Build More Homes So Prices Won’t ‘Tumble’: Economists
The Shrewsbury Chronicle looks at the affordable housing confusion in Massachusetts. “In many communities, there are double and triple the number of properties for sale now than a year ago, which is driving sellers crazy, but the demand for housing in Greater Boston still far outweighs its supply. The Commonwealth needs to build in excess of 30,000 new housing units to keep everything from child care providers to corporate headquarters from leaving the state.”
“Harvard economist Edward Glaeser, Freddie Mac CEO Richard Syron and Barry Bluestone, professor of political economy at Northeastern, all pointed to expensive permitting processes for builders, stringent land-use regulations and a ‘not-in-my-backyard’ attitude for the state’s failure to provide housing for the people it needs most.”
“Employment in Greater Boston declined 4.9 percent between 2000 and 2004, Bluestone reported and the state lost 5.2 percent of its population.”
“Housing cycles, where prices go up and then go down, occur everywhere, Glaeser said, but the volatility is far greater in metropolitan areas with restricted housing supply, such as California, where prices have dropped sharply.”
“‘At every low vacancy rates, below 1.5 to 2 percent, housing prices accelerate rapidly,’ Bluestone said. ‘With few homes on the market, sellers have an edge over buyers. At higher vacancy rates, prices begin to moderate and may even fall slightly as buyers begin to gain some bargaining power.’”
“‘But,’ he continued, ‘as vacancy rates for single-family homes rise much above 4 percent, housing prices begin to plummet. The sellers’ market turns into a buyers’ market. In the worst case scenario, prices can fall by 20 percent or more and not recover to their peaks for 12 years or more.’”
“Doesn’t the high increase in single-family home inventory fit into that category?”
“Yes, but that doesn’t show the whole picture. ‘If housing prices do not moderate as a result of greater housing supply, the resulting decrease in employment and increase in out-migration could lead to a housing price roller coaster with housing prices tumbling in the process,’ he said.”
“‘Paradoxical as it may seem, this suggests that a modest increase in housing supply now, leading to a moderation in housing price appreciation could help inoculate homeowners against a much larger loss in their property values in the future,’ Bluestone said.”
“Moderating housing prices, however, might not sit well with the thousands of home sellers out there, hoping to get top dollar for their highly appreciated homes. But in this case, what’s good for the goose is good for the gander, the economists said.”
The Rocky Mountain News reports on a related paradox in Colorado. “Rising foreclosure and interest rates, as well as an improving economy, drove the vacancy rate for rental houses in the Denver area to 4.9 percent, the lowest rate since professor Gordon Von Stroh began tracking small rental units in 2003.”
“The vacancy rate in the Denver area for traditional apartments stood at 7.7 percent in the first quarter.”
“‘Since we created this survey in the third quarter of 2003, this is the lowest vacancy rate the residential sector has seen,’ Von Stroh said. ‘I think it suggests that rental housing is improving as part of the overall momentum of the Denver economy.’”
“But despite job growth in the metro area , a trouble spot has been rising home foreclosures. But that has actually helped the rental market. ‘I think foreclosures are a factor,’ improving rental occupancies, Von Stroh said. ‘People who had been in an ownership mode are now in a rental mode.’”
“Bob Alldredge, a member of the National Association of Property Managers, agreed with Von Stroh’s assessment. ‘Most everyone who is involved in a foreclosure moves into a rental somewhere,’ Alldredge said. ‘But it is an interesting situation. Adams County has the highest rental vacancy rates, and that is where most of the foreclosures are.’”
‘Harvard economist Edward Glaeser, Freddie Mac CEO Richard Syron and Barry Bluestone, professor of political economy at Northeastern’
These guys are probably paid well to come up with any rational except homes are over-priced.
Amen to that! Let’s eliminate all the BS and finally call it what it is - a bubble, simple as that. I love the latest one blaming rates for the slow down…….could it be that prices just got way out of whack?! Ya think?
The denial is built in at so many levels of society. The majority of professionals in any industry probably own homes. The majority of those people have also probably come to see the recent paper value increases on their homes as permanent increases in their net worth. So even the professionals are personally invested in denial, regardless of their credentials or their abilities. I can see how this could easily lead to fuzzy thinking in this one area. I see it around me all the time.
Talk about living in an ivory tower! We are about 8 months past the peak in the greatest housing bubble in our history and NOW he thinks we need to build more houses.
I suppose that’s so the guy who is currently upside down in 19 of the 26 houses he owns can buy a few more…
That’s some warped logic. It’s like a Bush Admin stunt. Take something that works perfectly well, screw the thing up really bad and then stand back and say “hey, that’s fukked up”, ala social security.
More like Oral Bill’s buddy at Fannie Mae — remember, Fannie Mae is in the business of the “American Dream.”
Clinton has been gone for 6 years and still occupies your mind? It’s time to go fetch a 2 by 4. [lmao]
Give it a rest. You know better, and I do not think anyone is defending Bush.
Comment by Peter Gerard
2006-06-01 13:23:00
Give it a rest. You know better, and I do not think anyone is defending Bush.
_________________________________________________
Of course not. Everyone is backing away from him. Like yourself. Da da da da… stand by your man……
“Take something that works perfectly well, screw the thing up really bad and then stand back and say “hey, that’s fukked up”, ala social security.”
When was the last time anyone thought SS was going along fine? I though this issue was a pending disaster the day my mom (and everyone her age) was born.
And you believe their lies too?
Take something that works perfectly well, screw the thing up really bad and then stand back and say “hey, that’s fukked up”, ala social security.
SS may work perfectly well if you’re already receiving it.
For those of us who have to pay for it and not have it be there when we retire? Not so much.
S’ok though. When I’m president I’ll just open some Euthanasia Carousels and donate soylent green to the third world!
Sorry, but I feel like I gotta defend Glaeser and company. What’s really going on is a short run/long run thing. Housing is experiencing a bubble that inflated over the last couple of years. When the bubble pops, prices wil come down to pre-bubble levels. “Over and done” within a few years.
But, in the LONG RUN, there are a ton of zoning restrictions on housing (in California/NY, but not so much in AZ/TX). That has led to permanently high prices on the coasts. Even after the bubble pops, prices will still be too high because of a “zoning tax.”
The advice to build more houses on the coasts is good advice. California is a desireable place to live, and people want to move there. Regardless of how much prices fall after the bubble pops, housing would be even more affordable if current house owners didn’t say F-U to future house owners by restricting development.
I was a ‘house owner’ in California for over 23 years and I don’t recall ever doing anything to restrict development. No one ever asked me if I wanted to restrict development. Usually the people who were all gung-ho to restrict development were living in apartments near the colleges.
It’s very well and good to say “build more houses”, but clearly the current problem hasn’t been zoning. I don’t think zoning had nearly as much impact on the current run-up in prices as the boom/bust cycle. Not many of the builders survived the 90-96 period in Southern Cal, so a shortage of houses was created. But the excesses of the last three years was fed by the Fed. No amount of building would be enough if people belive it makes sense to go out and buy 26 houses.
Regardless of anything else I have heard, buliding more houses NOW is crazy; even on the coasts.
Perhaps the issue being alluded to by the professor is that developers are building too much “luxury” housing and McMansions, and not enough affordable housing. There are probably a lot of people with family incomes of less than $50K, who could afford and would like to buy a house that is under $100K. But what builder wants to build a house for under $100K and make only a few thousand, when they can build luxury houses for $500K and make tens of thousands in profit?
“…needs to build in excess of 30,000 new housing units to keep everything from child care providers to corporate headquarters from leaving the state”
This won’t be necessary at all. Let’s just wait a year or two and see how many of these houses will really be needed. OTOH, if the overbuilding kicks into overdrive, that will just mean a glut of super-cheap houses in the future.
No kidding. His logic is flawed, but if anyone wants to argue in favor of building more housing, who am I to complain?
yeah, more housing is good for prices. but i hope they’re building better quality homes in Mass than the $hit i see pretty much everywhere else. the more housing that gets built today, the more falling apart properties we will have in 2-20 years from now. the best quality houses tend to be built during slow housing growth periods. you can get the best workers and best materials for the best prices. i’ve already seen one 2002 home being sold as a “fixer-upper”.
This was the big “HUH?” moment. I tried to follow his train of thought, but the only way I could get it to compute is if they had built more houses 5 years ago. Way too late now, but I agree with HARM . . . who am I to argue. Please, build away!
they may want you to pay for it- professors are like that
Yeah, the logic is certainly flawed. Perhaps 30k new houses are required, but that does not make the problems of affordability go away.
I join the consesus….Build away.
“OTOH, if the overbuilding kicks into overdrive, that will just mean a glut of super-cheap houses in the future”
Sounds good to me. Keep on building.
This analysis makes a ton of sense to me. But you must read it with a *long term* mindset. These economists understand prices are going to drop. What’s they’re arguing is that in established urban areas is that if there is enough *moderate priced housing* that long term those metros will gain a more stable economy and thus not have the fluctuations in home prices we’ve seen.
I believe this. Right now, anyone who wants to be a teacher or other similar salaried professional is probably leaving California. If there were enough homes that they could afford (with a stretch), we would attract more industries here and thus not have as strong of a downturn.
Obviously, short term more housing means a greater vacancy rate and thus a steeper drop in home prices. Long term… the opposite.
Neil
Since I grew up in So Cal and lived there for 29 years of my life, I havew many friends and family down there. Never, since my moving away, have I heard so many of them talking about leaving. Even some of my family who are “there’s no place on earth like So Cal” are talking the talk lately of bailing out. Can you say mass exodus? Time will tell…….
Neil,
I can kind of get on board with that as long as we have the caveat in place that no “McMansion Developers” need apply. Is it simply “housing” that we need in MA or CA or is it 2,900+ sq. ft. “snubb homes” where the first thing you notice is the 3 car garage? How about making a few townhomes and condos that AREN’T “high-end” or up-scale? We’ve had sprawl before and as Robert Cote’ is fond to add, we’ve always survived it. If they build homes that people need, not want and finance them in a sane fashion I’m all for it! When was the last time you saw a listing boast linoleum floors and laminate counter tops?
Unfortunately here in MA those crackerboxes that go for 400K are just that. Badly designed, cheaply made, drafty, moldy, 1000 square foot house with 3 bedrooms. There are few if any amenities, and most of the cost is the land.
I can almost guarantee, that the difference between beuilding a 1200 square foot cape, and a 2800 + Mc mansion is going to be very little in the overall cost. The time difference it takes to frame a 10′ wall compared to a 15, or a 20′ is minimal!. The 2 most expensive rooms are the bathroom and the kitchen, need the same basic appliances, and the difference in finishes (100 or 1500 for a counter) is not going to impact the total price too much. The real difference comes in getting all the permits, around the wetlands regulations that change town to town, and seem to emcompass any available land around here, the septic permits, surveying, all the palms that… errr, sorry, all the permits that need to be pulled, and you get the picture.
Also if somebody in the neighborhood is against it, they show up in the planning board meeting, and protest the development. After that it takes a miracle, or an act by a well paid Kennedy in order to get anything done.
*Bingo*. Well put, pinch-a-penny.
Pinch said:
“The real difference comes in getting all the permits, around the wetlands regulations that change town to town, and seem to emcompass any available land around here, the septic permits, surveying, all the palms that… errr, sorry, all the permits that need to be pulled, and you get the picture.”
I DISAGREE with this assessment.
Although it is true that these permiting issues can be a hassle, they have ALWAYS been a hassle in all the bubble areas. Nothing changed in the last 5 years. It is not any harder to push a permit through today than it was in 2000. (in fact, I think it’s easier, given the rampant building done all up and down the East and West coast)
Certainly, permiting does not explain the tripling in “value” of my old SD place from 1999 to 2005 when I sold it. The permitting process cost the exact same.
You are falling for the lies of the builders and the NAR. They make this spin about permitting (I don’t argue that it’s a pain to get permits, only that it doesn’t add that much to the cost compared to 2000) etc to explain why housing has doubled/trebled in value over the last 6 years. It’s all BS though.
And lastly, permit issues don’t explain why a USED house is so costly. There are few permits, etc for buying used.
And the scarcity of land is BS too. MA is losing population, and has increased housing supply. Yet the prices rise out of proportion. Even now, with record inventory, house prices were rising.
If shortage of land or permiting issues were the problem, then we wouldn’t be having RECORD housing starts in 2005 and 2006 (which we did), because there wouldn’t be any more land or permits to build that record number of homes that have been built.
I’m sorry, but the reason prices rose was simply because prices were rising. Classic speculative mania.
Buy now or be priced out forever. Remember that tired old line. THAT’s what was to blame IMO
clouseau
Permits and zoning are just one part of the problem. There is a program in MA called 40B. It is supposed to “cure” the lack of available affordable housing. The program gets thrown into the ring every time that a high end development is proposed. That little old lady that objects to have a sprawling Mc Mansion in her back yard, 5X her house, gets shoved the 40B alternative. She chooses the Mc Mansions because it “raises” the value of her home.
The problem around here is not a lack of housing, it is not a lack of building, it is a lack of quality affordable housing. I am not asking for a 2800 square foot monster on 10000 square feet of land!. I am asking for around 1500 to 1800 square feet of habitable living space. That is where I was going. Those houses that are 1500 to 1800 square feet are 550-650K!. The 400K affordable housing are less than 1000 square feet!. Condos start around 250K for a 1000 square foot condo. The problem lies in several arenas, including the local towns that ask exorbitant amounts for new construction permits. Those permits will affect the bottom line, and will make housing more expensive.
Compare TX to MA. TX has no or little zoning, and the median price for a house is between 1/3 and 1/4 of a comparable house here. (TX_chic, I know Texas sucks, My brother lives, and melts there!).
To answer your question, of what has changed in MA in the last 5 years, I can tell you that people have been living off of their houses for that period of time. There are few new jobs, the high paying tech jobs have all but disappeared, and are being replaced by low level service jobs done by illegals. Those people that are selling both their land (to build new houses) and their current houses cannot lower their prices because they would be underwater very quickly! Unfortunately until last year there were many fools who believed that RE never goes down, and MA was different!
House Inspector Clouseau,
Sir! You have nailed it. I’ve heard the argument that the “permitting process” is so complicated that it’s driven out all of the smaller players much to the joy of the TOL’s of the world. To which I call BS on. Here in Oregon what we have for the most part is mom + pop builders and they seem to be doing just fine even with all of our restrictive legislation. (Although I’ll admit MA and CA are different animals) the basic pricipals are still the same.
Oh, you guys are going to LOVE this one! My former neighbor (lived in the fairly nice condo below me) “built” his new dream house and closed on it just at the peak in OCT 05. Since he got his permits before they went from $16,500 to $20,000 he was high fiving himself considering already “money in the bank”. Sheesh. I’m still trying to figure out what went wrong with his last dream house?
pinch-a-penny,
Well I have only to imagine. I used to work for a bank that required a vist “back east” once a year so we stayed at the Westin in Providence and shuttled to Lincoln, RI. At the time “Buddy” Cianci was mayor and it’s difficult (even for a native Chicagoan) to witness a more corrupt area. No offense, but isn’t “Buddy” doing time? While I do hear ya screaming I’ll stick by my original statement that sensible is sensible, brazen as that might seem. We can’t just throw our hands up in the air and say “Oh what the heck, give me a McMansion I don’t need and the debt for life program”. Hasn’t worked so far.
DinOR,
I’m no builder, but perhaps it comes down to how one defines ‘McMansion” (lot size vs. house size, etc.). If it’s lot size, then you might be on to something. Townhomes & condos obviously have a much smaller footprint, so much lower cost basis to build.
On the other hand, if the lot size is not a factor and the cost difference between a large pergraniteel-furnished McMansion and tiny linoleum cheap-o special is small, I’ll take the McMansion.
HARM,
My point is simply that our “just because we can” fees are typically 1/5th the amount CA builders pay. Yet we are continuously subjected to the same “sell job”. These fees are always passed on to the end user (me and you) and all I’m saying is if we could get a grip on our desire for the finer things in life (as Americans) we can begin to interject some sobriety into our housing markets. As long as we DEMAND McMansions that’s what we’ll get. Me? I think energy is still going to be a factor so I’ll take the cheapo special at no more than 1,600 sq. ft. Then again I’m at a point where I’d like to know that there’s something in life besides paying on and keeping up a house.
“If they build homes that people need, not want and finance them in a sane fashion I’m all for it! When was the last time you saw a listing boast linoleum floors and laminate counter tops? ”
You’re insane. Just how long would a builder stay in business by trying to sell people what buyers don’t want? I’m guessing not very long. If buyers want large houses, guess what’s going to be built.
Good point, Neil. If that’s what they meant, then I agree 100%. As a native Californian, I very much doubt this will ever happen in my state, though, thanks to deeply entrenched NIMBYism, local/state government corruption, and Prop 13.
Almost *zero* existing homeowners I’ve spoken to want any new development anywhere near their precious million-dollar crackhouses (might depress property values or obstruct their lovely view of the L.A. River). This anti-development mentality becomes almost fanatical whenever the term “affordable” or “working-class” are added to the mix. These are the NIMBYrods who routinely picket/protest hearings for every proposed new development –usually on the grounds of “saving the environment/children” or some other self-serving B.S.
I read an NAHB article that said some cities in CA slap on almost $100,000 in needless permits and “just because we can” fees on every single new residential housing unit developed. Even if there were no credit/asset bubble, this alone would be a HUGE disincentive against building new housing stock in CA, not to mention it jacks up prices.
If the above weren’t bad enough, then we have *wonderful* Prop. 13, a.k.a. “Savior of poor grandmas”. Another self-serving load of B.S. sold to the public in order to transfer the tax burden from corporations and existing owners to younger buyers. It also had the unintended side-effect of disincentivizing cities from permitting new residential housing in favor of commercial RE and strip malls (which Prop. 13 doesn’t apply to). State/local government ran the numbers and figured out they’d get an a$$load more tax money by permitting tons of new commercial RE, and ignoring residential. Ah… the fruit of trying to “engineer fairness” in the marketplace.
HARM,
Ah yes! The “just because we can” (get away with, what-cha gonna do about it fees!) We have them in Oregon as well (and in abundance I might add) but not to THAT degree! My brother was finish carpenter for years and we often got into the “sensible” home debate. The problem that I now see is that builders love working the prospective homeowner. “Well if you’re already spending X amount on this sh!tbox you might as well get the upgrade lighting fixtures and counter tops”! And on and on it goes until your getting incessant calls on your cell phone when you’re at work wanting to know “did you want satin finish or brass plated hardware”?
If home buyers toned down their tastes and expectations we could get to a point to where the “just because we can” fees will have to moderate so the builder can build a “reasonably appointed” 1,600 sq. ft. home and actually make a buck at it.
My understanding is that prop 13 does apply to commercial real estate and strip malls. The reason local govt pushes these over residential is for the sales tax revenue.
Exactly, the one thing Bill Fulton and I agree upon. Prop 13 has been circumvented in the commercial real estae market by using elaborate holding company title transfers. Prices have gotten so out of hand I wouldn’t be surprised to see the process show up in residential transactions soon. Anyway, Fulton calls this “zoning for dollars.” He’s right.
HARM is correct that many municialities do the development fee dance. The independent school districts and even water and sewer do the same. I’ve seen $45k per bedroom in extreme circumstances.
HARM is also correct that existing homeowners object to having the roads they paid for, the schools they paid for, the quality of life they paid for being stolen and distributed to people who do not equally value good schools, open roads, low crime, while being told that they are expected to pay for this.
You need to understand the geometry of development, particularly infill. People don’t buy with the expectation that 10 years later there will be 2x more of everything. If that were the case they’d have chosen elsewhere.
Home tastes (revealed preferences) have indeed changed. I fact I strongy suspect that the typical 1956 home would be acceptable to even the most accomodating 2006 owner. 43% efficient oil heat? 2 circuits of 20 amp electrical service? Single pane, single car garage, single phone line, single bathroom anyone?
Don’t get me started on Fulton and the housing “shortage.”
But seriously, Wait… That sounds a lot like most of the housing in MA!!! 3 bedroom 1 bath. upgraded electrical (It used to run on naked copper wire!), single car BASEMENT garage 900 Square foot house and 5000 square foot lot.
No, we really want all those professors from Hahhhvahd telling us how those houses are completely ahhhdequate!
This gets me every time I hear it.
If they “paid” for it, I’d like to see the receipt for the development options (e.g. building height, density restrictions) that were bought off the owners of relevant neighboring lots.
No receipt, no ownership. No free lunches.
Well said Harm. Nimbyism keeps prices permanently higher than they should be. If people want to move to an area, I say let’s build some houses. That seems like the responsible thing to do.
And lastly, permit issues don’t explain why a USED house is so costly. There are few permits, etc for buying used.
The permitting process limits the new supply. When you need to jump through 5 different town boards (planning board, zoning board, conservation commission, historical commission, open space preservation committee, etc etc) it become too much damn trouble and expense. You just can’t predict when some jerk who volunteers two or three evenings per month to leave the comfort of her home and the company of her family will deny you just because she does not like you, or does not want to upset a neighbor, or just wants to exercise her powers.
I have had cases where permitting was denied because of groundwater on other lots, or because the town decided that since a neighbor saw a fisher-cat on the property it must be wetlands, or because a ZBA official gave the wrong address, and so an appeal could not be made without filing a procedural appeal, winning that appeal, and then and only then getting the substantive issues before a judge.
One acquaintance lived on a road that was deemed a town road in 1932, including town water and electricity running the whole length — it apparantly was not a real town road if the planning board thought it shouldn’t be a real town road. The upshot? Four years in court, incuding a favorable ruling from the SJC, $45,000 in legal fees the builder had to eat. Shameless.
According to one study, the permitting process in Massachusetts is so onerous that it results in a 40% premium on all housing in the metro Boston area.
I have seen this time and time again. Plannig board denies because their aunt lives on the street, and may be run over by a kid in the new sub.
Lately thought, what I have been seeing a lot of is the threat of using a 40B option when their original sub is not approved. It is sort of the “nucular” option in that once it is mentioned, magically all permits are issued, and all planning boards toe the line…. That is until you find out that the site used to be a jewelery factory, that is in fact a brown site, and needs 10 years in order for the builder to clean it up and the EPA to deem it safe. (True story btw, as I know the builder that this happened to).
Nice observation Neil. I had to read the article twice to understand their point. Which in summary seems to be take a hit now (how much of a hit is in question) by building affordable housing or do nada and have The Commonwealth of Mass. in BK court in the near future.
The amount of housing being built in Southern Delaware is incredible. The beaches here are beautiful, but the speculation went wild. I just set up the Delaware Beach Bubble blog. If someone can give me simple instructions, I’ll start adding other bubble links. Thanks. Yesterday, I looked at a house that even had a fire place in one of the master bed rooms. A spec house for 2.4 million.
Does the experience (cited in the article) about tightening Denver rental markets indicate that we might see rental rates increase across the country as real-estate prices fall?
I wonder how long it will be before the Fed eliminates ‘equivalent rent’ as an inflation driver. Increasing rents at this time will lead to a rising core inflation rate, and the preception of runaway inflation. In fact, they may be the reason for the recent uotick in core. Damned if you do…
I live in Southern Delaware. This is a beach resort area. The amount of building is incredible. I think we will see steep declines in real estate prices here. Of course, many people that live here don’t believe that because they live near the beach.
“Housing cycles, where prices go up and then go down, occur everywhere, Glaeser said, but the volatility is far greater in metropolitan areas with restricted housing supply, such as California, where prices have dropped sharply.”
What metropolitan area in CA have prices dropped sharply?
(side note: Anyone who played SimCity knows that dozing, not building crappy homes raises nearby prices/values
)
There are different areas here in San Diego, where I have seen homes with a list price’s that have decreased by 10%. Assuming that the original list price was based on similar homes that have sold (they probably were not) then that would indicate a 10% drop in some areas, but they still have not sold. In the one area that I am looking nothing is selling. There are over 100 homes for sale and it is a small area, Tierra Santa, for anybody that is familiar with the area.
29% yoy decline in the median for sebastopol ca,zip 95472,see dq news figures for april.
Can someone explain to me in which industry, more supply=steady prices? Which economic models are all these economists using?
They are using the Irving Fisher model (”Prices have reached a permanently high plateau.”)
The same economic model that Florida was on.
He’s saying that more supply would reduce the impact of the boom and bust cycle (which would result in overall steadier prices) not that they would remain steady from here.
more good news for commodities. CALPERS new head is a commodity buff and want 10% of CALPERS in commodities. china says it should/will buy more gold and oil with it’s new US dollar reserves.
Neil, I don’t know many teachers wanting to leave CA. Gee, down in Bakersfield I know of a lot of teachers (remember they only work about 9mo. out of the year, get two weeks at Xmas, a week at Easter, all holidays, sick days, vacation time etc, have a great retirement plan) making north of $70,000 a year all the while telling the rest of the world that they are underpaid. Cost of Bakersfield is still one of the lowest.
Salinasron,
I don’t know what “California” you’re from, but the scenario you described of “overpaid” schoolteachers doesn’t even come close to describing the state where I live. You obviously have never taught (I did for 3 years in L.A.) and have *no idea* the amount of crap a typical teacher has to go through for crappy sub-par wages, disrespectful (and often violent) student, politically correct agendas rammed down out throats by politicos and bureaucrats, and a lifetime of mandatory (and out-of-pocket) re-training.
Everyone who has never taught for a living thinks it must be the easiest/best job in the world. Gee, I get paid for taking 3 months off! And I only “work” for 6 hourse a day –what could be cooler, right?
Wrong.
None of this takes into account the many hours spent each week writing and preparing lesson plans, syllabus, project outlines, grading papers, student & parent counseling, etc. All of this is “in addition to” the hours spent in the classroom, and for which you are NOT compensated. You are nonetheless required to do it anyway. Much of summer “vacation” is typically spent preparing lesson plans for the next year and working to supplement a very meager income.
In my district the average gross salary was around $35-40K. Granted, this was about 10 years ago and has appreciated somewhat, but the only people I knew who were making close to $70K had at least 25 years and held advanced degrees.
Teachers are paid nowhere near what they would be in the private sector for the same hours worked and level of education required. No wonder there’s so much turn-over and “burn-out” these days, especially in CA, where a teacher’s salary cannot come near to making a typical house payment.
Teachers are NOT overpaid here. They are not paid nearly enough!
Another rant abuot government employees who don’t get the what they would if in the private sector. Few private sector employees have the job security and automatic raises that governmet employees have. You can do you lesson plans while the kids do their work. PS I taught for five years - piece of cake.
you are paid what you can get.
PS I taught for five years - piece of cake.
Anon,
We’re not talking about bureaucrats, teacher’s union bosses or other “cherry” high-wage government jobs here. You say you taught for five years and call it a “piece of cake”? I call “Bullshit” on that. Unless you were a kindergarten or elementary school teacher (a much lighter academic load than teaching middle & H.S.), I seriously doubt you spent any significant amount of time as a teacher in any classroom.
And btw, if it was such a great-paying “cake” job, why did you leave it after only five years?
My brother and his wife are both teachers in the Menifee area of So Cal. There is no way in hell they are each making $70K and the job is ‘cake’. They toil their asses off and are barely treading water.
i’m with harm on this one. my wife is a bclad teacher in lausd. i am a cfo here in los angeles.
she works way more hours than me. the perks for her are that lausd provides outstanding health care and a privatized retirement program.
and i’m getting my credential to teach high school math.
accounting sucks.
Just on CNBC, yoy sales declines
West -10% (rounded)
North East -6% (rounded)
South +1.4% (exact)
Holy cr*& That’s huge!
Ok, back on the housing markets.
Cali needs more housing long term is what these guys argue. “Reading between the lines” they’ve already accepted that a downturn will happen for the current market. What they are arguing is that prices will be more *unstable* without more housing. Yes, that will prevent them from rising as fast next time, but also dropping.
As to the type, I hapen to like the NYC high rise with subway lifestyle. However, no company in my industry is estabilished in NYC. So I would be ok with high rise apartments/condos, or more townhomes, or whatever as long as there is more housing.
Alas, I must agree with HARM, nimbyism will keep development from happening until we have a large business decline.
Cest la vie.
Salinasron, I guess I was speaking to Southern California specific when it comes to teachers. I know too many living out of their folks homes or leaving the state. Looking back, I cannot believe the number of people I know who have pulled the plug and left California since 2000. Yes, I know the population is still going up. But I would argue that the mid to long term job market will be precarious. Too many of those types who provided the previous foundation for economic expansion seem to be in Pheonix, Austin, or other low cost cities. Obviously not all of them… but enough to slow the next economic expansion in my opinion.
Neil
I know too many living out of their folks homes or leaving the state. Looking back, I cannot believe the number of people I know who have pulled the plug and left California since 2000. Yes, I know the population is still going up.
Yes, long-time working class CA natives are being replaced by a never-ending flood of super-cheap illegal day laborers –oops, sorry, I meant “guest workers”. My bad. Quite a foundation for a “robust” economy and resilient middle class, no?
Around here (San Diego) there appear to be whole tent cities in the hills up over the new 56 freeway.
@GH,
Shit, we better go buy some tents right now –they’re not making any more of ‘em, you know!
DinOR, you are right that they work the buyer. The pitch in the past was buy new and you get to choose colors, flooring, etc. Put in all the extras you can afford, gee $10,000 of extras is only gonna cost you an extra $100/mo. and when you sell it will be easier to find a buyer. Besides, you bought everything new, everything guaranteed for five years, and most people move after about five years anyway and the new buyer subsidized them for you. Now if you buy that fixer-upper you’ll get a loan and then later have to get another after the repairs at a much higher interest rate and payment because of the shorter repayment term. People were flocking to their doors tripping over each other to buy that new home.
salinasron,
As usual you bring a floodlight to solar eclipse! I thought I was already squinting. So true, these guys know just what buttons to push and usually have an “in house” pitch man that you are lead to believe is on your side. Yeah, right. At first they agree to just about anything you prefer but it’s not long before your “consultant” in conjuction w/the realtor are playing the buyer like a fine instrument. Enough already!
OT,
Maybe this could be of interest to Ben’s blog.
http://moneycentral.msn.com/content/Investing/Realestate/P129383.asp
http://articles.moneycentral.msn.com/Investing/RealEstate/3waysYouCanGoBrokeInRealEstate.aspx
Read about Media Leaving Millions of American Homeowners Vulnerable to Unethical Lenders and Mortgage Brokers Said Consumer Advocate, Harj Gill/a>.
“The reason: unethical appraisers, real estate agents, lenders, and mortgage brokers have conspired to misinform and misled millions of Americans, with the latter financing people into inappropriate mortgages. Everywhere families are losing their homes to foreclosure and analysts predict the worst is yet to come.”
In Las Vegas, NV where foreclosures rates increased by 99% from January to February, Gill presented a community service seminar to teach homeowners how to avoid losing their homes. In addition to covering all his expenses, Gill donated copies of his book and financial software program to help attendees create a personal foreclosure protection plan.
Gill’s call to arms to the media, “ABC, NBC, FOX, CBS, CNN, you have made billions of dollars from your audience. Now give something back by taking ethical responsibility and help me educate and empower them.”
PR Newswire? That always sets off the red flags, to me anyway.
Harj Gill = Crap, Crap and more Crap.
He’s just trying to sell his books look likes he hired a new PR guy.
I think he sounds concerned
Read about Consumer Advocate Harj Gill Donates 200M in Software Packages to Help Homeowners Avoid the Upcoming Housing Market Crash .
I could be wrong, but his approach reminds me of Dave Del Dotto or Tom Vu. I’m of the mindset that if you are really sincere about trying to help someone. You don’t run for every camera or news reporter. You do your deed and go about your business as if nothing happened.
Read about NEW YORK (Reuters) - Fannie Mae (FNM.N: Quote, Profile, Research) directors, who have so far escaped the kind of blame heaped on boards at bankrupt companies such as Enron and WorldCom, may soon find their free pass is being revoked./a>.
This is the time bomb waiting to happen….
“If Fannie was naughty, so are the government chiefs responsible for her and the voters that elected these chiefs. Fannie was spanked, but the public will be punished much more badly in the next depression, and sadly, they won’t know why. ”
I just read this comment. I truly wish America would wake up. The govt wants us poor and stupid and we need to stand up…. and I hope it’s soon.
for some reason my posts are not showing up, so sorry if this is the 3rd..
OT, Ben might be interested in posting.
http://moneycentral.msn.com/content/Investing/Realestate/P129383.asp
http://articles.moneycentral.msn.com/Investing/RealEstate/3waysYouCanGoBrokeInRealEstate.aspx
Mertiage had some news out. An exective of two quit “No News Here” - The press release sounded like Enrons when MR. Skilling Left
DC HOUSING MARKET FLAT AND NOT SINKING during Q1 2006, according to the Office of Federal Housing Enterprise Oversight.
Over a one-year period, prices were up a much sharper 20.84 percent, said the OFHEO.
http://dcbubble.blogspot.com/2006/06/dc-housing-market-flat-and-not-sinking.html
Yeah, hang your hat on anything! Did you read the caveat about the “cash-out” effects on the numbers. I think you did not!
“In conclusion, the empirical evidence suggests that the growing prevalence of cash-out refinances over the last year has had the effect of increasing measured appreciation rates for the HPI. Homes with cash-out refinances likely are disproportionately those that have experienced the most appreciation. Thus the HPI dataset, which includes appraisals used for cash-out refinances, may have relatively more rapidly appreciating houses than the purchase-only index.”
I have read your posts before, but never went to your blog until now. It is very depressing to find that you are in the words of my kids a “poser”. I would love to have a “soft landing”, IMHO there ain’t no such animal. That you perpetuate an econocentric non bubble stand is just as criminal as the realtor who states “House prices only go up”. I am glad I do not rely on your information.
Slightly OT: Has anyone read the new book about Alan Greenspan? It’s called “Bubble Man” and is apparently pretty damning of Ol’ Easy Al.
Many on this board think that the bubble is a symptom of an economic plan gone wrong but maybe the bubble is the plan. As we stopped being a producer nation by shifting so much of our industry to Mexico and then China and became a debtor nation, we had to get consumers to spend down their savings to keep the economy going as there was less and less actual wealth being produced. These bubbles in essence get people to spend down their savings.
Bubble number one was a way to get Americans to spend down their retirement accounts. Here is how it happened:
1) There was a switch from defined benefit plans run by investment professionals to defined contribution plans, which give more investment control to non-professionals.
2) As the 401k money flowed to Wall Street or in this case, the NASDAQ, paid “investment advisors” sold worthless or overvalued tech stocks, the media put these “investment advisors” all over TV without mentioning all their conflicts of interest. The media treated any real economists as out dated and the media quoted bubble cheerleaders no matter how crazy their theories were and treated them as real experts. As the new 401k investors moved into the markets they were fooled by this way more than any defined benefit plan administrator would ever be.
3) The money flowed from the retirement savings to the economy
4) The people responsible covered their ass by blaming all the “investors” 401ks put into the markets for being fooled by the media blitz and unscrupulous investment advisors.
When that was all played out Bubble number two was real estate. Worked about the same,
1) Low interest rates pushed prices up and new mortgage products allowed inexperienced people to enter as new homeowners and investors.
2) Realtors with conflicts of interest advised buyers that prices would not go down.
3) As prices climbed past any economic justification, the media ignored any economists who suggested there was a bubble and put on re cheerleaders.
4) As prices increased homeowners spent down their equity to make up for staminate wages or at least spent more freely than they would have otherwise as they were more confident with all that equity. (remember we moved all those jobs overseas).
5) RE equity borrowing and false consumer confidence buoyed the economy.
6) The bubble is bursting and “savings” tied up in home equity are gone, blame the fbs.
Bush already has a plan for the next bubble, let American’s invest their social security and spend down the last of their savings.
Many people here think the problem with the bubble is that they cannot afford a house. I am beginning to think that the bubble is a symptom of a much bigger problem.
“Many people here think the problem with the bubble is that they cannot afford a house. I am beginning to think that the bubble is a symptom of a much bigger problem.”
I agree Will and have kindly posted some sites that are useful to me:
Grandfather Economic Report series: http://tinyurl.com/p9usz
Financial Sense online: http://tinyurl.com/qobhw
SafeHaven Preservation of Capital: http://tinyurl.com/oon25
Fiends SuperBear : http://tinyurl.com/pake9
Itulip.com The contrary Market View : http://tinyurl.com/47ggb
From the early ’70s until 2000 we have had 6 Bubbles and currently are in 4 or more bubbles. The housing bubble will affect us most. Housing is a basic right that the Fed in order to avoid recession allowed to be perceived as an investment. That (IMHO) is the biggest crime of the Fed!
I do visit those sites and your’re absolutely correct
I am not saying it is malice, but I will say it is in part an irrational belief in markets and a pressure to make that belief work or use it for self interests. It is a plan that puts profits for a few before national and human interest.
It is a systematic problem, you don’t need to get all the Realtors together in an evil plan to be dishonest about the value of real estate all you need to do is set up a system where it is tolerated.
It is too bad to because it is destroying America a little at a time.
Will, the thesis is compelling, but there is a question: WHY?
The thought that Bush and Wall Street would weaken our entire economy for generations and foment unrest amongst the voters as some sort of method for transferring wealth is pretty short sighted. It’s not the type of plan that this all-powerful group (who can induce an entire nation) to give up their life savings would embrace, as it leads to complete volitility in the political and social arenas.
I think something like the PPT is more likely the biggest secret plan these folks could muster.
I think it’s a lot more interesting to attribute to a master plan than to what it really is: Greed & Stupidity. Greed & stupidity by consumers and greed & stupidity by the “Masters of the Universe”.
It’s a conspiracy, alright. But just because someone conspires, does not make them smart.
“Never attribute to malice that which is adequately explained by stupidity.”
–Hanlon’s Razor.
see my reply above
I have a question. When the feds state employment gains, do they include the illegals?
What do think of this statement - “Look at the upside! If 80% of the construction industry consists of illegal aliens, we won’t be laying off that many Americans! Just the Realtors, Mortgage Bankers, etc., and who cares about them anyway? Most of them have just HAD that job since 2001, if THAT long - they can easily migrate back to what they did before or to the next path to riches…”
“Median Price” — as I understand it (and correct me if I’m mistaken), “median price” has little to do with prices on individual properties going up or down, it’s merely a function of interest rates and overall economic growth (plus things like lending practices, speculation volume, etc.). Thus, there’s no reason why “median price” has to go down, even as the market craters.
Think about it, most people shop for a house with a budget in mind, either a monthly nut or an overall price, and buy at whatever they determine their limit is. So if someone wants to spend $1 million, they will - it’s just a matter of what kind of house they get. Prices could plummet by half and those people would simply get twice the house for their money, and the “median” could continue upward as long as the loans keep flowing, or inflation keeps rising, or the economy grows.
Of course, rising interest rates reduce the monthly nut vis-a-vis price, and a broad economic downturn reduces the size of the average person’s “affordable” monthly nut. But in general, “median price” tells us zero about whether prices are going up or down.
OT: I plotted all the latest OFHEO data released today:
http://www.housedata.info
Thank you
Regarding the addition of more real estate for the huddled masses, which increasingly includes a greater swath, is it better to build apartments with linoleum, carpet, and laminate countertops
or SFHs?
Affordability seems pragmatic, but will the apartments soon be turned into cheap condo conversions and lose their economies of scale??