Archive for the Housing Category

Housing:  Another Bubble Blown By Criminally Low Interest Rates (August 24, 2020)

Posted in Covid / Coronavirus, Housing, Interest Rates on August 24, 2020 by e-commentary.org

. . .

K          “We are back in the 2005 – 2007 housing bubble.”

J          “We are careening toward the 2008 bubble burst.”

. . .

K          “The current nearly zero interest rates are a sign of a severely broken economy.  The time value of money should not be zero.”

J          “An irreparably broken economy.  They may drive them negative.  That should be inconceivable and anathema in a market economy.  Free money is not free.”

. . .

K          “Last year it was $49.99 and further reduced with the $10 off coupon for my birthday.  This year it was $59.99 and only reduced with the new $5 off coupon for my birthday.  $39.99 to $54.99 in one year.”

. . .

J          “$7.98 last month to $9.98 this week.  And because of limited supply, I had to drive across city to two stores to find what I needed.”

K          “The cost of the sticks to build a house has gone through the roof.  The cost of roofing materials has gone through the roof.”

. . .   

K          “So many folks are skipping their mortgage payments and using the money and the enhanced and very temporary government financial assistance to buy vehicles and other personal property on credit they may not be able to afford in the coming year.”

J          “Skip one month, look around and discover no immediate consequences.  Skip a second month, look around and discover no immediate consequences.  Skip a third month, look around and discover no immediate consequences.  Then it becomes habit.  Each month they get further and further and further in the hole.  And they forget that when you are in a hole, quit digging.”

. . .

K          “The state foreclosure moratoriums have largely expired yet the federal foreclosure moratoriums are still in place.  The surprise in the market is that the title companies are so busy refinancing loans they cannot get around to handling foreclosures.”

J          “Many present refinancings are future foreclosures in wait.  When you are in a hole, I say, quit digging.”

. . .

K          “Debt may not be repaid but it is always paid.”

J          “Anything that cannot go on forever will not go on forever.”

. . .

K          “Remember when the Queen of England asked some e-con-omists at the LSE why no one had predicted the credit crisis.  She asked the right question to the wrong gang.  What was coming was clear as gin in 2005 and then unfolded predictably over the next few years.”

J          “Do you have her number?”

. . .              

[See the e-commentary at “Housing Again (October 8, 2007)” that discusses the anatomy of a house, “America the Bankrupt: Economics 210 in the Land of the Freeway and the Home of the Wave (January 17, 2005)” discussing the looming “Hyperdive“ decline in the economy, “When the Bubbles Burst (December 4, 2006)” discussing the macroeconomic and microeconomic consequences of the housing market collapse, and “The Dow Jones (the Murdoch ?) Hits 14 K In A Hollow Economy (July 23, 2007)“ discussing the coming decline in the stock market that can only be delayed not avoided.]

Bumper stickers of the week:

“History does not repeat itself, but it rhymes.”  Mark Twain?

Housing Again (October 8, 2007)

A house is a bundle of 1) sticks, 2) dirt, and 3) money/interest obligation.  The Truth In Lending Act requires the lender to provide basic information about the terms of a loan.  A $100,000 house subject to a 30 year mortgage at 10 percent requires the borrower to pay a total of over $316,000 during the life of the loan.  Thus, more than 2/3rds of the money ($216,000) pays for the money; less than 1/3rd ($100,000) pays for the sticks and the dirt.

When interest rate drops to 5 percent, the borrower pays a total of over $192,000 during the life of the 30 year loan.  Thus, less than 1/2 of the money ($92,000) pays for the money; more than 1/2 ($100,000) pays for the sticks and the dirt.

Reducing the interest rate reduces the total purchase price of the sticks, dirt and money/interest obligation needed to acquire the house.  When Greenspan reduced the Federal Funds Rates in 2001 and mortgage interest rates dropped, the price of the money/interest obligation dropped correspondingly.  Those who had the sticks and the dirt at the time were in the money.  Others were able to acquire a house (sticks, dirt, and money/interest obligation), for at least a few years.  Those who obtained a house in the early days of the run-up with a fixed rate mortgage of 5 to 6 percent have a “bird’s nest on the ground” if they keep a cool head.

The interest rate in a typical adjustable rate mortgage (ARM) adjusts upward in the next months and years even if other interest rates do not rise.  When the interest rate rises to 15 percent, the borrower pays a total of over $455,198 during the life of the 30 year loan.  Thus, almost 4/5ths of the money ($355,198) pays for the money; little more than 1/5th ($100,000) pays for the sticks and the dirt.

Many of the ARMs are more difficult to refinance because they include “pre-payment penalties” if the notes are paid early.  A borrower could pay off all but the last month’s obligation and then pay off the last month according to the terms of the note.  Some judges might allow it; some would not.  The pre-payment penalty provisions should be stricken because they are 1) against public policy, 2) unconscionable, 3) fraudulently obtained, 4) buried in adhesion contracts, and/or 5) _________.  There will still be an economic impact because so many investors were fooled and/or fooled themselves into believing that they would receive the substantial returns from the ARMs and other bogus instruments.

The “wealth effect” now has been supplanted by the “poverty effect.”  The “multiplier effect” is being supplanted by the “divider effect.”  And there is not a whole lot that the Fed can do to improve our lot.

However, Al Greenspan recently announced unambiguously that the credit crunch is behind us.  In the near future, no one will even remember this latest pronouncement and hold him to it.

Bumper sticker of the week:

“Time is money, money is time, that is all ye know on earth, and all ye need to know.”    John Maynard Keats

On Acceptance. And Home, Hope, Fear, Change, Uncertainty, Insecurity, Class, Income, Gender, Region, Religion, Profession, Education. And Syntax. And Race. (September 9, 2019)

Posted in Class, Education, Gender, Housing, Race, Religion on September 9, 2019 by e-commentary.org

. . .

J          “Toby Hemenway observed about life with their rural neighbors:  ‘We were on good speaking terms with all our neighbors, but never found much common ground with them.  Local parties often began with watery beer and ended in drunken fights, so we went to fewer as time went by.’”

. . .

K          “They were transferred and transported from a small fishing community to the East Coast, submitted the application to the yacht club, and waited.  And waited.  And when they inquired when they might get a response were enlightened:  ‘In about 200 years.’”

. . .

J          “He characterized the entrenched neighbors surrounding the new stewards of Green Acres as cool and distant and observed:  ‘They’ll let you volunteer all you want, but don’t expect to get invited to their homes for dinner.’”

. . .

K          “And then the other recent pilgrims band together which creates two communities in the community.”

. . .

K          “The cauldron of class, income, gender, region, religion, profession, education and even syntax create hurdles that can become barriers.  With a little understanding and a lot of work, common ground can be found.  A sincere dinner invite was even issued.  Oddly issued?”

J          “Losing that cherished ground to the highest bidder often produces legitimate resentment among the long-term locals.  They may even lose their ground merely because the taxes to hold their ground are overwhelming.” 

. . .

K          “Toss race into the pot and taste the stew.  Even today, a non-white moving into the area would trigger an overload.  Or should I say “Oddly today” the move would be awkward and uncomfortable.”

J          “And non-whites are legitimately resentful when they lose their ground to well-healed whites who move into the area and move them out of the area.”

. . .

K          “Gentrification is the private sector solution to housing and urban development.  The Department of Housing and Urban Development should be scaled back to police the market for red lining and other market impediments but otherwise not get involved in the market.”

. . .  

J          “Imagine a vegetarian tee-totaling transgender who describes their former neighbor’s cabin as an ashram and festoons it with Buddhist prayer flags and fires up solar panels.”

. . .

[See “Peak Oil and Urban Sustainability” by Toby Hemenway dated June 1, 2005 that provides much insight but does need a much sexier title.]   

Bumper stickers of the week:

YMMV

A television may insult your intelligence, but nothing rubs it in like a computer.

“And 3 Feet Above The ‘Recalibrated Sea Level’!!!” (May 22, 2017)

Posted in Architecture, Economics, Health Care, Housing on May 22, 2017 by e-commentary.org

. . .

K          “Forget about the attractive magnet schools, forget about the nine star energy rating, forget about the cute little pergola in the back yard.  Recall and remember that the property is 3 feet above the official published ‘Recalibrated Sea Level’ (‘RSL’) for the region!!!  3 whole feet!!!  Almost a meter of freeboard.”

J          “The sales brochure proclaims:  ‘Natural gas bill:  only $14,700 per year!  And only 1600 square feet!’  That should seal the deal.”

. . .

K          “The premium for the flood insurance exceeds the yearly mortgage payments, but that is the way it is today.”

J          “Bummer.”

K          “But it is still slightly less than my health insurance premium.”

. . .

K          “I think they call it ‘contemporary architecture’ in all the tony salons.”

J          “Did you read if the HOA provisions allow you to use one of the swamped homes in the neighborhood as a duck shack?”

K          “If you have both your state and federal duck stamps and a temporary use permit on your person.  But there is a three-day stay limitation.”

. . .

[See the article “High Ground Is Becoming Hot Property as Sea Level Rises” by Erika Bolstad in “Scientific American” dated May 1, 2017.]

[See the e-commentary at “The Marginal Utility of (House) Utilities:  Only 1600 Square Feet! (October 25, 2010)”.]

Bumper sticker of the week:

Take the high ground, take the high road.

The Dow At 14 K. Again. (February 4, 2013)

Posted in Banks and Banking System, Economics, Federal Reserve, Housing, Inflation, Stock Market on February 4, 2013 by e-commentary.org

. . .

C          “Back above 14,000 again.”

D          “Happy daze are here again.  I guess.  14,000 is better than 7,000, but how much better and for how long and for whom and for what reasons are anyone’s guess.”

C          “Beaucoup dollar electrons are given to those who already have beaucoup dollar electrons.  There are no other places to plug in the dollar electrons, so the stock markets are the default investment.”

D          “And money market funds and certificates of deposit are paying .0000001 percent which is crippling current retirees.”

C          “And those who know that the stock market is rigged and instead seek a safe refuge have no remunerative alternative.”

. . .

C          “Real estate continues to fool everyone.  The value of commercial properties is likely to slide as brick and mortar businesses board up their doors and windows.”

D          “The banks cannot mark to the actual market value their vast portfolios of repossessed and returned houses and underperforming loans.  Their collective insolvency would be manifest.  A collective lie undergirds the system.”

C          “Housing starts may be up but only at the upper end of the housing market.”

D          “With these low interest rates, a 30 year note is very appealing and may be prudent and prescient for the right person.  The homeowners who can manage to hold jobs and fund and feed a mortgage with a low interest rate may find that they have a bird’s nest on the ground.”

C          “When inflation takes off.”

D          “Yup.”

. . .

C          “One arm of the government – the Federal Reserve – is funding and fueling the other arms of the government with bogus electronic chits.”

D          “The way I see it, one arm of the bankers – the Federal Reserve – is funding and fueling the bankers and fooling and defrauding the body politic.”

C          “Anything that cannot go on forever.”

. . .

[See the “e-ssays” titled The Dow Jones (the Murdoch ?) Hits 14 K In A Hollow Economy (July 23, 2007) and “Fiat Stock”: Taking Stock Of The Stock Market (May 16, 2011).]

Bumper stickers of the week:

Shouldn’t it be Obsessive-Compulsive Order?

Anything that cannot go on forever will not go on forever.

Losing Faith: MF Global and Kodak (January 9, 2012)

Posted in Bankruptcy, Banks and Banking System, Economics, Housing, Judges on January 9, 2012 by e-commentary.org

. . .

K          “With each passing day, the American dream is being stolen from more and more proverbial hard-working and law-abiding Americans.  When enough ordinary Americans lose their few investments, there will not be enough Americans who are invested in America.”

J          “MF Global and Jon Corzine stole money and did the American thing.  They fraudulently filed Chapter 7 of Title 11, the Bankruptcy Code, as a securities dealer rather than a commodities broker to provide powerful creditors access to the company’s cash before its ordinary citizen clients.”

K          “The picture at Kodak is not pretty.  The retirees will discover that the pensions they worked a lifetime to build are vaporized or at least reduced in a moment via Section 365 of Title 11.  Even the Bankruptcy Code is economically and morally bankrupt.”

J          “And distorted and prostituted at every opportunity by bankruptcy lawyers and judges.  For so many other ordinary Americans, their house is a cage, a prison and a leg-hold trap.  The owners are drowning and can neither fight nor flee, neither tread water nor swim away.  Housing prices still must drop substantially to achieve market clearing prices.”

K          “If everyone acknowledged the real market value of houses, the house of cards would collapse.  Big Banks and most homeowners would be forced to admit that everyone is hopelessly insolvent.  Local governments would not be able to raise enough tax revenue unless they raised the mill rate to a crippling percentage of purported market value.  The only way for the Republic to survive the day is to nourish a collective national delusion that everything really is alright.”

J          “Is it better to nourish a collective national delusion?”

. . .

Bumper sticker of the week:

When you ain’t got nothin’, you ain’t got nothin’ to lose.

Standing Up In America (December 5, 2011)

Posted in "Fiat ______", Bailout/Bribe, Banks and Banking System, Courts, Credit Unions, Crime/Punishment, Housing, Kleptocracy, Law, Locke Gary, Perjury/Dishonesty, Politics on December 5, 2011 by e-commentary.org

. . .

L          “We now learn that while he was Secretary of Treasury, Henry Paulson tipped off some of his hedge fund buddies of the Fannie Mae bailout.  Everyone in power is quick to proclaim that his statements and actions are not illegal and declare that nothing can be done.  His statements and actions are illegal, but those in power refuse to enforce Title 18, the criminal provisions of the United States Code, because they do not want to bring charges against their compatriots in power even their competitors in the other party.”      

O         “They cop out and refuse to send the cops out.  Because otherwise someone could bring charges against them some day.  The Great Ruling Class Truce.  And no one asks any follow-up questions or demands answers.”

L          “However, a federal judge in New York, Jed S. Rakoff, took a stand from his seat on the bench and rejected a settlement between the Big Banks and the SEC that would have let the Big Banks substantially off the hook.” 

O         “I read a blurb that the state attorney general in Massachusetts, Martha Coakley, took a stand and demanded that the Big Banks follow standards.  The lawsuit may put the Big Banks on the hook.”

L          “And in developments overseas, America’s standard-bearer in China, Gary Locke, is America’s stand-up guy in China.”

. . .

[Henry Paulson:  http://www.bloomberg.com/news/2011-11-29/how-henry-paulson-gave-hedge-funds-advance-word-of-2008-fannie-mae-rescue.html]

[Jed S. Rakoff:  http://www.npr.org/blogs/thetwo-way/2011/11/28/142856070/judge-blocks-citigroup-sec-settlement]

[Martha Coakley:  http://www.washingtonpost.com/business/economy/massachusetts-attorney-general-sues-big-banks-over-foreclosure-practices/2011/12/01/gIQAgwnUIO_story.html.  See the “e-ssay” titled Fire Your Attorney General (November 7, 2011)]

[Gary Locke:  http://www.washingtonpost.com/lifestyle/style/gary-locke-is-star-in-china-as-first-us-ambassador-of-chinese-ancestry/2011/11/28/gIQA703DEO_story.html?hpid=z2.  See the “Category” denoted “Locke, Gary”]

Bumper stickers of the week:

America Is Exceptional / When America’s Exceptional

Take a stand

Take a few fiat dollars out of your credit union and put them in your pocket for safe keeping.

Fire Your Attorney General (November 7, 2011)

Posted in Banks and Banking System, Courts, Crime/Punishment, Health Care, Housing, Kleptocracy, Law, O'Bama, Occupy Movement on November 7, 2011 by e-commentary.org

. . .

U          “A state attorney general represents the people of the state in legal matters.  The attorney general is your attorney representing you as a citizen.  What are all these state attorneys general doing maintaining frivolous litigation against Romney – O’Bama Care?  They are tying up the courts and wasting tax dollars.”

V          “Their acts of commission are matched by their acts of omission.  Too many attorneys general are ready to give immunity to banks for all their crimes and fraud rather than doing their job and taking the banksters to court.  We need to fire the state attorney general before he can do more harm.”

U          “In my state, do we need to fire her or will she do her duty?”

V           “Do we need to fire the Attorney General?”

. . .

[See Gretchen Morgenson, “A Deal That Wouldn’t Sting,” The New York Times, October 29, 2011 at http://www.nytimes.com/2011/10/30/business/a-foreclosure-settlement-that-wouldnt-sting.html?]

[On Saturday, good citizens withdrew their funds from national banks and deposited them in credit unions and community banks as part of “National Bank Transfer Day.”  See the “e-ssay” titled “Boycott Big Banks (February 1, 2010)” and the “e-ssay” titled “Carefully Courting “Romney – O’Bama Care” Through The Courts (August 15, 2011).”]

[Wall, Berlin – 8-13-1961 – 11-9-1989]

Bumper stickers of the week:

Boycott Big Banks

Divest nationally; invest locally   

Fire your attorney general

Parade of Homes/Charade of Horrors (October 31, 2011)

Posted in Coffee Party USA, Housing, Less Government Regulation Series, Market Solutions, Occupy Movement, Pogo Plight, Population on October 31, 2011 by e-commentary.org

. . .

X          “The event should have been touted as a tour of Halloween Haunted Houses.  Nothing is changing.  No one is learning.  The garage door on the McMansion is only one inch thick.  What did you find?”

Y          “On the subsidized house, the garage door is two inches thick with brush insulation around the outside perimeter.”

X          “The Horror House is heated with an eighty percent efficient forced air system that draws combustion air from the garage and outside.  Even a new generation system that draws air from outside induces a stack effect flow of air that cools the house in the winter and warms it in the summer.  Cozy.”

Y          “The subsidized chateau is equipped with a ninety-five percent efficient forced air system that draws piped combustion air from outside the structure.  Huge energy savings.  The PVC to the outside is run aesthetically.”

X          “The McHorror House has windows splattered all over the place, but they are double paned.”

Y          “The code requires them.  Most of the windows in the bargain bungalow are on the south side with some on the west and a few on the east.  Some of the windows are covered with simple double-cell blinds.”

X          “The kitchen in the McMonster is equipped with shiny stainless steel but marginally efficient appliances.”

Y          “Simple Energy Star appliances.”

X          “The McNightmare is illuminated with regular incandescent light bulbs and T12 fluorescent bulbs in the garage with a smattering of cfls (compact fluorescent lights).”

Y          “Compact fluorescents throughout with T8 bulbs in the garage and two LEDs for the outside lights on the walkway.”

X          “There are so many little things.  The Monster Mansion has regular gate valves that may seize in a decade or two.  They require multiple turns to open and close, yet after a few years are really only good for one turn.”

Y          “They could do a good turn by getting quarter turn valves from the same supplier who outfitted the subsidized place.”

X          “One thing after another.  And I watched everyone else wandering around the McMongo house bedazzled by all the flashy baubles.”

Y          “The market sets the standards for the mansion; the government sets the standards for the subsidized structure.”

X          “We need more citizens less bedazzled by baubles.”

. . .

[Neither rain nor sleet nor snow could rein in or slow the “Enough is Enough!” March in Washington D.C. sponsored by Coffee Party USA on Saturday nor dampen the spirit.  A few hundred hearty souls hailing from Rhode Island to Oregon showed up at the gathering on the west side of the Capital to listen to a wide range of speakers.  They are frustrated but not feckless.  No one was arrested.]

[See the “e-ssay” titled “On Overpopulation (June 14, 2010).”]

Bumper stickers of the week:

Insulate it tight; ventilate it right

Seven billion little miracles are a big problem.  That’s ghoulish.

On Trading Off (May 9, 2011)

Posted in Economics, Energy, Environment, Global Climate Change, Global Warming, Housing, On [Traits/Characteristics] on May 9, 2011 by e-commentary.org

. . .

X          “I gave a neighbor a few dollars a few years ago not to cut a tree on his property that provided ample shade for my house and a sylvan view for me.”

Y          “You paid for what they call ‘borrowed landscape.’  You receive a pleasing view that someone else funds and maintains.”

X          “He pays the taxes and I rake the leaves within the drip zone.”

Y          “Anything in writing?”

X          “Just a handshake deal that has worked so far.  The tree shades the house from the sun and lowers the electric bill.  Now I need the energy from the sun to hit the house and lower the electric bill.  The solar panels are wired in series and when even small areas of a few panels are shaded they produce less electrical output.  I plan to approach him and see if he will let me cut the tree.  He installed a back up wood stove last year and may now allow me to cut it if I give him the wood in sixteen inch lengths.  That would work for me.”

. . .

Z          “We debated the proposed microhydro project last week.  It is hard to be in favor of microhydro at the public forum on alternatives and then against microhydro at the fly fishing club meeting.”

Y          “Hard to have hydro without hydro.”

. . .

Z          “It looks like I am saving the planet until you look at all the costs.  ‘Emergy’ is all the embedded energy in an item.  The measure incorporates all the energy to produce and consume it not just my cost of acquisition and consumption.  Weighing everything, the decision is not as clear.”

. . .

X          “The community council seeks to impose height restrictions on buildings and also require more substantial setbacks from the street.  A building must go up or go out.”

Y          “They may be against buildings.  A building can’t go up if it can’t go up or go out.”

. . .

Z          “Do you support a local farmer who occasionally indulges some pesticides or a distant organic farmer?”

. . .

Y          “Providing fewer parking spaces won’t reduce the number of cars.  Providing more sidewalks may increase the number of pedestrians.  However, aren’t you simply substituting concrete for tarmac?”

. . .

Bumper stickers of the week:

Medium Is Beautiful

Eat Mangoes Naked

Sawgrass Is Popeye’s Spinach On Crack

“Peak Land”: The Exodus Toward The Equator . . . or the North Pole? (April 4, 2011)

Posted in Consumerism, Depression, Economics, Global Climate Change, Global Warming, Housing, Peak Land, Population, Recession on April 4, 2011 by e-commentary.org

. . .

7          “Look at the movement of the ‘center of population’ or the ‘median point’ of the population in America over the decades.  Opportunity, open space, sun shine, clean air, air conditioning, ‘right to work laws’ and lax state environmental and occupational regulations attracted individuals and businesses to the western longitudes and the southern latitudes of America.  The center has moved from Maryland to Missouri.  In the coming decades, the population will need to migrate closer to the sun which on this planet means closer to the equator.”

13        “Not enough dead dinosaurs.  The decline in fossil fuels will drive everyone crazy and may drive them to drive south.  About ninety percent of the Canadian population lives within one hundred miles of the United States border.  They can’t move far and remain Canadians.  We will need to move south.  However, people will not have the electricity to condition the air.”

7          “Americans are drifting toward the southwest, yet they cannot live and work there because of the limited water supply even if photovoltaic cells are welcome and promising.  The populace may end up moving to enclaves in Oregon.”

13        “Then we bump into another limit.  We as a people have always lived at ‘peak land’ because the total number of hectares is finite and known.”

7          “With the rising seas reducing the land mass.”

13        “Exactly.  I look at the globe and a map differently.  I see a narrow undulating band of livable land that does not demand the consumption of substantial deceased dinosaurs to stay warm, offers adequate water supplies and provides locally grown food.  The sustainable plat on the planet is contracting.  Even rising temperatures will not be enough to offset the prohibitive costs of heating cold regions and handling short growing seasons.”

7          “Yet as the perverse insulation envelops the Earth, northern climes may become temperate climates.  Canadians may be well positioned.”

13        “All the rates of change are in flux and uncertain.  We are now moving from ‘peak land’ to scarcer land.”

7          “We are on the wrong side of too many tipping points.  Usable land is contracting while the population is expanding.”

13        “While the population is exploding.  A friend estimated that the city will reach five hundred thousand residents by 2030.  I observed that the city would need to contract to fifty thousand residents at most.  He was nonplussed and added an aside about the birth rate.  I agreed that we are over gross and getting grosser.  Nonetheless, our numbers must shrink and migrate.  He remained nonplussed.”

7          “For most people, it does not add up.  They aren’t even doing the math.”

. . .

[April – National Poetry Month]

Bumper stickers of the week:

A half dozen six-word memoirs in an “e-poem” titled “Take only pictures; Leave only footprints.”

Many live humans; Few dead dinosaurs.

Disregard the e-con-omists; Regard the physicists.

Change your attitude; Range the latitudes.

Pay old bills*; Develop new skills.

Consume less junk; Savor more beauty.

So many challenges; So little time.

*          Craft your own financial game plan.  With hyperinflation on the way, purposefully delaying the payment of bills allows one to pay obligations with significantly devalued dollars.  That is the strategy being pursued by the governments.