Flashback 2005: Margaret Hwang Smith and Gary Smith said "there is no bubble"

Margaret Hwang Smith and Gary Smith, economics professors at Pomona College in Claremont, California, argued in a paper titled "Bubble, Bubble, Where’s the Housing Bubble?" that "there is no bubble in the prices of single-family homes in 2005."In a bubble, market prices are far above fundamental values calculated with reasonable assumptions about the future cash flow. By this definition, there is no bubble in the prices of single-family homes in...

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Quote of the day

This quote from Dean Baker—one of the first economists to notice the housing bubble (about a year-and-a-half after I noticed it, but I digress)—actually comes from two weeks ago. I just found it and I like it, even if it is an exaggeration:The Fed Is Responsible for 10.2 Percent Unemployment in the Same Way That Al Queda Was Responsible for September 11thAn elaboration:There may well be an anti-elitist strain to the anger against the Fed and Bernanke, but serious people do not dispute their responsibility for the economic crisis. There was an enormous...

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Federal housing subsidies are insane

Federal housing subsidies are insa...

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GDP revised downward

From The Wall Street Journal:What last month had appeared to be third-quarter growth of 3.5% in gross domestic product turns out to have been a more modest 2.8%. Consumer spending was pared back to 2.9% from 3.4%. The cash-for-clunkers subsidy produced fewer new-vehicle purchases than first estimated. In short, we aren't getting much bang for our $787 billion stimulus buc...

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Cato on the housing crisis

The Cato Institute's view of the housing bubble and resulting financial crisis:The housing bubble and its aftermath arose from market distortions created by the Federal Reserve, the government backing of Fannie Mae and Freddie Mac, and the Department of Housing and Urban Development and its Federal Housing Administration. Americans suffered through a severe recession in 2008 and 2009, a downturn unfortunately precipitated by perverse government policies.Regarding bad decisions made by the private sector, the traditional remedy for severely mistaken...

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Almost one-quarter of mortgage borrowers are underwater

From The Wall Street Journal:The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery.Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American CoreLogic, a real-estate information company based in Santa Ana, Calif.These so-called underwater mortgages pose a roadblock to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped...

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Existing home sales up 23.5% year-over-year

The month-over-month change was 10.1%:Existing home sales surged in October to the highest level in more than 2-1/2 years, according to a real estate industry report issued Monday.The National Association of Realtors reported that existing home sales rose 10.1% last month to a seasonally adjusted annual rate of 6.1 million units, up from the downwardly revised rate of 5.54 million in September. ...The gain was likely due to an influx of buyers looking to take advantage of an $8,000 tax credit that the Obama administration made available for qualified...

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Housing starts fell significantly in October

Month-over-month housing starts fell in October:In a blow to the optimism that had surrounded the U.S. housing sector in recent months, housing starts fell a sharp 10.6% in October, the Commerce Department reported Wednesday.New construction on housing units dropped to a seasonally adjusted annual rate of 529,000, the lowest level since April. The 10.6% drop was the biggest percentage decline for starts since January.Both single-family homes and multifamily units declined last month.Prior to the October decline, housing starts have been flat for...

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Five myths about homeownership

Joseph Gyourko, chairman of the real estate department and the director of the Zell/Lurie Real Estate Center at the University of Pennsylvania's Wharton School, lists five myths about home ownership:Housing is a great long-term investment.The homebuyer tax credit makes buying a house more affordable.Homeownership is good for society because owners make better citizens.It's safe to buy a house with a very low down payment.Owning a home is cheaper than renting one because you save on rent.For his explanation of why they are myths, click here. I don't...

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When did the housing bubble begin?

The Wall Street Journal asks when the housing bubble began:Why should we care when it all began? It’s politics. If the housing bubble began during the Clinton administration, it can be blamed on the Democrats and their efforts to expand homeownership to people who, in some cases, may not have been quite ready for it. If it began under George W. Bush, then it can be imputed to the Republicans’ love of deregulation.Of course, as we all know, the causes...

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Why eminent domain should be used sparingly

This is karma:The private homes that New London, Conn., took away from Suzette Kelo and her neighbors have been torn down. Their former site is a wasteland of fields of weeds, a monument to the power of eminent domain.But now Pfizer, the drug company whose neighboring research facility had been the original cause of the homes' seizure, has just announced that it is closing up shop in New London.To lure those jobs to New London a decade ago, the local government promised to demolish the older residential neighborhood adjacent to the land Pfizer...

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Jeffrey Sachs: How to stimulate the economy

Columbia University economist Jeffrey Sachs criticizes the Democratic and Republican ideas for stimulating the economy:Following a Keynesian approach, the Obama administration has focused on restoring consumer spending. They have gone about this with a combination of near-zero interest rates, massive Fed financing of mortgages and various consumption incentives, such as rebates for new homebuyers and cash for clunkers.During the previous bubble,...

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Robert Shiller conflicted by housing data

Fox Business journalist Alexis Glick describes her recent interview with Robert Shiller:Today it was clearly visible that the historical data he looks at to predict the future is not working. The current appreciation in housing and other economic indicators are not what the models would suggest. Time and time again he said “this is a time of great uncertainty.” He’s clearly puzzled by the rapid appreciation in home prices while disturbed by the “bail out economy” and the national deficit. He admitted, “Things seem to be working right now but we’re...

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Fannie Mae needs another bailout; Freddie Mac will need one

Fannie Mae is in more financial trouble:Fannie Mae, the federally controlled mortgage finance giant, said Thursday it lost $19 billion in the third quarter and had submitted a request to the Treasury Department for $15 billion in more aid to stay afloat.District-based Fannie Mae and its McLean sibling, Freddie Mac, were seized in early September 2008 by the federal government. Since then, Fannie Mae has lost $111 billion. The $15 billion in aid it has requested comes on top of $45 billion it already received. Freddie Mac has received $51 billion...

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Congress and president renewed home buyer tax credit on Friday

As I'm sure you've heard, Congress and President Obama renewed the home buyer tax credit on Friday. It's a massive waste of money that will simply add to the national debt. Unlike infrastructure spending, which will enhance long-term growth while helping to bail the country out of its current financial mess, spending $40,000+ each just to transfer existing houses from one person to another will harm long-term economic growth. It will harm economic...

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October 2009 job numbers

The unemployment rate has reached the highest level since the early 1980s, rising to 10.2% in October 2009. The last time the U3 (official) unemployment rate was this high was April, 1983. (As a kid back then, it really didn't seem that bad—although I'm doing well now, too.)Initial weekly unemployment insurance claims continue to improve—or more precisely, they are getting worse at a slower rate. This graph shows year-over-year numbers. Ideally,...

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BMW 5 Series 1989-1995 Service Manual

Whether you're a professional or a do-it-yourself BMW owner, this manual will help you understand, care for and repair your E34 5 Series. Models and engines covered:- 525i (M20 with DME 1.3) 1989-1990- 525i (M50 with DME 3.1) 1991-1992- 525i (M50TU/VANOS with DME 3.3.1) 1993-1995- 530i (M60 with DME 3.3) 1994-1995- 535i (M30 with DME 1.3) 1989-1993- 540i (M60 with DME 3.3) 1994-1995Transmissions covered: - Manual (remove, install, external service)Getrag...

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The definitive guide to modifying Citroen Saxo

Would you like to modify your Citroen Saxo, but would prefer to carry out the jobs yourself? All you need to know on Saxo modifying is contained within this guide.Downl...

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Fiat Tipo and Tempra Repair Manual and Owner Reference Information

This manual applies to: Fiat Tipo and Tempra:-Petrol engines: 1.4 (1372cc) and 1.6 (1580cc)-Diesel engines: 1.7D (1697 non-turbo), 1.9D, 1.9TD and 1.9TDs (1929 turbo and non-turbo)-Hatchbacks, Saloons and Estates 1988-1996-Manual and Selecta (automatic) transmission modelsThis manual contains highly detailed, easy-to-follow service instructions, ideal for beginners and experts alike. It is illustrated with hundreds of clear photographs and...

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Home buyer tax credit = more global warming

According to Harvard economist Edward Glaeser, Congress and the White House are intent on harming the planet:ENVIRONMENTALISTS who are worried about global warming should pay attention to the congressional debate about extending the home buyers tax credit. Federal tax policies toward housing have long encouraged Americans to emit more carbon. President Obama could do the country, and the planet, a service by either refusing to sign the extension of the $8,000 credit or by insisting that it be accompanied by offsetting reductions in the home mortgage...

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Homebuyer tax credit nearing renewal

Stupid stuff like this is why, after a decade of voting straight Democratic in state and federal elections, I decided to stay home yesterday and let the winds of change blow. I'm disgusted with both political parti...

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How the crisis could change economic theory

Here's an interesting look at how our little housing bubble may change macroeconomic theory.The crisis exposed the inadequacy of economists' traditional tool kit, forcing them to revisit questions many had long thought answered, such as how to tame disruptive boom-and-bust cycles. ..."We could be looking at a paradigm shift," says Frederic Mishkin, a former Federal Reserve governor now at Columbia University.That shift could change the way central bankers do their job, possibly leading them to wade more deeply into markets. They could, for example,...

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D.C. area foreclosures double year-over-year

From last Wednesday's Washington Post:The number of Washington area homeowners in foreclosure has more that doubled in the past year, according to a report to be released Wednesday that shows the problem remains most acute in a few counties and could get worse as more borrowers fall behind on their payments.About 2.7 percent of local borrowers are in the foreclosure process, meaning that the bank has started the legal process to take back the property, according to the report by the Urban Institute, a nonprofit policy research group based in Washington....

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