Interesting take by real estate investor John Adams:
At the risk of offending my good friend Don Ratajczak, I am going to put on my economist hat and offer to solve our economic problems in a seven-day period. News from the housing front is simply depressing and the recovery, such as it was, seems stalled.
Washington obviously needs new ideas, so here goes:
All agree that the real estate industry represents a huge sector of the economy, and when somebody buys a new house it employs hundreds of people all over the U.S. However, people who are worried don't buy houses, and a large segment of the workforce is either unemployed or worried.
Real estate led us into this recession and it will have to be real estate that leads us out. That's the way it has worked for the past seven recessions in a row, so what do we need to do?
On Monday, declare a national moratorium on all residential foreclosures unless the lender has engaged in meaningful attempts at modification and has employed every reasonable strategy to keep the borrower in the house. Also, grant "safe harbor" status to servicers who grant modifications in good faith. That step alone will keep millions in their homes.
On Tuesday, modify the Garn-St. Germain Act to invalidate "due on sale" clauses used by federally chartered lenders to prevent buyers from taking over payments. This would allow thousands of owners to sell to buyers who are able to make the payments, but unable to meet new and more stringent underwriting criteria. Lenders should still be able to require reasonable credit and income standards, but assumption should be quick and easy, and at no cost.
(Making it easier to "assume" loans could make a huge difference- Conan's comment)
On Wednesday, change the tax code to encourage real estate investors. Eliminate all income taxes on profits derived on the sale of any home purchased as a bank-owned foreclosure, then renovated and resold within 12 months to an owner-occupant.
This would cause bank-owned homes to become much more attractive to private investors, who would rush to buy them as soon as they became available. They would then renovate them with private money rather than looking for a government handout. And it would help stabilize neighborhoods by eliminating vacant houses and substituting owner-occupants.
On Thursday, declare a six-month "federal tax holiday" and simply stand back and watch the economy move into high gear. It is a fact that tax cuts create jobs, and that's what the real estate market needs more than anything else.
On Friday, take the day off, but notice that the stock market has recovered and every home in America has jumped in value by 10 percent. Everyone will feel more confident, unemployment will decline and the recession will officially be over.
Please share your thoughts with me at money99.com.
John Adams is an author, broadcaster and investor. He answers real estate questions on radio station WGKA-AM (920) every Saturday at noon.
For more real estate information or to make a comment, visit www.money99.com.
http://www.ajchomefinder.com/mortgage-center/how-to-end-the-574574.html
Won't work.
Quote from: Gaspar on July 27, 2010, 01:22:40 PM
Won't work.
Why not? I think most of the ideas are good ones.
It makes sense and relies on the private market. There is no way in Hell that this administration would ever take this approach.
Therefore it would never work.
:(
And besides. . .Waterboy would complain because it's too simple.
First off, the recession is actually over. Unfortunately, lagging indicators like unemployment are still in the dump. Part of this is likely due to the fed's unwillingness to act on the deflation issue, which causes higher structural unemployment.
I don't quite understand why modifications will suddenly take off when there are already big cash incentives for lenders to make modifications. Note we already had a foreclosure holiday, also.
Tuesday's plan will never fly with Republicans as a whole. Remember that these are the people who blame the crisis on poor people getting loans they couldn't afford, yet this guy wants lenders to relax underwriting standards. Never mind that the vast majority of foreclosures are on second homes and jumbo loans. I need to relocate the source for that, it was pretty shocking. Turns out, the higher the borrower's income, the more likely they are to walk away.
This guy just doesn't get it. The problem isn't real estate, the problem is the well over trillion dollars sitting in corporate reserves that isn't getting spent due to expectations of deflation. This is what is keeping unemployment high despite the slight increase in GDP over the last year.
Lastly, there are already plenty of investors buying, at least here in my neighborhood. I've seen four houses flipped in the last few months.
Quote from: nathanm on July 27, 2010, 02:59:03 PM
First off, the recession is actually over.
I know Mr. Biden. You've been telling us that for some time.
(http://assets.nydailynews.com/img/2009/07/26/alg_biden.jpg)
Those stupid indicators. We should ignore them.
Just listen to us. . .You can trust us.
Not sure this belongs here, but this is a very informative clip about how to tackle the deficit. Paul Ryan is no "crazy" right winger. He very intelligent and well spoken (oh, and Chris Matthews getting taken to the woodshed is a bonus):
I got a better idea.
Joe Biden should just tell the unemployed that they are actually employed. They should just consider their unemployment checks as "employment checks."
Or as Nana would have us believe "Weekly Economic Stimulus Checks."
(http://farm5.static.flickr.com/4108/4835061469_e999436e3b.jpg)
Quote from: Gaspar on July 27, 2010, 03:28:47 PM
I know Mr. Biden. You've been telling us that for some time.
(http://assets.nydailynews.com/img/2009/07/26/alg_biden.jpg)
Those stupid indicators. We should ignore them.
Just listen to us. . .You can trust us.
Phil Hartman left us way too soon, he could have pulled off a great send up of VP Biden.
(http://www.morethings.com/fan/saturday_night_live/phil_hartman/losing_it0.jpg)
Quote from: guido911 on July 27, 2010, 03:32:24 PM
Not sure this belongs here, but this is a very informative clip about how to tackle the deficit. Paul Ryan is no "crazy" right winger. He very intelligent and well spoken (oh, and Chris Matthews getting taken to the woodshed is a bonus):
Glad you posted that. Ryan is brilliant. I skimmed his plan and it's all common sense. The CBO has actually scored it as paying off the deficit, and it has elements that everyone (regardless of party) should admire. The thing I like the best is that it's not written as a political piece.
I admire Ryan because he is not the political type. He always seems to have a far deeper understanding of anything that he is asked about than his interviewer or his debate opponent. He actually knows what he's talking about rather than regurgitating talking points.
http://www.roadmap.republicans.budget.house.gov/plan/summary.htm
Download the PDF for the full plan.
Quote from: Gaspar on July 27, 2010, 03:28:47 PM
I know Mr. Biden. You've been telling us that for some time.
These words you use. They have definitions.
I would not, by any means, argue that the economy is
strong. But we are simply not presently in a recession, which is defined as two or more consecutive quarters of negative economic growth. Once growth resumes, a recession, by definition, is over.
Edited to add: At least Ryan didn't try to claim that tax cuts increase revenue. Does anybody have a link to the cuts he wants to make? If he's using the usual 10 year horizon for his claims about how much his cuts will save, it's not nearly enough to close the gap. Taxes will have to go up at some point, like it or not.
Quote from: nathanm on July 27, 2010, 02:59:03 PM
First off, the recession is actually over. Unfortunately, lagging indicators like unemployment are still in the dump. Part of this is likely due to the fed's unwillingness to act on the deflation issue, which causes higher structural unemployment.
I don't quite understand why modifications will suddenly take off when there are already big cash incentives for lenders to make modifications. Note we already had a foreclosure holiday, also.
Tuesday's plan will never fly with Republicans as a whole. Remember that these are the people who blame the crisis on poor people getting loans they couldn't afford, yet this guy wants lenders to relax underwriting standards. Never mind that the vast majority of foreclosures are on second homes and jumbo loans. I need to relocate the source for that, it was pretty shocking. Turns out, the higher the borrower's income, the more likely they are to walk away.
This guy just doesn't get it. The problem isn't real estate, the problem is the well over trillion dollars sitting in corporate reserves that isn't getting spent due to expectations of deflation. This is what is keeping unemployment high despite the slight increase in GDP over the last year.
Lastly, there are already plenty of investors buying, at least here in my neighborhood. I've seen four houses flipped in the last few months.
What Adams was proposing wasn't lax lending laws, he makes the caveat that assumptions should be made easier but only if people can provide reasonible income and credit standards. That's sound logic. There's plenty of people who have the monthly cash flow to afford the payment who simply don't have the cash required for down payment, closing costs etc. Those people are caught in eternal rent Hell.
Quote from: nathanm on July 27, 2010, 04:01:48 PM
These words you use. They have definitions.
I would not, by any means, argue that the economy is strong. But we are simply not presently in a recession, which is defined as two or more consecutive quarters of negative economic growth. Once growth resumes, a recession, by definition, is over.
And we know that. What you are ignoring though is that if unemployment doesn't start to shrink soon, we will see more negative economic growth. For all we know, government consumption might be what is driving the engine right now.
Quote from: nathanm on July 27, 2010, 04:01:48 PM
These words you use. They have definitions.
I would not, by any means, argue that the economy is strong. But we are simply not presently in a recession, which is defined as two or more consecutive quarters of negative economic growth. Once growth resumes, a recession, by definition, is over.
Yes, that's the Shiskin definition. There are several others that make up a "macro definition" of the concept.
A 1.5% increase in unemployment over 12 months.
Check
A sustained but short term decline in the size of the economy.
Check
The most popular def:
The National Bureau of Economic Research calls it "a significant decline in [the] economic activity spread across the country, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales." (Almost universally, academics, economists, policy makers, and businesses defer to the determination by the NBER for the precise dating of a recession's onset and end.)
Check
Congratulations, I see that you and Biden have already made the choice that best fits your purposes.
Quote from: Conan71 on July 27, 2010, 04:06:16 PM
And we know that. What you are ignoring though is that if unemployment doesn't start to shrink soon, we will see more negative economic growth. For all we know, government consumption might be what is driving the engine right now.
Gaspar apparently didn't know that. :-*
Yes, unemployment is a significant issue. It's most likely being caused by deflation. For full employment, we need 3-5% inflation. That's just the way it works. There are three ways to stave that off at this point. Action by the fed, fiscal stimulus by the government, or increasing business spending. IIRC, you have declared that you are against both of the first two.
Personally, I think the gap we're facing is too big to be borne by any one of those alone. Moreover, we're in a bit of a catch-22. Businesses are loathe to spend because of a lack of demand driven by expectations of deflation. The deflation is caused both by expectation and the presently lower velocity of money resulting from the cash hoarding going on by just about everybody. Some combination of stimulation of business demand, fiscal stimulus from the government, and QE from the Fed will be necessary to prevent 10% unemployment from becoming the new normal as it already is in many other countries around the world.
Gaspar, I cited the NBER's definition. They are the authoritative source on whether or not we are in a recession. They say we exited the recession earlier this year.
Quote from: nathanm on July 27, 2010, 04:18:16 PM
Gaspar apparently didn't know that. :-*
Gaspar, I cited the NBER's definition. They are the authoritative source on whether or not we are in a recession. They say we exited the recession earlier this year.
Really? That's awesome!. . .and strange, because they state on their website, in the most recient memo.
The committee reviewed the most recent data for all indicators relevant to the determination of a possible date of the trough in economic activity marking the end of the recession that began in December 2007. The trough date would identify the end of contraction and the beginning of expansion. Although most indicators have turned up, the committee decided that the determination of the trough date on the basis of current data would be premature. Many indicators are quite preliminary at this time and will be revised in coming months. The committee acts only on the basis of actual indicators and does not rely on forecasts in making its determination of the dates of peaks and troughs in economic activity. The committee did review data relating to the date of the peak, previously determined to have occurred in December 2007, marking the onset of the recent recession. I'm not seeing any info that they have changed their position. Do you have an unpublished source?
They have said that the recession ended, but that they can't yet say exactly when. Of course, no matter what they say, it's always subject to later revision.
Quote from: nathanm on July 27, 2010, 04:49:33 PM
They have said that the recession ended, but that they can't yet say exactly when. Of course, no matter what they say, it's always subject to later revision.
Yeah, the only "lagging indicators" I've seen this recession have been the revisions of the data that come along later. Seems like a well planned out smokescreen to me. Keeping in mind this began under Bush - They release the preliminary data to much press and attention, the markets react to this data as it is front and center of all attention. Then, as weeks and months go by, the numbers are revised downward and downward. Had the actual final number been published on day 1, it would have been devastating and shocking news that could put the markets in panic. With these gradual revisions, people are eased into the prospect of economic doomsday rather than slapped in the face with it.
Some were saying in late 2007 that a recession had started. The "forward looking" indicators of the stock market were not saying we were in a recession yet (Dow peaked over 14k in Q4 2007) - it was more of a sense people had of the real world and what the housing bubble was about to do to the economy. How long after late 2007 was it that they finally admitted the recession started then? I think it took about a year before they "revised" the data. Due to the political climate at the time (Unpopular Bush in the White House) it was mainly Republicans trying to say we weren't in a recession and Democrats saying of course we were (with some exceptions). Now it seems the opposite is the case, with Obama in office, that Republicans think we are still in a terrible recession and Democrats saying a recovery is well under way. Funny how that works isn't it?
Quote from: YoungTulsan on July 27, 2010, 05:01:33 PM
Now it seems the opposite is the case, with Obama in office, that Republicans think we are still in a terrible recession and Democrats saying a recovery is well under way. Funny how that works isn't it?
A recovery is not necessary to declare an end to a recession, only the lack of a continued drop in economic activity. So yeah, we may not be in a recession, but we're still in smile shape and nothing is being done about it between the Fed chairmen vacillating and there being no political support for another stimulus.
Quote from: nathanm on July 27, 2010, 02:59:03 PM
First off, the recession is actually over.
Treasury Secretary Geithner apparently didn't get that memo.
Quote"Right now, the best thing the government can do...is help create the conditions for the private sector to start to invest in hiring again," he said. "Now, we've seen six months of positive job growth by the private sector. That's pretty good," Geithner said. "Pretty good this early in a recession.
Emphasis added.
http://blogs.abcnews.com/politicalpunch/2010/07/treasury-secretary-private-job-growth-pretty-good.html
Quote from: nathanm on July 27, 2010, 04:01:48 PM
These words you use. They have definitions.
No fair! When I try to stick to definitions, I get told to loosen up a bit.
If any of you knew how to end the recession/depression in a week, you'd be President instead of living under a Bible.
It's like watching kindergartners solve the world's problems by arguing. Quite funny actually, how shallow most Tulsans really are, having lived many other places. Give them a religion and a dog and a green yard with a McMansion and they are happy, no matter how bad things get economically.
Davaz has gone anti-religion apparently
Quote from: Townsend on July 29, 2010, 02:07:04 PM
Davaz has gone anti-religion apparently
Oh no, not that jackass. I smell a ban coming...
It's almost got the arrogance of FOTD, er fotd, er Aox, er Rip Tout but the writing style is slightly different.
Quote from: Conan71 on July 27, 2010, 01:16:01 PM
Interesting take by real estate investor John Adams:
On Tuesday, modify the Garn-St. Germain Act to invalidate "due on sale" clauses used by federally chartered lenders to prevent buyers from taking over payments. This would allow thousands of owners to sell to buyers who are able to make the payments, but unable to meet new and more stringent underwriting criteria. Lenders should still be able to require reasonable credit and income standards, but assumption should be quick and easy, and at no cost.
(Making it easier to "assume" loans could make a huge difference- Conan's comment)
On Wednesday, change the tax code to encourage real estate investors. Eliminate all income taxes on profits derived on the sale of any home purchased as a bank-owned foreclosure, then renovated and resold within 12 months to an owner-occupant.
This would cause bank-owned homes to become much more attractive to private investors, who would rush to buy them as soon as they became available. They would then renovate them with private money rather than looking for a government handout. And it would help stabilize neighborhoods by eliminating vacant houses and substituting owner-occupants.
Just found this thread. This is a good example of simple thinking that ignores past history. After Tuesday and Wednesday you have just set the stage for another real estate/banking meltdown within a 10 year period.
Tuesday- Once you eliminate Due on Sale clauses, and reinstitute "take up payments" you open the door to all kinds of fraud and a loss of confidence by owners of mortgages. The industry is already full of faked income, unlisted personal loans for downpayment, dual contracts etc. that exacerbated our problems. By making it easier to assume a loan you invite more of those practices. If they are qualified and bankers add fees as noted, what is the difference anyway? It artificially inflates prices. I remember looking for assumable loan homes when I searched for my first home because it avoided scrutiny by the lender. I would have paid a lot more purchase price to have found one. Truly, it would work quite well in stimulating the real estate industry, but would you want to own one of those mortgages?
Wednesday-the naivete of this one makes me think it comes from the banking industry who is patiently waiting for something to help salvage the loser properties they are impatiently holding on to. They want to shift their risk to someone, anyone rather than simply put them up for sale at their new values, take the loss, but make up for it on new loan fees. Real estate investors, except the ones on tv hawking their get rich with real estate schemes, don't like to use their own money for anything. They use leverage. Anyway, talk about a chance to grow more government....12 months, owner occupied, tax exempt...who has to administer that?
Then, those owners who aren't eligible for the tax giveaway have to defer their taxes because they were more prudent. I might be inclined to let my home go into foreclosure and let my brother in law buy it from the bank, remodel it, sell it back to me (on an assumption of loan of course), then split the profits. All for the chance to revive the real estate speculation industry? Wasn't that part of the problem?
WB, I think he's actually advocating a "qualifying" assumption. I believe the big glut of surplus property in the 1980's melt-down had a certain amount of non-qualifying assumptions as part of the problem. Let's say those properties did wind up in the hands of people who were a bit less stable, if they manage to keep the home out of foreclosure for an additional year or two and keep the loan performing until the markets are a little more friendly, that's not necessarily a bad thing.
Why all the cheer lately? I've got a pair of rose colored glasses you can borrow. ;)
Quote from: runfromtulsa on July 29, 2010, 02:01:38 PM
If any of you knew how to end the recession/depression in a week, you'd be President instead of living under a Bible.
It's like watching kindergartners solve the world's problems by arguing. Quite funny actually, how shallow most Tulsans really are, having lived many other places. Give them a religion and a dog and a green yard with a McMansion and they are happy, no matter how bad things get economically.
IT'S ALIVE!
(http://1.bp.blogspot.com/_co3wu2CRTpo/SbqQx58xbpI/AAAAAAAAA1U/HKWE2gZMADA/s320/its_alive-fstn-721852.jpg)
Quote from: runfromtulsa on July 29, 2010, 02:01:38 PM
If any of you knew how to end the recession/depression in a week, you'd be President instead of living under a Bible.
It's like watching kindergartners solve the world's problems by arguing. Quite funny actually, how shallow most Tulsans really are, having lived many other places. Give them a religion and a dog and a green yard with a McMansion and they are happy, no matter how bad things get economically.
Howzitgoin, Davaz? ;D
Okay, since he snuck in, I'll throw the dog a bone....
(http://www.blog.joelx.com/wp-content/uploads/2008/09/christianity-demotivational-poster.gif)
Report: Unemployment High Because People Keep Blowing Their Job InterviewsJuly 29, 2010 | ISSUE 46•30
http://www.theonion.com/articles/report-unemployment-high-because-people-keep-blowi,17803/
Quote from: Conan71 on July 29, 2010, 03:37:17 PM
WB, I think he's actually advocating a "qualifying" assumption. I believe the big glut of surplus property in the 1980's melt-down had a certain amount of non-qualifying assumptions as part of the problem. Let's say those properties did wind up in the hands of people who were a bit less stable, if they manage to keep the home out of foreclosure for an additional year or two and keep the loan performing until the markets are a little more friendly, that's not necessarily a bad thing.
Why all the cheer lately? I've got a pair of rose colored glasses you can borrow. ;)
Is my cynicism hanging out? I just want to go back to the ugly to look at, but fun to live in 60's!
Quote from: waterboy on July 29, 2010, 07:17:45 PM
Is my cynicism hanging out? I just want to go back to the ugly to look at, but fun to live in 60's!
Like a shirt tail
Even given the massive exportation of jobs to China, my company appears to be doing very well in several major indicators of business in this country, including automotive. We got hammered big time, losing money for the first time in over a century - including the Depression - and still coming back nicely. The recovery is real. Just not real exciting.