Break all the windows; everyone gets rich

7 posts

Bob Dylan Roof
Rest comfortably, America. The managerial elite have everything under control.


Should Gov't Pay to Reduce Housing Supply? ‚Äč


http://www.cnbc.com/id/42667090/

The shadow inventory of homes in the United States currently stands at 1.8 million units. That's a nine-month supply. Add to that the current 8.6-month supply of existing homes on the market and you can bet home prices will decline further. Some say destroying the homes to get rid of the excess supply is the only way out of this mess. But who pays?

Should the government pay to bulldoze abandoned, foreclosed homes to shed excess housing supply?

http://en.wikipedia.org/wiki/Parable_of_the_broken_window
Broseph

why not less home prices fall? property tax declines?

Team Zissou

that, and banks having to mark down their portfolios

Broseph

It's a good thing this can't happen in Canada.

Canada today compared to 2006 US:

Higher family debt-to-income ratio than US
Home prices higher than in US
Case-Shiller index reaching higher highs than in US
Income to house price ratio higher than in US
Percentage of people owning homes higher than in US
Larger share of mortgages are guaranteed by the government than in the US

Today in Canada:

35-year mortgages recently removed.
Interest rates starting to creep upwards.
Less and less volume on housing sales, higher and higher prices.
Taxes have been increasing.
Homeowner renovation tax credit expired.

Sounds like Canada is in the perfect situation to avoid a housing meltdown, and prices can only get higher!

Broseph
From http://www.nytimes.com/2011/04/23/business/economy/23housing.html?_r=1&hp
Macrobius

Canada and Australia, as commodity exporters are likely to see similar trouble in their housing markets after the commodities bubble bursts.

The truth here is that large institutions cannot manage physical inventory. This is the downside of backing our debt by 'collateral' (that is, by confiscating physical inventory such as houses and used autos, as security for the bondholders, such as the state-run Chinese pension fund that holds about 1 trillion in US debt). Having large quantities of 'property' that you can't in fact manage without setting up forced labour camps like the CCC to do it isn't the wealth we thought it was.

Perhaps we should just offer the property in a debt-for-housing buyout swap with China. That Trillion dollars of T-bonds works out to 4,000,000 houses at a quarter Mil each. Sounds like a fair price and an easy way to liquidate quite a bit of inventory. Wasn't that the original idea anyway?

This is America's Soviet Collectivisation of Agriculture moment.

billy_boatrocker

C.F. Bastiat. Always a good read, & antidote to economic idiocy as policy.