Archive for ‘housing’

July 27, 2009

Confession of Confident Cluelessness

“This is the most over-bought market I’ve seen in ages.”
Jim Cramer, “Mad Money,” CNBC

After a slow start today, the report that new housing sales increased 11% in June pushed the stock markets up — but not much. (Memeorandum has blog reaction from Don Surber, Calculated Risk and more.)

What does it mean? Short answer: I don’t have a freaking clue. And that’s a good thing.

Compiling this afternoon’s “Wall Street P.M.” report at, I had to sift through a lot of financial news, and I sifted it with the curiosity of a guy who honestly doesn’t know any more about Wall Street than you do (and probably less than some of you).

My office TV was on CNBC today, and there is certainly no shortage of people out there willing to say what it all means. The fact that these people disagree with each other all the time . . . well, where is the truth?

Basic economics, however, I understand. And basic economics — combined with all that sifting through the news — told me that this morning’s housing report wasn’t all that hot. Check out what these analysts told the Wall Street Journal:

“[T]he dismal state of the U.S. labor market will continue to cast a long shadow over the prospects for a meaningful recovery in the sector in the near term . . .”
“[T]he report showed a sharp 6% sequential decline in June suggesting that much of the sales activity was concentrated at the lower end of the market . . .”
“The news sounds better than it looks . . . despite the jump in sales in June, new home sales remain at very low levels, and the not seasonally adjusted data show a total of 36,000 homes sold nationwide in June, the lowest sales total for June since 1982.”

Also, 31% of June home sales were “distressed” sales, involving foreclosures, etc. Does that sound like “recovery” to you? Apparently, Wall Street wasn’t thrilled, either, and so the market only recorded a minor gain. Meanwhile, the Treasury Department is flooding more than $200 billion of new debt into the market this week, which has people worried about “overwhelming supply.” Oh, yeah, and there was a Monday spike in the CBOE Volatility Index.

What does that mean? I don’t even claim to know, in the sense of whether you should buy or sell or flee to a cabin full of freeze-dried food in Montana and wait for Armageddon. Rebecca Jarvis of CNBC is now chattering away in my left ear about “vector rotation,” and Larry Kudlow is pimping the “big summer rally” — and all this chatter might be very important.

Or not. But I don’t have to know what it means to do a market report at — I just look for interesting facts and pile ’em up. My favorite fact of the day? This quote:

“Last week was dubbed as a good earnings week, but good compared to what?” asked David Hefty, CEO of Cornerstone Wealth Management in Auburn, Ind. “It doesn’t take a lot to get the market excited these days.”

Right. But just don’t ask me what it means. You can figure that out for yourself.

March 5, 2009

Foreclose and Evict the Deadbeat Scum

OK, as political slogans go, it ain’t “Hope and Change,” but as economics it’s way better than this:

Learn About the Making Home Affordable Refinance and Modification Options
The President’s plan was created to help millions of homeowners refinance or modify their mortgages.
Refinancing: Many homeowners pay their mortgages on time but are not able to refinance to take advantage of today’s lower mortgage rates perhaps due to a decrease in the value of their home. A Home Affordable Refinance will help borrowers whose loans are held by Fannie Mae or Freddie Mac refinance into a more affordable mortgage.
Modification: Many homeowners are struggling to make their monthly mortgage payments either because their interest rate has increased or they have less income. A Home Affordable Modification will provide them with mortgage payments they can afford.

To quote The Outlaw Josey Wales, “Don’t piss down my back and tell me it’s raining.” This is a classic example of how interventionist government picks winners and losers, singling out some people for favoritism, while screwing over the rest of us.

When I left Georgia in 1997, we left behind a cute little bungalow on a full acre of wooded land that we bought cheap in 1992. It took us two years to sell the thing, which meant that I spent my first two years in Washington paying that mortgage while also paying $900 a month for an apartment. We tried to rent out our Georgia house, then tried to do a rent-to-own, until finally we sold it at a very modest increase over what we’d paid for it. The damage to my family’s financial situation in the meantime was enormous.

You do what it takes. And since what it took was for us to suck it up, essentially forfeiting our equity and become tenants, that’s what we did. Well, welcome to 2009, and suddenly it’s unpatriotic to expect people to make the mortgage payments or else lose their equity. People have a right to a home, no matter if they’re 120 days past due. Pay close attention to the next sentence:


Excuse my temporary departure from the appropriate decorum of family-friendly blogging, but expecting me to conceive of worthless deadbeats as victims is a bit much to ask. I’m hustling as hard as I can — please hit the tip jar, people — to avert complete financial disaster myself. I’ve got six kids to support, and I ain’t got time for pity, as if pity had any economic value to begin with. Imagine me calling up the finance company and pleading pity to prevent the repossession of my car. (I’m still waiting for those ACORN protesters to show up.)

Now, you can go to Michelle Malkin and read about people whining about the Obama plan. Or you can go to Naked Capitalism and read a detailed analysis of this “mortgage modification” nonsense cooked up by the Treasury Department. But, in general, as an economic proposition, the plan can be summarized in two words: It sucks.

That’s why I’ve announced my own plan, “Foreclose and Evict the Deadbeat Scum” (FEDS). It’s very simple:

  • The banks take back the houses currently occupied by deadbeat scum.
  • The deadbeat scum either find a place to rent, or move in with relatives, or go straight to hell. It doesn’t really matter. We’re talking economics.
  • This creates a housing occupancy in the homes formerly occupied by deadbeat scum.
  • The banks must either (a) sell the homes for whatever the market will pay, or (b) rent the homes to people who weren’t foolish enough to take on balloon-payment mortgages.
  • Whatever the ultimate result — and rents for homes made vacant by the FEDS program may need to be reduced in order to attract tenants — the point is that the excess-valuation problem in the housing market will be resolved, so that prices once again reflect actual supply and demand.
  • Homeowners who don’t wish to participate in the FEDS program can opt out by making their fucking loan payments, like they fucking agreed to when they fucking signed their fucking contracts.

Don’t blame me for the rough language. That’s how the free market talks, you worthless scum. “Compassionate conservatism” left town two months ago. Now you’re talking to the heartless right-winger your mother warned you about. Either make your payments or get foreclosed and evicted. As an economic proposition, one is as good as the other.

February 11, 2009

Re-inflating the bubble?

The news that Senate Republicans have added “tax relief for homebuyers” to the stimulus bill is not good news, says Doug Bandow at The American Spectator:

The housing market bubble burst. It cannot be reinflated. The bust will be painful, but dumping more money into the market in an attempt to inflate prices will only slow the adjustment process. The pain is unfortunate, even tragic for some people, but inevitable.

Exactly — a point made by Ron Paul just yesterday. While driving to Washington, I was listening to C-SPAN radio coverage of the House Financial Services Committee hearing with Federal Reserve Chairman Ben Bernanke and caught this:

Ron Paul . . . says that, as a free marketer, he is also upset that Congress wants to prop up housing prices when there is a glut of housing on the market. “What’s wrong with allowing the market to allow these prices to adjust,” and drop quickly, so that “we can all go back to work again?”

That is to say, from a free-market perspective, those houses are worth whatever they’ll sell for. The losses caused by the collapse of the bubble are real, and until those losses are realized — that is, until the houses are sold and the market readjusted — we are living in a state of economic denial, which Senate Republicans are attempting to prolong.

This is what Michelle Malkin has been trying to say in her many months of outspoken opposition to Washington’s bailout/stimulus frenzy. The market is the market, and you can’t fool the market. It might be the only thing that Ron Paul and Michelle Malkin agree about.

UPDATE: While trying to find video of Dr. No’s statements yesterday, I found this video from February 2007 — two years ago, before the bubble burst — where he’s talking “fiat money.”:

This sounds kooky at times, but his essential points are correct:

  • By manipulating the money supply and interest rates, the Fed conceals economic reality behind a wall of artificial price-signals.
  • During the “bubble,” the consumer price index (CPI) did not accurately reflect the inflation that Americans were experiencing in higher costs of housing, health care and college tuition.

We had government “experts” telling us that inflation was running only 2% annually, even while housing prices soared, effectively pricing many young people out of the market.

In retrospect, we see that kooky “Dr. No” was prescient, and all the “experts” were full of crap.

October 11, 2008

Affordable housing? Success!

For the past decade, we’ve heard nothing from liberals but whining about “affordable housing.” The working poor were being priced out of the housing market, denied their chance at the American Dream. Yadda yadda yadda.

So now the housing market declines — home prices are down 16% in the past year — and what do we hear from liberals? More whining.

The Bush administration finally succeeds at achieving a liberal objective, reducing home prices, and do Republicans get any credit for it? No.

In fact, not only are liberals treating the success of the Bush “affordable housing program” as a disaster, they haven’t even noticed the success of the “affordable securities program,” which has reduced stock prices by 22 percent in just eight days. No longer are the working poor priced out of the stock market, but even this good news is ignored by the biased media.

There’s no pleasing some people.