Tumbleric

Oct 25 2009 ∞
“ Assertions made without evidence can be dismissed without evidence.
—

Christopher Hitchens (via savagemike) (via atheistramblings) (via asprettyasasong)

This sounds good, but it’s wrong. If I assert that the Earth revolves around the sun, Christopher Hitchens cannot legitimately dismiss that assertion if I’m unable to reproduce the mathematical observations that underlie that universally agreed-upon truth.

This statement, like most of what Hitchens writes, is sophistry.

Oct 22 2009 ∞
“ As an inefficient use of taxpayer money, clunker cash pales besides the homebuyer handout. With housing affordability currently the best it’s been in most of our lifetimes, with marked-down home prices and mortgage money in the 5% range, you wouldn’t think homebuyers would need a subsidy. But there it is, and it’s a lot more expensive than you think. According to estimates by Ted Gayer at the Brookings Institution, each additional home sale generated by the $8,000 first-time homebuyers’ tax credit actually costs the government $43,000. How’s that possible? Gayer figures that of the 1.9 million homebuyers that will get the $8,000 tax credit, 85% would have bought a house anyway. The price tag of $15 billion — about twice what Congress had intended — he reckons will result in approximately 350,000 additional home sales, at a price tag of $43,000 for each additional sale. That’s nothing compared to the tab for a possible one-year, $15,000 tax credit for all home buyers (except those with high incomes.) Gayer figured that would cost the Treasury $73.9 billion, which he estimated would increase house sales by a total of 253,000. Each of those extra home sales would cost the Treasury $292,000 ($73.9 billion divided by 253,000.) The National Association of Home Builders, not exactly a disinterested bunch, figures the subsidy would boost house sales considerably more, by 700,000 homes. That implies each of those additional sales would cost American taxpayers only $133,000 — still “a very expensive and poorly targeted subsidy,” writes Gayer.
— Homebuyers’ Handout — Worse Than Cash for Clunkers - Up and Down Wall Street Daily - R. Forsyth - Barrons.com
Oct 21 2009 ∞
“ If you thought home prices were bottoming out, you may be wrong. They’re expected to head a lot lower. Home values are predicted to drop in 342 out of 381 markets during the next year, according to a new forecast of real estate prices. Overall, the national median home price is predicted to drop 11.3% by June 30, 2010, according to Fiserv, a financial information and analysis firm. For the following year, the firm anticipates some stabilization with prices rising 3.6%. In the past, Fiserv anticipated the rapid decline in home-sale prices over the past few years — though it underestimated the scope. Mark Zandi, chief economist with Moody’s Economy.com, agreed with Fiserv’s current assessments. “I think more price declines are coming because the foreclosure crisis is not over,” he said. In fact, those areas with high concentrations of foreclosure sales will experience the steepest drops, according to Fiserv. Miami, for example, is expected to be the biggest loser. Prices are forecast to plunge 29.9% by next June — after having already fallen a whopping 48% during the past three years.
—

Homes: About to get much cheaper - Yahoo! Finance

Just to put this in perspective: A condo that cost $1M in 2006 now costs $520,000. If Fiserv’s number is correct, this condo will cost $364,000 a year from now. $1M to $364k is a 63.6% drop, peak to trough. And Fiserv has historically underestimated these movements.

Hard to believe I actually had people telling me to buy Florida real estate in 2006, and chuckling with disbelief at what a fool I was not to be “playing the game” with them.

Oct 20 2009 ∞
“ Specifically, the Treasury program is targeted at subprime borrowers hit with ballooning mortgage payments vs. prime borrowers hit by job losses. As for the “morality question” of whether the government should be bailing out homeowners, Warren says “I’m passed that,” noting “there’s plenty of unfairness to go around.
—

Warren Housing Market Getting Worse: Tech Ticker, Yahoo! Finance

Wow. I kind of like Elizabeth Warren, but I’m a little surprised that she’s the first to explicitly say, “fairness is out the window”. I disagree, and not just for moral reasons. These types of unwarranted bailouts create very real moral hazards (the results of which are already being seen) that beget more crises. What a mess.

Oct 19 2009 ∞
“ As of Aug. 31, there were 3.3 million homeowners 60 days or more late on mortgage payments, said Faith Schwartz, who runs the Hope Now Alliance, a mortgage-industry trade group working on foreclosure prevention. A hotline for troubled homeowners run by the alliance fields 5,000 calls a day, she said
—

Keeping up with an avalanche of troubled mortgages - MarketWatch

There are about 150 million households in the US. About 67% of these are owned, rather than rented. So 100 million owned houses and apartments. 3.3% of all “owners” are delinquent by 60 days or more. 1 in 30 if you prefer.

A big proportion of these borrowers are going to default. This has significant consequences for housing inventory, which is artificially depressed right now because of moratoria and bank backlogs. But when I argue that we’re looking at another leg down in housing in 2010, this is why.

As always, the wildcard is the government. There appears to be no limit to what they will try when it comes to propping up the residential real estate market. So if the fed just prints money and buys every house at 2007 prices to “stimulate the economy”, I would expect prices to rise. If market forces are even partially playing out, I expect prices to continue to fall through next year, possibly further.

Oct 18 2009 ∞

The U.S. Mint Sucks.

squashed:

I’m serious. It has one important job—making money—and it does a terrible job at it. As any Ron Paulite will happily tell you, the Federal Reserve prints paper money (which raises a few issues that nobody cares about except people who miss the gold standard). The mint just does coins. Coins have three uses. 1) You can put them in old parking meters, 2) you can give them to street musicians who aren’t good enough to make you break stride to open your wallet, and 3) you can let them pile up for a few years, take them to the bank, and turn them into real money. So the mint missed the boat on that whole paper money thing.

Of course, paper money is getting less useful by the year. Most of us only use cash to pay for things that are either very small or very illegal. Generally, anything over a few dollars goes on a card. Most of our purchases are done electronically. Even checks are generally converted to some digital form—because it’s a hassle flying millions of tiny pieces of paper all over the country to make sure they clear in time. And if your card is lost or stolen, you’re in a much better spot than if you lose a wallet full of cash.

Of course, there’s a problem. Many, many people get in serious financial trouble because they’re bad at handling credit cards. If you’re good with with finances and are a bit careful, you can come out even or a bit ahead with the credit card company. (Of course, the businesses you’re patronizing are paying a hefty portion of their sales to subsidize this). And, for the most part, we’re willing to accept that the convenience of plastic money outweighs the significant societal cost.

Except, we don’t have to have a significant societal cost. Why can’t we have government backed, electronic currency? The infrastructure is mostly there. At least in Michigan, food stamps are currently done in some sort of card form. Would it be terribly difficult to open the system to everybody, particularly if merchants would not have to pay the credit card fees?

No, it wouldn’t be terribly difficult. At least one company (Revolution Money) already built all the technology to do this without resorting to the expense of traditional payment supply chains.

Oct 16 2009 ∞
“

A white Louisiana justice of the peace said he refused to issue a marriage license to an interracial couple out of concern for any children the couple might have. Keith Bardwell, justice of the peace in Tangipahoa Parish, says it is his experience that most interracial marriages do not last long.

“I’m not a racist. I just don’t believe in mixing the races that way,” Bardwell told the Associated Press on Thursday. “I have piles and piles of black friends. They come to my home, I marry them, they use my bathroom. I treat them just like everyone else.”
—

Interracial couple denied marriage license in La.

Tell me again how we’re in a post-racial America. Also, tell me again that having shrieking maniacs egging on the worst parts of our national pathos isn’t making things worse.

+ ∞
“ Despite concerted government-led and lender-supported efforts to prevent foreclosures, the number of filings hit a record high in the third quarter, according to a report issued Thursday. “They were the worst three months of all time,” said Rick Sharga, spokesman for RealtyTrac, an online marketer of foreclosed homes. During that time, 937,840 homes received a foreclosure letter — whether a default notice, auction notice or bank repossession, the RealtyTrac report said. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008.
—

Foreclosures hit record in third quarter 2009 - Oct. 15, 2009

How ‘bout them green shoots?

Seriously, what would this number be if the government wasn’t spending trillions of dollars trying to prevent foreclosures?

Oct 09 2009 ∞
“ Even as the U.S. home ownership rate dips to a six-year low, landlords are having an increasingly difficult time finding tenants. The national apartment vacancy rate hit 7.8 percent in the third quarter, its highest level since 1986, according to a new report from real estate research firm Reis. Moreover, since vacancy rates increased even during this traditionally strong period, landlords should expect rental demand to erode even further from here, says Victor Calanog, a Reis research director. “If things were weak this time around, you can expect that during the colder months, things will be even weaker,” Calanog says. “We started monitoring this around 1980—we are going to break all-time highs.
—

Apartment Vacancy Rate Set to Break Record - The Home Front (usnews.com)

This piece tends to be less frequently discussed, but the rental market is also in disarray. Record rental vacancy rates inevitably lead to rent decreases by the basic laws of supply and demand (although perverse rent control laws will cause landlords to hold out longer than they rationally should in the face of vacancies).

Rentals are the primary substitute for a mortgaged house. Falling rents main the buy/rent math associated with a new purchase is not static, and will this math becomes an additional driver of house price declines. If the substitute for that 2BR I was thinking about buying once would have cost me $4,200 a month but is now $3,700 a month, my willingness to pay on the sales side just went down as well.

Oct 05 2009 ∞
“ Foreclosures have just about wiped the subprime loans out of the market. But now, other types of loans are about to adjust. Some of them won’t necessarily adjust upward. Rates on adjustable loans can also go down. And they probably will over the next year for borrowers with traditional prime loans because rates are at historic lows, said Guy Cecala, publisher of Inside Mortgage Finance. “We have a long way to go before prime borrowers see a big jump in payments,” Cecala said. “It’s not something people are predicting for 2010. We’re looking at 2011 and 2012. None of us know what’s going to happen then, but we’re assuming rates will rise.
—

A Look Ahead To the Great Resetting - washingtonpost.com

This is a reasonable point, but only takes you so far. The above statement is true for “Prime ARMs”, e.g. traditional mortgages with a down payment and amortized payments over the first five years prior to reset.

Where this point is entirely inapplicable, however, is to the larger pile of loans that were either interest-only during the pre-recast period or were Option-ARM loans, where the payments prior to recast were actually negative amortization, and caused the principal balance to actually rise every month.

Even in a low interest rate environment these borrowers will see dramatically higher payments. This problem is particularly acute in California specifically and in mid/high end areas generally.

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