Minor Thoughts from me to you

David Friedman uses the focus on affordable housing to illustrate how asking the right questions can lead you to different conclusions than you would otherwise get.

When someone moves into one house he moves out of another, which is then available for someone else to move into. If the development is built and the units are bought by people currently living in San Jose, the net result will be to increase the city's housing stock by almost a thousand units. Doing that will make more housing available in the city and lower its cost. The question the Mayor should be asking, assuming that what he is really interested in is the welfare of the citizens of the city and not merely his ability to control things, is whether the development will draw mostly from current residents or mostly from people who would not otherwise live in the city. Pretty clearly, that question never occurred to him.

The assumption of the Mayor–I think of city planners more generally–is that the way to get affordable housing is to build affordable housing. That is not the only way of getting it. The alternative, very common in the history of U.S. cities in the past, was for poor people to move into housing that had been occupied by, possibly built for, less poor people, vacated when the less poor people moved into newer and better houses.

The same way poor people get cars.

I thought this was very insightful.

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Asks the Wall Street Journal. But it seems like they may have buried the most important part about the supposedly surprising survey.

“The preference for the suburbs suggests that future demand will be in the form of single-family homes rather than condominiums more prevalent in cities,” said David Berson, chief economist with Nationwide Insurance Co. “That’s also good news for future suburban single-family sellers, many of whom are baby boomers.”

The survey results, though, could be skewed because they included only millennials who first answered that they bought a home within the past three years or intended to do so in the next three years. That excluded young people who intend to rent for many more years, which is a large and growing group, in part because of hefty student debt and the tight mortgage-lending standards of recent years.

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The housing crash may have been more severe than initial estimates have shown.

The National Association of Realtors, which produces a widely watched monthly estimate of sales of previously owned homes, is examining the possibility that it over-counted U.S. home sales dating back as far as 2007.

The group reported that there were 4.9 million sales of previously owned homes in 2010, down 5.7% from 5.2 million in 2009. But CoreLogic, a real-estate analytics firm based in Santa Ana, Calif., counted just 3.3 million homes sales last year, a drop of 10.8% from 3.7 million in 2009. CoreLogic says NAR could have overstated home sales by as much as 20%.

If true, that is definitely not good. It's going to take a whole lot longer than we thought to get back to a healthy housing market, if the number of unsold homes is a lot larger than we think it is.

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I find the current narrative, about the housing market meltdown, to be extremely disingenuous. Take Barack Obama, for example.

He described this summer's subprime lending crisis as a case study of greed among mortgage lenders and the agencies that provide information about them. ...

Well, that's certainly one way to describe what's happening in the housing market. But I don't think it's very honest. As I've said before, I don't see how giving mortgages to people who are unable to afford them, then going bankrupt when they default on the loan, qualifies as greed.

Instead, I prefer to consider Hanlon's Razor: "Never attribute to malice that which can be adequately explained by stupidity."

Stupidity, sure. Giving money to people who can't give it back is about as far from greed or theft as a business can possibly get.

However, I'll be happy to accuse home buyers of greed. What would you call it when someone earning $40,000 a year decides to buy a home costing $200,000 or $250,000? Many of the families now defaulting on their loans were looking to get in on a "hot" housing market that had the potential to double or triple the value of houses in the area. They saw cheap money and jumped at the opportunity to get rich.

That's why I'm convinced that this won't do any good:

Mr. Obama of Illinois called for regulatory efforts to increase transparency and accountability among financial companies. Mr. Obama zeroed in on the housing market, proposing tighter federal rules on mortgage fraud and government rating systems for mortgages and credit cards.

"If more Americans were armed with this kind of information before they purchased risky mortgage loans," he said, "the current crisis might not have happened."

If Senator Obama really believes that, he's delusional. We were buried in paperwork when we bought our house. We had to sign sheet after sheet of paper, giving us all of the details about our mortgage. Our Realtor and mortgage banker answered all of our questions, throughout the entire process. Even if they hadn't, website after website offered comprehensive information about every different type of mortgage. Americans had plenty of opportunity to arm themselves with whatever information they needed.

The housing meltdown happened because everyone involved believe that the market would continue to go up forever. Consumers got greedy and banks began taking irresponsible risks thanks to easy money. This "crisis" can't be blamed on any one group and I'll not respect anyone that tries to do so.