Tumbleric

Nov 08 2009 ∞
“ Congress delivered an early Christmas present to the real-estate industry yesterday. Local real estate agents said the congressional action could lead to a busier-than-normal winter for home sales in Massachusetts. ‘I know it sounds self-serving, but I truly see this as a great stimulus (for the economy),’ said Gary Rogers, president of the Massachusetts Association of Realtors.
—

The Housing Bubble Blog

Houseowner A sells their house to Houseowner B (who gets money from taxpayers to do it). Houseowner A then goes and buys a house from Houseowner C (and gets money from taxpayers to do it). Can someone please explain to me these transfers of housing from one person to another stimulates the economy?

Nov 05 2009 ∞
“ Last fall, as the financial system was teetering and the biggest banks were tightening credit, Karen DeForte couldn’t find a lender to refinance the two mortgages on her New York home, until she received a phone call from Lend America. Most banks rejected Ms. DeForte because her debt level was too high and her credit score too low. But Lend America put Ms. DeForte into a $402,000 loan backed by the Federal Housing Administration, a New Deal-era agency that Washington and Wall Street were relying upon to pick up the slack in the mortgage market as private lenders pulled back. Ms. DeForte fell behind on payments six months later and is seeking a loan modification. Taking the loan was “a stupid mistake,” the 46-year-old office manager said.
—

FHA Digging Out After Loans Sour - WSJ.com

So, an office manager (let’s say she makes $65k) borrows $402,000 (~6.5x her income). The public subsidizes this loan via the FHA. But of course she can’t make the payments, because the loan is for too high a multiple of her income. So she seeks a mortgage modification, also subsidized by taxpayers, which presumably she’ll get. And that will be fine for a few months until (for any number of reasons) she re-defaults. Then what? How will the taxpayers continue to pay for this woman to be a home “owner” (quotation marks because her loan probably exceeds the value of her house)? A second modification? Principal reduction? More tax credits?

It continues to be mindblowing that we as a taxpayer base will spend tens of thousands of dollars to keep this individual woman in her mortgage. Not her house - that’s secondary. In her mortgage. And because that mortgage is likely larger than the value of the house, all of this rolls up to taxpayers basically paying up so this woman can remain a debt slave.

And you have to ask … why the hell are we doing this? And the answer is simple - it’s good for the banks.

Nov 04 2009 ∞
“ The Senate and House are poised to agree on a compromise measure to extend unemployment benefits that also would expand a popular $8,000 tax credit for homebuyers, despite a recent government report on extensive mistakes and suspected fraud in the program.
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Congress Poised to Keep Homebuyers’ Tax Credit - NYTimes.com

What a huge shock…

Congress is crap at its job.

Nov 02 2009 ∞

Breaking news hits social networks in 3 mins; mainstream news sites in 20 mins.

mikehudack:

soupsoup:

(via @RachelSterne)

I’d like to better understand what percentage of that “breaking news” that hits social nets is incorrect. Is the 17 minute delta the price we pay for accuracy and actionability?

Also - for what percentage of “breaking news” does 17 minutes genuinely matter? Unless it’s “A tidal wave is heading toward Manhattan” I’m generally fine with waiting 17 extra minutes to get something that’s been fact-checked.

Nov 01 2009 ∞
“ The trouble is that those GDP and productivity growth figures could be significantly overestimated—perhaps by one percentage point or even more. That’s because the official statistics are not designed to pick up cutbacks in “intangible investments” such as business spending on research and development, product design, and worker training. There’s ample evidence to suggest that companies, to reduce costs and boost short-term profits, are slashing this kind of spending, which is essential for innovation. Without investment in intangibles, the U.S. can’t compete in a knowledge-based global economy. Yet you won’t see that plunge reflected in the GDP and productivity statistics, which are still too focused on more traditional sectors, such as motor vehicles and construction.
—

The GDP Mirage - BusinessWeek

My ongoing fear is that we are recklessly behaving in a way that prioritizes short-term results (“There will be no more Lehman’s) at the expense of much longer-term consequences. Whether those are consequences to our currency, to innovation spending as referenced above, or to the overall financial health of consumers (“BUY A HOUSE (you can’t really afford) NOW! HERE’S SOME MONEY TO GO DO IT!”), we are pushing ahead with near-term measures to convince ourselves that the problem is past. I don’t think it is, and solutions like the one above are worse than the problems they purport to solve.

Oct 29 2009 ∞
“ Whenever the tax credit finally expires, Las Vegas and every other city will have to confront the inevitable question after all such stimulus packages: what will motivate the buyers of tomorrow? “In my office, people were buying homes left and right because of that tax credit,” said Kitty Berberick, who works for an insurance company in Las Vegas. “That credit was a godsend.
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Fears of a New Chill, Just as Home Sales Had Begun to Thaw - NYTimes.com

No, Kitty Berberick, a “godsend” would be housing priced affordably, so that people could buy them without having to be given taxpayer money.

Oct 28 2009 ∞
“ What happens when you artificially prop up housing prices? Imagine the credit were expanded to all home buyers and made permanent. This would simply boost housing prices at the low end of the market by close to $8,000, since all buyers would be willing to pay $8,000 more. (Prices would rise by a little less than $8,000 because at higher prices, more people would be willing to sell.) Whom does this benefit? Not first-time home buyers. It benefits people who already own houses (and their real estate agents) because it’s a one-time boost in housing values. This would be just the latest chapter in a long history of government policies to boost housing prices — the mortgage interest tax deduction, the capital gains exclusion on houses, the extension of the mortgage interest tax deduction to second houses, etc. Each of these policies pushes up prices just once; if you want to keep pushing up housing prices, you have to keep adding sweeteners. A temporary tax credit has a similar effect, but for a shorter period of time. It boosts the price of a transaction that would have happened anyway. It may create additional transactions, but is that a good thing? If someone could not have afforded a house without the tax credit, then what is he or she going to do when the tax credit goes away and the price of the house falls? In effect, the tax credit is a way of making houses temporarily affordable that would not otherwise be affordable, and we know where that leads.
— Simon Johnson and James Kwak - The home-buyer tax credit: Throwing good money after bad - washingtonpost.com
Oct 27 2009 ∞
“

The main argument for the tax credit is that it stimulates the economy and stabilizes the housing market. Seen purely as a stimulus, the tax credit is highly inefficient. The National Association of Realtors claims that the credit created 350,000 new sales; the Calculated Risk blog calculates that this means the government is paying $43,000 for every extra house sold (since most sales would have happened anyway). According to the Wall Street Journal, Goldman Sachs estimates 200,000 new sales, implying a cost of $80,000 per marginal sale.

Even at a price of $43,000, what are we getting? Given that these are first-time home buyers, and given the glut of homes on the market, most of these are financial transactions where a house changes hands in exchange for cash (and additional transaction costs). The $43,000 is not being invested; it isn’t buying anything for the public, like a new road. It’s just cash going into people’s pockets.
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Simon Johnson and James Kwak - The home-buyer tax credit: Throwing good money after bad - washingtonpost.com

It is continually baffling to me that anyone that thinks goosing the transfers of real estate from one party to another has a stimulating effect on the economy. It’s just a wealth transfer, and an inefficient one.

Oct 26 2009 ∞

What we got for a few trillion dollars

Uncle Sam’s interventions in the housing market have pushed home prices 5% higher on a national average than they would have been otherwise, Goldman Sachs estimates in a report released late Friday.

…

But these artificial props won’t last forever and may have created a false bottom in the market. “The risk of renewed home-price declines remains significant,” Goldman economist Alec Phillips writes in the report, “and our working assumption is a further 5% to 10% decline by mid-2010.”

So what did we get for several trillion dollars of public debt? We got a national peak-to-trough decline of 36% instead of 41% (so far)?

Mammoth purchases of mortgage securities by the Federal Reserve appear to have held home mortgage rates about 0.30 percentage point lower than they would have been, Goldman says. Those purchases are due to be phased out in next year’s first quarter.

And 30 basis points of lower rates.

The argument that I’ve heard is that without the government running up (even larger) debts and robbing Peter to pay Paul on housing, we’d have a “really bad housing crash”. To my eyes, it doesn’t seem like the taxpayers got a very good deal here.

+ ∞
“ The phone is fine.  I make and receive calls, but I certainly don’t think of the iPhone as a “phone.”  I have no idea whether the iPhone’s phone is better or worse than a BlackBerry’s, and I don’t care.
—

The Truth About The iPhone, Week 13

Certainly.

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