Monday, April 06, 2009

How the Crash Will Reshape America

The Atlantic reported What’s the right spatial fix for the economy today, and how do we achieve it? The solution begins with the removal of homeownership from its long-privileged place at the center of the U.S. economy.
Stupidity. Housing bubble caused the problem, so penalize homeowners.
Substantial incentives for homeownership (from tax breaks to artificially low mortgage-interest rates) distort demand, encouraging people to buy bigger houses than they otherwise would.
No it was sub prime mortgages the did that.
.... If anything, our government policies should encourage renting, not buying. Homeownership occupies a central place in the American Dream primarily because decades of policy have put it there.
No it was because with home ownership, if you paid your nortgage for 20 or 30 years you would own your home, and have some place to stay when you got old.
A recent study by Grace Wong, an economist at the Wharton School of Business, shows that, controlling for income and demographics, homeowners are no happier than renters,
You can craft a study to show whatever yu want, expecially if you can fudge the numbers (i.e. controlling for ...)
nor do they report lower levels of stress or higher levels of self-esteem.

And while homeownership has some social benefits—a higher level of civic engagement is one—
And people take better care of property they own, rather than rent.
it is costly to the economy. The economist Andrew Oswald has demonstrated that in both the United States and Europe, those places with higher homeownership rates also suffer from higher unemployment.
That is stupid.
Homeownership, Oswald found, is a more important predictor of unemployment than rates of unionization or the generosity of welfare benefits. Too often, it ties people to declining or blighted locations, and forces them into work—if they can find it—that is a poor match for their interests and abilities.

As homeownership rates have risen, our society has become less nimble: in the 1950s and 1960s, Americans were nearly twice as likely to move in a given year as they are today.
If they don't move as often, they can get to know their neighbors better.
Last year fewer Americans moved, as a percentage of the population, than in any year since the Census Bureau started tracking address changes, in the late 1940s. This sort of creeping rigidity in the labor market is a bad sign for the economy, particularly in a time when businesses, industries, and regions are rising and falling quickly.

The foreclosure crisis creates a real opportunity here. Instead of resisting foreclosures, the government should seek to facilitate them in ways that can minimize pain and disruption. Banks that take back homes, for instance, could be required to offer to rent each home to the previous homeowner,
Force banks into becoming landlords.
at market rates—which are typically lower than mortgage payments
That is because rental does not result in ownership.
—for some number of years. (At the end of that period, the former homeowner could be given the option to repurchase the home at the prevailing market price.)
Why should he want to purchase; you said rental was better.
A bigger, healthier rental market, with more choices, would make renting a more attractive option for many people; it would also make the economy as a whole more flexible and responsive.
You take away the investment incentives that makes individuals invest in renal properties and force banks to become landlords, something they are not qualified to do.


haljett said...

No doubt, we are in for a world of hurt.

I read this and I this morning I saw this artice:
FDIC Watch: Agency’s Insurance Commitments 34% Higher than Reported

I think the best thing for the average American to do is to clear out as much of their debt as possible and put some savings away. Maybe even invest in some gold and silver too.

I’ve been watching the precious metal markets with the free widget ExactPrice and both those metals are falling into some good price ranges I think for buying.

Whatever happens, it doesn’t look to me like we’re going to be able to avoid some big time inflation.

Don Singleton said...

I fear it will be more than inflation; they will probably have to invent a new word for it. It will be worse than Jimmy Carter's Stagflation.

Investment in Gold or Silver is probably a good idea, but get the actual coins/bars. Don't just go for companies saying they have it in your account.

And get guns before they become illegal.

Jedi Knight Ivyan said...

What a bunch of bologna! Whoever wrote this article must have their entire portfolio sunk into rental companies.

Don Singleton said...

Whoever wrote this article must have their entire portfolio sunk into rental companies.

I dont see any other explanation