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?
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.
Congress Poised to Keep Homebuyers’ Tax Credit - NYTimes.com
What a huge shock…
Congress is crap at its job.
Breaking news hits social networks in 3 mins; mainstream news sites in 20 mins.
(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.
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.
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.
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.
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.
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 Truth About The iPhone, Week 13
Certainly.