patrick.net

Randy H Says:

"astrid, That’s a very narcissistic view, even for me. (and I’m one of the few holdout fans of Ayn Rand Objectivism)"

I'm amazed at the number of Ayn Rand fans I meet. I first struggled through Atlas Shrugged as a 12 year old kid and knew it was an important book but didn't understand everything. When I read Atlas Shrugged again (and everything else written by Ayn Rand) in High School my entire outlook on life changed...

Oh well heck, I should go and reserve the yacht right now!

Do you want me to send a "Personal Mortgage Consultant" over?

Skibum,

Thank you. Well put. The way I look at it is if you're a professional musician then fine, spend what you need to get your sound right. Garage hacks like me spending major $'s on a US made Fender Strat? Have you heard me play? Now that's difference between a justifiable expense and obscene! Many of my friends that don't even play as (well?) as I do insist on nothing but the best. Not b/c they rate it but b/c they can afford it. I'm sure skiing is no different.

Haiku Housing Blues Whine:

Olga make big dough.
Big Bulgarian realtor.
Me, poor MBA.

I should have sold shit-
boxes for a living, not
try to be legit.

In debt for college,
Hippy-ass professors laugh,
For they have tenure.

Burn rate of housing,
Big national scandal. I
Write check for school loan.

I whine because I
Earned it and played by the rules.
Done got me no where.

Should have been just like
Olga: dumb, but hawking real-
estate. Could have been rich.

Now I make twelve an
Hour, as a telemarket-
ing, cheap phone biatch.

God almighty, how
Can anyone endure this
Much less survive it?

I curse your stupid
McMansions, and pray for the
Day justice prevails.

See the groundhog smile,
With life so simple and free.
Wish I was one, too!

Maybe I'll go on
Welfare. At least I'd have some
Free Medical care .

Perhaps another
Big depression shall arise,
Wash it all away.

I crack open a
Dos Equis, and dream of life
When it was normal.

I see people scram-
Bling, like birdies for a
Nest: they've failed the test.

West of the Missis-
Sippi, Giuseppie bakes a
Zippy little pie.

Should have been him,
The happy little baker
From north Italy.

Ho hum, I'm on Dos
Equis one-hundred and one.
I sit here drunk...blitzed!

Perhaps people can retire on old barges in international waters just outside a fourth world country. Workers can be ferried to “sponge bath” retirees. These barges will be earthquake-proof and is save against rising sea level due to global warming.

Not a bad idea, but why stop with retirement barges? How about "Home-roids" or “X-blimps”. They can all be staffed with Cryo-boomer zombie Wal-Mart greeters!

Do you like Chinese food? Are you too poor to retire to Arizona or Florida? Afraid of hurricanes and earthquakes? Like abusing low wage domestic workers? Too poor to own your own car?

Perhaps we should help those who are too poor to retire period. How about a "work-vacation" in Arizona or Florida during which they will learn important skills such as sponge-bathing retirees and decontaminating bathing facilities.

I’m only familiar with China, but maybe we can sell these folks some land the Sahara too.

How about some virtual land in some up-and-coming role-playing Xbox games?

SQT Says:

"I wonder how many of the ultra-extravagant parties have been funded by home equity?"

Most of the ultra-extravagant/over the top Bay Area kids birthday parties have been paid for in cash since both mom and dad earn a few Ha Has per year.

An ex girlfriend described one party for a three year old (that in addition to the clown, the pony and the jumpy room was catered by Paula LeDuc, had tons of Joseph Schmidt truffles and two bars with bartenders making mimosas with Dom Perignon and pouring Silver Oak Cab and Far Niente Chardonnay) as a "grotesque display of wealth"…

When I was managing property in the East Bay I often had Hispanic families who borrowed money and spent way more than they could afford on big "Quinceanera" (15th Birthday) parties...

DinOR,

You're right about the skiing. The funniest sight on the mountain is a gear-head from the city with high-end skis that are too long for him, boots that are too stiff (usually racing boots), and some Marmot or similar outfit that was designed to withstand an assault on Mt. Everest. He's invariably in a squat-dump position straight-lining down a black diamond run he has no business being on. Usually a prelude to a total yard sale.

SFWoman Says:

This is why the knowledge of foreign languages is becoming increasingly important. That is if we aren’t the ones scrubbing the backs of people from other countries…

How do you say, "don't forget to scrub between the fat folds" in Spanish or Chinese?

Here's an interesting question (IMO): How many housing bears do you think are objectivist and/or libertarian in political/philosophical leaning? I wonder if there's a correlation, since I think what goads most of us is the lemming/sheeple/no independent thinking mindset driving this thing.

Gross display of wealth yes, but at least the food would have been edible. I think that party clearly falls into the “he’ll be too young to remember, we might as well enjoy ourselves” catagory.

Perhaps I should throw a big birthday party for our cat. How about toro, awabi, and uni? The cat will not enjoy the food but I will finish it. :)

Here’s an interesting question (IMO): How many housing bears do you think are objectivist and/or libertarian in political/philosophical leaning?

Perhaps objectivist. Many bears are liberals though.

Your cat must be wimpy. My cat would eat that before you could even get out your chopsticks.

My cats somehow do not enjoy seafood too much.

I haven’t found a true political home. I am fiscally conservative, fairly socially liberal, but am disgusted by not requiring people to assume responsibility for themselves but still allowing them the benefits of our society. Is there a political group out there for me?

SFWoman,

You are in a similar category as myself. I guess you could call us "Classical Libertarian", or "Minarchists". See The Libertarianism-Morality Conundrum thread).

PS,

I knew where Joe Schmoe was going and believe it or not this blog is one of the few places you can actually discuss it. Many people get quite offended when you mention these types of issues. It's kind of like "Can't you see, I've pulled my hair out and pulled out all the stops to make this a party a smash and you're trying to ruin it with your kill joy attitude"?

A lot of bears are liberals, it is true. However, this is partially due to the red state/blue state divide. Appreciation in places like Texas and Georgia has been mostly modest and steady, and affordability is not a problem, so people there have good reason to be bullish on housing.

The red states, with the noted exceptions of AZ, FL, NV and CO (the latter two are not that red, but they did go for Bush in 2004) , have mostly escaped the housing bubble. In TX you can get a brand new 1800 sq ft middle class home from KB for $95,000. Heck, even unskilled workers can afford a home; there are plenty of $55,000 SFH's in middle class neghborhoods there.

Moreover, a lot of conservatives are Baby Boomers. While the Boomers are mostly characterized by their libreralism, there are many millions of conservatiives in their 40's and 50's who have no understanding of what market conditions are like today. They are bullish on housing because their house has always gone up in value. In this way, your conservatives in Simi Valley are no different from the libs in Montecito, both are equally clueless. Furthermore, they tend to explain away complaints about prices as "whining," advising younger people to "brown-bag it" for a while in order to save up a down payment.

Some conservatives are fully aware of the housing bubble and attribute it to the decline of the blue states' social and economic policies. They are always pointing out that the blue states have been losing population for years, while red states have been growing rapidly, etc. I sometimes find myself in this camp, but I make a real effort not to politicize every economic tend that comes along, so I tend to think that the bubble is just a fact of life that can't really be blamed on either party.

Some conservatives are fully aware of the housing bubble and attribute it to the decline of the blue states’ social and economic policies.

I also fall into this camp, although t think these are only catalysts. Greed and fear is the main driving force of all bubbles.

Furthermore, they tend to explain away complaints about prices as “whining,” advising younger people to “brown-bag it” for a while in order to save up a down payment.

Just say, "price is not the concern, value is" and they will go away.

FAB,

If we keep talking Ayn Rand then we're likely to wake praetorian back into posting. He was always good at debating against Objectivism (better than I at defending it).

Joe,

They are always pointing out that the blue states have been losing population for years, while red states have been growing rapidly, etc. I sometimes find myself in this camp, but I make a real effort not to politicize every economic tend that comes along, so I tend to think that the bubble is just a fact of life that can’t really be blamed on either party.

Blue states and Red states have both been _gaining_ population. I think only one state has posted consecutive population _decline_ in the past 10 years. It's just that some red states have been growing faster than "big" blue states. Also, don't forget there is a scalar effect: the smaller growth in the blue states has added far more gross population to the US than the high growth in the red states. It's a percentage growth function thing. 3ish% growth in CA + NY + MA = just under half the total contribution by the aggregate red states.

I don’t know, at least in CA, both parties had a hand in policies that instigated the current bubble. GOP–> prop 13. Dems–> NIMBY laws

I don't think Prop 13 could have caused the bubble without NIMBY laws. On the other hand, any growth-control will lead to shortages. So I do think that NIMBY laws are more responsible.

Also, how many boomer liberal homeowner will now vote to repeal Prop 13? It is all about self-interests.

new thread: NAR: Speculation Accounts for 40% of 2005 Home Sales

And there are plenty of Conservative Republicans out there who support NIMBY laws - not only do they don’t want the growth/traffic, but they also serve to preserve/protect/prop up their property values.

Sure.

The head of the local preservation trust (which primarily sought to limit building on unbuilt lots) when I lived in Belmont was a popular local Libertarian politician. I always found it odd that a Libertarian was the head NIMBY.

Astrid-

I agree, but I tend to think these things have only exxacerbated the bubble, they are not the cause.

I certainly think that goverment could mitigate the effects of the bubble by easing zoing restrictions, building more roads/and or public transit, etc., but the business cycle and manias have always been with us, and I don't think government can do away with that.

In Britan, the Labour party has actually promised to do away with the business cycle; Gordon Brown (likely to be Tony Blair's successor as PM) actually used "No Return to Boom and Bust" as one of his campaign slogans!

Needless to say, I think that's insane. The government does not control the economy, we cannot legislate prosperity, it's crzay to think otherwise. And while our American politicians arent' exactly the cream of the crop, none of them would be caught dead making such an outgrageous promise, not even the moonbats.

The politicization of the economy has always bothered me, and I try to bend over backwards to not blame all of life's economic woes on the White House.

Since when did overpaying for something become a source of enjoyment?

Perhaps it is a way of displaying "wealth"?

(Remember, Debt = Wealth)

In Britan, the Labour party has actually promised to do away with the business cycle; Gordon Brown (likely to be Tony Blair’s successor as PM) actually used “No Return to Boom and Bust” as one of his campaign slogans!

I laugh when people try to do away with the business cycle.

It is possible to eliminate the boom/bust cycle, only if you leave it in a permanently depressed state. :)

Bring back the Conservative Party!

I really hate to brand or label people... but any human who thinks he can defeat boom/bust cycles is a communist.

I really hate to brand or label people… but any human who thinks he can defeat boom/bust cycles is a communist.

Or laughably self-delusional, or both. Even so, I think NIMBY laws have the effect of making the boom/bust cycles far more severe. If there was ever a clear-cut example of government interference creating moral hazrds, the RE bubble is it. And CA is the poster child.

It is possible to eliminate the boom/bust cycle, only if you leave it in a permanently depressed state.

can you reference any respected authority on this? given that govts generally don't want to see depressions under their watch, although they still seem very ignorant of the economic drivers...

so booms and busts are essential now. once again, we should just shut down this site then. total waste of time. the economy is on track, lending practices are normal and prudential, and tulip booms, dotcom crashes and having your life savings wiped out overnight because you believed in 'the system' is perfectly normal and acceptable. further, you are not entitled to an affordable house anywhere in the country, just get used to renting forever and retiring on nothing.

what's a communist?

The head of the local preservation trust (which primarily sought to limit building on unbuilt lots) when I lived in Belmont was a popular local Libertarian politician. I always found it odd that a Libertarian was the head NIMBY.

I really do not understand libertarianism then.

The only way we can save the world is for everyone to become more spiritual and care about everyone else. This is so far away from human nature that we can forget about it.

can you reference any respected authority on this?

I am a self-respected person and so I hereby reference myself. :) Just kidding.

Boom/bust cycles are horrible. But they are no worse than humanity.

If there was ever a clear-cut example of government interference creating moral hazards, the RE bubble is it. And CA is the poster child.

hmmm, so CA state laws have created the boom? nothing to do with people in a private market bidding higher and higher? getting more and more credit from private sector lenders without regulation or oversight? completely uncontrolled by govts? given the most recent thread pointing out that 40% of purchases are investments or holiday homes.

can you point to any sound reason the govt is to blame? except that centralised banks control the single economic lever of interest rates, which has multiple effects on multiple parts of the economy, often working in different directions to somebody's detriment.

and given that similar booms are occurring in a dozen OECD countries in the world right now due to historically low interest rates, liberalised credit offerings by private sector lenders, and no curbs on free market speculation. so they're all suffering from govt-induced moral hazards? i'd like to see the peer-reviewed academic paper on that - presume you're working on one... those views are not just blind prejudice and idiotically blind self-destructive tendencies - like the poor Republican-voting farmers of the red states guaranteeing their kids will never get to college and they will never get affordable health care...

I always found it odd that a Libertarian was the head NIMBY.

hmm, people often have self-inconsistent belief systems. surprise, surprise. politicians just go with their gut instincts on everything, anyhow, no matter how contradictory it is... whatever has personal or voter appeal...

hmm, people often have self-inconsistent belief systems. surprise, surprise. politicians just go with their gut instincts on everything, anyhow, no matter how contradictory it is… whatever has personal or voter appeal…

Different Sean, sometimes I really wonder how much our beliefs are different yet how much the are the same. :)

Uhhh....DS,

We basically agree on the central bank/low interest rates (plus GSE/MBS/taxpayer risk underwriting) having started this whole thing. What I'm basically saying is you have two government-induced moral hazards operating side-by-side here:

(a) Federal (and international) level: The Fed/CB injects massive amounts of liquidity into mortgage/banking system, which gets loaned out to Jill & Joe McDebtor in the form of IO/neg-am/no-doc jumbo-sized loans. Which triggers bidding wars and much higher prices. Risk gets transferred from banks/S&Ls to individual taxpayers & investors, thanks to mortgages getting sold and repackaged as MBS/CMOs. Speculation is also partly taxpayer subsidized in the form of over-generous capital gains exemptions, mortgage interest deductions (incl. investment property), 1031 exchanges, etc.

The stimulus/effects are mostly temporary, and lasts only until short rates are raised back above CPI levels, and while GSEs remain solvent. Whether or not the speculation-friendly tax incentives are more permanent remains to be see.

(b) State and local level: NIMBY anti-development laws & Prop. 13 tax re-distribution schemes erect barriers and disincentivize new housing development/zoning.

This has a much longer lasting, more permanent impact on housing prices regionally than the federal stimulus above. Even in the complete absence of a speculative bubble, CA house prices would be far higher than most other states. There is no other good reason why this is so, "sunshine premium" notwithstanding.

Bring back the Conservative Party!

Thatcher got voted out because the policies weren't working, and she was making life very unpleasant for a lot of people other than her elite cronies. There was, amongst other things, a 'grey rebellion' when she started axing meals on wheels services for senior citizens...

I don't know why people who are unahppy with CA have to go to Tenessee or Texas, what about other places in the world?

I have been to Dallas, you can't pay me enough to move there. I have been to Tenessee on business as well, thanks but no thanks. Now if I only have a couple mil to spare, these are definitely not the places where I fancy I can advance my personal wealth or intellectual stimulation further. Nothing wrong with these nice country folks, just not my cup of tea. If I have a couple Bil to spare, then I may consider moving there, with the intent of turning the local town into some sort of paradise I envision.

If one day CA becomes unbearable, I would rather move to Seattle. If Seattle fails, then Vancouver, if Vancouver doesn't work out, Sydney, if Sydney fails, I will exhaust London, Tokyo before I even think about Dallas. It is not that important that I have to stay in the US, my family are sort of scattered around the English speaking countries. But growing up in a cosmopolitan, I require some minimum degree of filth and crime to get by. :-)

Even in the complete absence of a speculative bubble, CA house prices would be far higher than most other states. There is no other good reason why this is so, “sunshine premium” notwithstanding.

so nothing to do with 'get rich quick' messages, irrational exuberance of markets, people believing investment properties will be their 'retirement plan', general ignorance of fundamentals, panic buying in a boom, opportunistic speculation, 'the guy next door just made a fortune', etc etc - just like the dotcom boom...

there is abundant housing to go around, despite people pointing to curbs on development. i think the price hikes are far more sinister than just a putative supply/demand effect.