently weak job market and tepid levels of growth have driven the Fed to provide more stimulus to the economy, some have questioned why the central bank simply doesn’t lower this rate to zero.
…
‘as a persistently weak job market and tepid levels of growth’
And we’ve had near zero interest rates for how long? Didn’t Greenspan try this after the stock bubble? It’s gotten so bad that the Fed now tells everyone listening they will keep rates low for years in advance!
ZIRP doesn’t appear to create anything but bubbles. Then it eventually fails at even that. What it does create is economic distortions and greater wealth gaps. How much documented failure will it take before these central bankers question their policy?
“How much documented failure will it take before these central bankers question their policy?”
What interest do they have in admitting to the world that their policy was an abject failure?
How much documented failure will it take before these central bankers question their policy?
No amount of documented failure will ever be enough for central bank hubris. However, when the electricity has been shut off at the offices of central banks for non payment and the doorways barricaded by armed guards, the issue will have become moot. But then maybe a miracle will happen.
Well, after much looking…I’m feeling the push to sign paperwork on a house. The rents I’m looking at in a reasonable area are anywhere from $1500-$2500 a month. This is for one and two bedroom apartments with outside parking and public mailboxes, etc.
Half an hour away from those apartments are houses that used to be selling for $350K. Now they’re in the low 60’s.
Hmm. Mortgage at 3% on 60 grand, or $2000 a month.
I know they’re going to drop once interest rates do, but with the Special One at the helm for another 4 years I don’t see them going down in that time.
Besides, if I default on it…I’ll cry “unfair” and “something else” like all the sad sacks that spent their second mortgages on boats.
Is that wrong?
At some point in some places it makes sense. $1500-$2500 rent for a two bedroom apartment or buy a house in the low 60’s?IMHO you are at that point in one of those places. Pay the damn thing off and get on with your life.
If it was $350K for the house and $2,500 for rent, then you rent.
Seriously, I agree. Buy a house yesterday.
$350K for a house or $2500 rent — IMO financially that’s a toss-up. At that point it would depend on the job situation and the house.
“$350K for a house or $2500 rent — IMO financially that’s a toss-up.”
lmao.
come on oxide–that is not a toss up.
a traditional metric for rent vs purchase is that purchase price is usually about 100 times monthly rent.
so a house that rents for 2500 per month should be price around 250k. if the price is above 250k, you’re sort of overpaying. on the other hand, if you could score a house with 2500 rent for 200k, then it’s time to consider purchasing.
the other thing i would want to know is, what is the median household income in the area. if it’s 70k or so, then maybe 250k is an OK price. but still a little high, IMO.
if it’s 70k or so, then maybe 250k is an OK price. but still a little high, IMO.
Remember that median house price should be 2.5 (or 3)x median income, but not every house is a median house, and not everyone makes median income.
A good question about a $250,000 house is, are there many households making ~$100,000 a year in the area who would want such a house. And what is the supply of such houses.
Spoiled.
Your financial death spiral is yours alone.
It’s ironic Oxide, the houses aren’t $350K anymore there, they are $60K (if the poster is to be believed). Yet you say buying at $350K is a no-brainer. Maybe this was your entry point. I’ll bet a dime that you don’t figure in falling prices.
Unfortunate, but any place with price collapse that extreme will be like a bombed out community. Median household income, meaningless, not enough families to ocupy the housing. Prices can go to near zero, I lived through that a generation ago. That house I was a pup in is still worth zero.
“Unfortunate, but any place with price collapse that extreme will be like a bombed out community.”
What amazes me is that people who don’t live in communities where prices completely tanked can’t imagine it happening where they live. This especially applies to places like SD and DC where a flood of government spending has helped keep home prices up on a quasi-permanently high plateau.
Take away those large infusions of federal monies, and the areas that haven’t yet seen home prices tank soon will.
“Now they’re in the low 60’s.”
That’s about all a used house is worth. You’ll be fine.
That’s what a used house is worth in an area without plentiful good jobs, sure.
But yes, I agree on the 350k vs 2500 rent thing. Clearly better to rent no matter what the job situation.
60k vs 1500 rent seems like a no brainer. But the thing is, 60k is probably 2-3x income for that area. In my area, that number is more like 150-200k.
I guess what I’m saying is–60k isn’t really a no brainer, because it depends on what the job stability and compensation is like in that area.
Where is this? Phoenix or Vegas?
Exactly. You can’t get a decent house for 60k in a city with good paying careers. Thus, renting better for most people.
Hmm. Mortgage at 3% on 60 grand, or $2000 a month.
You could pay that mortgage off in 3 years if you paid $2000 a month.
“The Victor Valley has been one of the epicenters of the housing market’s boom and bust during the past decade. The median home price in the area dropped from $323,000 in July 2006 to $103,000 in July 2009, according to Caroll Yule of Shear Realty. Investors flooded into the market after the housing bubble burst as they looked for opportunities to make money off cheap foreclosed homes.”
This does not surprise me. What does surprise me is how people do not learn from the history of that area. The entire high desert booms during housing booms but falls far during the busts. LA beach cities boomed but only came down slightly. There are reasonable explanations for both. The desert is hot. The dust can cause respiratory problems (Owens lake dust). The jobs are scarce, the pay is low, the commutes are hellish. LA moves its gangs out to the desert communities or its welfare recipients. Meth labs spring up while house prices fall. This all happened in the early to mid 90s too. Then stopped for a few years.
Wash, rinse, repeat.
No matter the price of the house, I would never ever live in a place like this. Surrounded by proles, few/no high paying jobs around, piss poor schools*, and long commutes to things you want to do.
* I don’t believe in overpaying for rent/house to get “good schools”. However, I do want one kid someday and I’d rather not send him/her to a truly hideous school. This has more to do with the other kids, the parent, and the culture of the school rather than the teachers or actual education
No matter the price of the house, I would never ever live in a place like this. Surrounded by proles, few/no high paying jobs around, piss poor schools*, and long commutes to things you want to do.
Reminds me of the locale where the old show “My Name is Earl” was set.
However, I do want one kid someday and I’d rather not send him/her to a truly hideous school. This has more to do with the other kids, the parent, and the culture of the school rather than the teachers or actual education
I’m glad you are thinking ahead. What you have just pointed out is a main driver behind the home schooling movement. I know many people who are far more capable of educating their own children than the teachers at the local public schools. The US spends more on its public education than it seems to get from the process.
Lots of interesting comments, and I’m thinking along those same paths.
I’m in the high desert right now. Toyed with the idea of moving from the Owens Valley to different areas…housing here is never going to be an option. Too expensive because the utilities own most of the property here. Not to mention the people….it’s like living with a bunch of cavemen. Another good place to visit, not live. Used to vacation up here when I was a kid and there was water in Owens Lake. It’s horrible what LA has done to this valley in 20 years.
Looked into Bullhead City, simply because prices are so cheap. Stopped looking after one trip. It looked like someone airburst a 600 pound block of meth over the city.
Now I’m looking in Orange County and San Fernando Valley (for retail store opportunity, more customers). On the trip down I laugh as I pass the sign with continually dropping prices on the houses in Adelanto.
Yes, it’s a craphole. I run an online business so all I really need right now is a cheap place to run it from while setting up the retail locations in So Cal.
(Can’t wait for the comments about Adelanto)
Adelanto means “progress” in Spanish.
“The entire high desert booms during housing booms but falls far during the busts.”
The Antelope Valley usually tracked quite well with defense spending. When the Berlin Wall fell the region sank like a stone only rising again due to the housing bubble.
Then the $323,000 to $103,000 price drop is nothing compared to the further drops. There will have to be a big round of defense spending cuts unless someone manufactures an act of war by a foreign country. The natural prices of 1500 square foot houses out there are under $80,000, in 1997 dollars.
Dave in Adelanto. I hope you do not own in Owens Valley but are at most renting. I remember reading about people in Independence using oxygen machines because of years of respiratory problems from the Owens dust. I kept getting sinus infections twice a year lasting a couple of weeks for the eleven years i lived in the high desert. Once had walking pneumonia. All this stopped immediately when I moved to the Sonoran Desert in 1996. I did not know until then that it was the toxic dust giving me the problems. Get out when you can.
“…unless someone manufactures an act of war by a foreign country.”
Isn’t that how we ended up in Iraq back in 2003? Something about yellow cake uranium, I believe…
“unless someone manufactures an act of war by a foreign country.”
Who, us? Seriously, we’re experts at this by now. It’s not IF it will happen, but WHEN. We’ve learned to expect it, and not just because of Bush.