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Down, house prices! Down!

By Michael J. Smith on Friday April 16, 2010 06:33 PM

I must have mentioned before how I would really like to say nice things about Michael Meeropol, for the sake of his mom and dad, a couple I admire deeply. But damn, Mike sometimes says the silliest things. Here he is, in another item from my lefty mailing lists:

I sent a letter to the NY Times, asking them to support the RIGHT TO RENT ACT OF 2010.

For those who don't know it's a proposed law that would put into effect the Dean Baker/Mark Weisbrot proposal from at least 2 years ago --- namely that the way to keep people in their homes without subsidizing the bankers who made these ridiculous mortgages is to give them the option of renting at fair market rents (the law says for 5 years).

The bankers can foreclose but they can't kick you out of your home -- and you can stay there for five years paying market rent (which is almost always way below the ridiculous mortgages you owe on the bubble-inflated house prices).

It cures two problems at once ---

1) no one is kicked out of their homes

2) no empty homes to ruin neighborhoods and depress housing prices further.

I think we should begin badgering Congress to do this.


I was almost with him for a while there -- anything that tends to turn owners into renters is fine with me -- but then I got to point 2:
No empty homes to ruin neighborhoods and depress housing prices further.
-- and had a minor meltdown.

What the hell is wrong with "depressing housing prices"? What other commodity necessary to life do we want to see become more expensive? Air? Water? Food? Sunlight? No? Then why shelter? Why isn't it a triumph for humankind when shelter gets cheaper? And as for "ruining neighborhoods" -- if they're the sort of neighborhoods that nobody would live in except on spec, then the sooner they're ruined, the better.

Oh, I know, I know, people's "savings" are tied up in these fetish objects. Actually, that's not quite true. What was supposed to happen was that the speculative gain on the house was going to offset the share of the interest you spent on the mortgage(*) and give you a nice better-than-average return on the principal to boot.

But let's ask ourselves: how do you realize these "savings" -- actually, of course, these speculative gains? By making some younger person buy the house, at its inflated price, when you decide to cash out, that's how. To the extent that this scam can work successfully over any period of time, what is it but an intergenerational transfer of wealth from younger people to older ones?

Fie on it. I want to see house prices in the basement, the subbasement, the catacombs, the chasms, the caverns, the Malebolge. I want to see people being paid to live in these sheetrock monstrosities.


(*) Of course Uncle Sam paid the rest -- or rather, we renters paid the rest of it, through that iniquitous cross-subsidy for "ownership" known as the mortgage interest deduction. Faugh!

Comments (25)


Excessive hostility.
The "empty-houses-in-the-neighborhood" price effect is an unnecessary add-on to the housing price contraction already underway. Unoccupied houses lead to many bad outcomes. Do you want to punish the residents who feel they have to stay and pay? The fmv rent will have its downward effect on home prices anyhow.
The foregoing is untalented amateur analysis.
I recommend Michael Hudson on the transfer of revenue from the public sector (beginning with Proposition umpty ump) to the FIRE. The transfer is less intergenerational than you think because the most money is paid in interest to the lender.

When I first read this post it was in a reader feed thing that didn't load the picture, so I wasn't sure which of his sets of parents you were talking about.

The transfer is less intergenerational than you think because the most money is paid in interest to the lender.
I don't doubt that this is true. The "developers" and the banks surely did a great deal better than any class of ordinary-Joe householder. What interests me, though, is that the proposition as sold to these ordinary Joes and Janes transparently amounted to a scheme for robbing the next generation, to the extent that they ever expected it to pay off at all -- and of course they did. From whose pocket did they think their unearned gains were to be taken?

As for "excessive hostility", of course I don't agree. No amount of hostility could possibly be excessive on this topic. The generations-long house scam gutted the cities, blighted the countryside, and turned honest respectable people into narrow-eyed real-estate sharpers -- or sharper wannabes, at any rate.

Recall Mr Levitt's famous observation -- "No man with a mortgage has time to be a Communist," or words to that effect.


And then Joe and Jane died and left it to Billy and Sue to fight over. Or at least that is what they used to do before Medicare and medical science kept them alive until all their estate's value could be transmogrified into nursing home services.

Joe and Jane during their parenting years were giving Billy and Sue a comfortable, healthy home and yard to grow clever and strong in. How many people before just yesterday, so to speak, have thought that they were going to sell their home to their children's contemporaries and make a killing? They thought that they were leaving it to their children, who could sell it for whatever it was worth and take the proceeds back to the housing market and participate at whatever level obtained. The paid off house was a way to protect the next generation from the inflation of house prices. (Now people live so long that the grandchildren get the benefit, if the nursing home trap is avoided.)


house ownership crisis policy RX
as a self expressive art form

i suggest we let
the shelter department of nambla
run this family house lot
controled value implosion



You'll be happy to know that my mahn Jan says that you're in for another 15% drop from current housing prices (it's been a 30% drop so far since the peak of the bubble).

Just be glad that you don't live North of the 49th. The average home price in Vancouver just went over $1,000,000 (AVERAGE!) and that's in Canadian dollars, which are worth more than American dollars.


deserves to have a lot implosion


the loonie needs to lose 30%
of its value against the yankee thaler

you smug ice drips east of bc
deserve worse

---that goes even for you
my dear quebec
you had your chances
to play bold separatists
... and chickened out ---


Aside from the moral satisfaction you gain from disappointing people who were expecting to cash in on un-earned, inflated property values. what exactly is the economic benefit you expect from depressing housing prices nationwide? Or put it the other way around, and maybe OP can answer this, aren't there some major risks like ruining smaller banks and credit unions, depressing construction and building trades (one of the few industries that can provide new employment), further draining property tax revenues on which school systems and other governmental services depend?

Current home values are probably a house of cards collapsing under its own weight anyway -- but there's always something to be said for a soft landing versus a catastrophic event, unless you're a believer in the idea of creative destruction (I think Condeleeza Rice was the latest to voice that unthinking platitude.)


yeah, falling prices are a problem that shouldn't really be glossed over. I'd prefer stagnant land prices and rising wages and rising price level


deserves to have a lot implosion"

What's the PV of a house with a basement full of kush?

"the loonie needs to lose 30%
of its value against the yankee thaler"

you don't need to tell me that. I'm from rustbelt north, where the proles have a phd in forex. We did, after all, produce Mundell. we love a low loonie.

"you smug ice drips east of bc
deserve worse"

do I detect a hint of jealousy, a bit of wounded pride?

and as for your take on quebec... it belongs in a snow globe


"aren't there some major risks "


" ruining smaller banks and credit unions"
recall fidic protects depositors so on that ...who cares
the collapse will indeed reduce
those sources of loan flow
so what who cares

"depressing construction and building trades "
surely we could ....could keep these folks busy building other stuff
uncle funded stuff

" draining property tax revenues "
true perhaps but rates can rises as assessments fall --where state law allows --

" school systems and other governmental services depend (on property tax revenue)"

but they ought not
and uncle might increase his meager contribution to education funding
and states might follow orgeon
and increase their progressive income tax
rates by adding higher tiers at the top

of course none of this will happen
if we had a second lot value implosion
but father S is not expecting
his dream to come true anyway
he's just challenging the pwog
sacro sanction of sprawlville
with its easily manipulated
lot value as nest egg nexus scam
that makes lawn mowing kulacks
homer ralph archie and chester


Mundell ?

that ham !!!

i loved that boozy gent

in my day at columbia
he and old vick
were the canadian book ends
of the department


something I should really reemphasize, cause I've seen you make the mistake before:

Your sentimental take on the Quebecois boer movement is actually pretty offensive and could get you into a lot of trouble if you were to actually repeat it in Montreal. I noticed "Patrick" at EV try to tell you the same thing a while back.

It's about equivalent to me showing up here, draped in a confederate flag and saying "I wish you guys won"


They have slaves in Quebec? I'm amazed, amazed.

On another topic, senecal writes:

aren't there some major risks like ruining smaller banks and credit unions, depressing construction and building trades (one of the few industries that can provide new employment), further draining property tax revenues on which school systems and other governmental services depend?
I love the idea of ruining banks. A really happy ending to It's a Wonderful Life, in my opinion, would have involved Potter choking to death on a lobster claw and George getting an honest job as a ditch digger.

As for school systems, I've written at some length to the effect that we're overschooled, just as we're overpoliced. But to the extent that police and schools are necessary and useful, there is no immutable law handed down from on high saying that these things can only be funded by property taxes.

How about funding 'em with... a carbon tax?


haha yeah, I admit that was a pretty hyperbolic comparison.

The subtleties that are apparent to Canadians don't always translate, so I thought it was better to err on the side of getting the point across. There was a good reason why so many Jewish people left Montreal in the 70s, and I'm not sure that OP realizes exactly what he is dredging up.

Perhaps I lack the savvy (and this fact I readily admit) but wasn't nearly every benefit "won" by Boomers really just a loan to be paid by their grandchildren?

My parents are Boomers, and I'd hate to see them work for so long to...wait, nevermind - my father was tossed out on the street after 35 years and three mergers, and now works an entry level job, post-"retirement age."

Fuck 'em, I say. Maybe this is me thinking harder than normal about how personally my eldest son has paid a price for the Boomer Security State's constant readiness, but kill the switch already.


Boomer benefits? It will be 2 more years before boomers are eligible for full SS benefits. By then Obama will have started squeezing the goody out of them. It's Grandma you want to shoot the bird at. Ah, the greatest generation that grew up in the 1930's, the glory years of the last century.

Gotta say it: SMBIVA loves everybody in general but despises any person with a predicate.

I don't know about that. My grandmother lived in a house her husband and brother and law built, from the ground up. And that was fairly common in New England, esp. for immigrants. They didn't borrow. They saved.

If I remember correctly, it was one season's worth of farm labor which got them the materials, plus a lot of bartering and hand to hand trade.

...come to think of it, my father's father built his own farm house, on the Connecticut, about twenty miles and a state border away from where his once and future bride's family grew up in hand made home.

My grandfather's brother was a furrier/trapper - who built his own home, with help from (the now nearly defunct) extended family.

My wife's father grew up in a hand made home, in central NH - a home built by his one armed grandfather, on barter.

Her mother's family emigrated from Wales to the Puget Sound, and built a farm house with the help of the local Christian Science community, again hand made.

Perhaps that's just New England (although, I know folks from Virginia, Kentucky and LA with similar stories), but a goodly number of the homes of working class folks, from my grandmother's generation, were family/community raised structures.

Now, if we're talking Lady Baroness of Sarasota, and her bubble building Florida schemes for would be landed gentry...


"I'm not sure that OP realizes exactly what he is dredging up."


the rebellion of 37-38
my ancestors fought the bloody brits
for a free quebec

what jack ass stands in the way of settling the easiest national question
in all of norte amigo

father S reemebers one danty maoite crowd in the 70's that got their dipers so twisted uyp over this they cried "soil your ballot "
when the first free quebec referendum
cast the stark choice b4 them

to my eclair spined cousins not even a franco phonic majority dare push for
a unilateral declaratiuon of independence
what hens what capons
why the smith crowd in their
renegade republic of rhodesia
put these weak kneed patriotes to shame


bethune just who in montreal would take offense at a free quebec gesture ???
my nattering frog relatives ???
the indigenous peoples ??

or theeuro- poachers from elsewhere

mention of the jews of montreal is laughable
yes what an oppressed group they were


"The subtleties that are apparent to Canadians don't always translate"

subtleties ???
what subtleties ???

canadiens is an even hollower
collective label
then americans

canada is a colonial conjury
a shotgun wedding of
two utterly distinct settler nations
one content to oppress the other
sparta and the helots

not quite as obnoxious as colonial ireland
where the natives were true natives and just ala the boars the rump of a rival
defeated empire's colony

i suppose a united ireland strikes you as a foul cause as well ??

to the devil with such
saxon burr headness bethune
i can imagine you
sounding like my ex inlaws
marvelous anglo canadians they
"subtleties " indeed


Canadian politics -- notoriously a head-banging topic. Guelphs and Ghibellines ain't in it.


damn, well I have to at least give you credit for owning your position and going all the way with it.

pur et dur, huh? based on your family participating in the 1837 rebellion? really?

Who would take offense to an American saying that Quebec "chickened out" and should separate? Well, probably just about anyone in Montreal who isn't white, catholic, francophone (in that order) pure laine. You know, that pesky ethnic vote

Hell, I can't even see many pure laine taking kindly to your critique. Montreal did overwhelmingly vote no, you know, and I'm not sure that they would consider it chickening out.

If the Jews were so privileged, and had nothing to fear, then why did so many of them pack up and leave? laughable, really? Why did the Cree and Mohawks plan to rejoin Canada? Why don't you try running your ideas by a few Haitian-Canadians?

re: Ireland. I am actually 1/2 Irish, dad born in Dublin. I'm nominally a citizen of Ireland, from one of the most well-known families that can be traced back on record to at least the 1200s, a family who lost their land for not renouncing Catholicism, who were featured in Joyce and included some of the most famous IRA members. My gramps almost got his head blown off for looking out a basement window at a patrol that had stopped outside. Great grandpa was actually in the stadium on bloody sunday. We got held at the border on the way to Boston during the 1980s on suspicion of being IRA operatives. Do those bona fides give me enough authority to decide the issue of Irish unity in 2010, o paine?

No. I'll let the actual Irish people decide that, and respect their decision to move forward instead of reopening barely healed wounds. I don't have to live with the consequences, but I know that such foibles have never stopped the more-Irish-than-the-Irish Bostonians from loudly proclaiming what's good and right for Ireland. I didn't know that the same attitude carried over to Quebec. It must be something in the water

and dude, Ian Smith???? uh, burr heads?
ethno-nationalism rears its ugly head. I guess you do know what you are dredging up, but are you really serious about this? were you just into your cups last night?

"sounding like my ex inlaws
marvelous anglo canadians they "

is that what all this is about?


never take me that seriously
on foreign politics
its just a spectator sport

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