Stop Me Before I Vote Again

Friend, NOTHING is wrong with that reasoning. Rent-to-own laws could have saved our society from the worst of its current degradation. Seeing property as merely an investment, with no interest in it except it's making you money, is an appalling way to approach anything in life, but especially such a basic need as shelter. Anyone not a moron, or blinded by dollar fever, has seen this mess coming since the early 80s. There has been no remedy because laws always side with landlords against renters.
And anyway, we don't want the 'price' of anything to be high, if we've got any sense; rather we want the value of an hour of labor to be upgraded.

Oh, and I'm going to indulge in some more lookism here and observe that my man Dean really needs to do something about that appalling shirt collar.

You may have seen this or linked this already. It is a longish argument against buying a house in this market (or any market) ...

http://patrick.net/housing/crash.html

Dean always really needs to do something about every aspect of his appearance. I've ribbed him about it in the past, but I'm actually growing quite fond of his disheveled, cadaverous look.

I think Baker is right. I usually agree with him on pretty much everything. His partner Marc Weisbrot is really good as well.

Jan Hatzius, who has consistently out-predicted all other economists in the last 5 years, is also making some similar points:

http://www.youtube.com/watch?v=LWe_nYQax9s

summary:
-mid-2010 fiscal stimulus & inventory cycle fall off, weak demand from there on out
- 15% decline in housing prices still to go

Last week he came out and said that the Fed won't raise rates for all of 2011 which implies that things are still looking grim.

the CEPR feed is a good resource:

feed://feeds.feedburner.com/cepr

Over 25 percent of the houses purchased during the bubble were purchased solely as investments, usually by corporations. Why should anyone give a fuck if some greedy corporation loses its investment? The sole purpose of housing should be to provide shelter, not fuel for speculative investment scams. We should be aiming to make housing as cheap and affordable as possible, not artificially inflating housing prices to protect someone's investment.

At some point, we need to come up with some alternative means of financing and constructing affordable housing, and I don't see our government and certainly not the for-profit market producing a solution in that regard anytime soon.

"Why do we want house prices to be high? We don't want bread prices to be high, do we"

lot prices mjs....lot prices

bread versus shelter fine good question

shelter can be had reasonably enough

rental rates as our man baker notes
are subdued these days

home owners aren't better or worse off because of construction costs

owning an immobile home
just creates illusions of where
the investment value is stored
and what is in fact rising or falling in value

a mobile home
isn't worth that much more (or less )
then it was worth in "real" dollars
ten years before the lot pop
-- hovers around
it's cost of construction
like a house boat --

why would "we" --that is some "we" or other--
want lot prices to go higher or at least stay where they are ???

well if "we "
are in some way connected
to the mortgage payment stream
we want the walk away rate to abate

but who is this "we" measured
in parts per million citizen

as to the lot owner class it self for itself
they needless to say
are a mighty sizeable body
of petty golden calf worshipers

in fact
they're the bulk of voters in america

would these benighted lot holders
be better off today
with a pay raise then with a lot raise

nope prolly not

that's devilish part of this
primo exploiter class scam
once the fish is hooked well ....
it's hooked

walk away from the fantasy folks walk away from the fantasy

money for nothin ain't money for nothin
if you happen to produce your living
by your labor at least
you really borrowed the price of that lot
with your future labor time

so call it a night
leave the table

you bet the game was rigged
you lost

"Why should anyone give a fuck if some greedy corporation loses its investment? "

no one does
but they give a fuck if they lose on their investment

the lot was a leveraged play
2/3 of owners had mortgages
most with fairly thin equity margins
so pop the lot spiral and now...
well of course you wish some how the spiral could get restarted
is that so surprising
wishing of the on a star variety may be foolish
but it's hardly bizzare

" the sole purpose of housing should be to provide shelter"

should mate ?? => davey hume

focus on the game these plebs are in

that they will never see equity in that investment again only debt services that exceed comparable housing rental rates

or is it worse have we two products that provide diffrent use values here

ranch house for sale

and apartments for rent

are the banks renting out their inventory of foreclosed houses ??

maybe they're too smart to make the
right move that obvious

"artificially inflating housing prices to protect someone's investment."
what if "someone" has enough votes
to elect their prefered candidate

"At some point,
we need to come up with
some alternative means
of financing and constructing
affordable housing"

that mission is about equivalent
to finding a cold table top fusion process

forget about it mate

" it costs twice as much to borrow the money as it does to borrow the house"

true or over stated
that still gets at the nub here
from a shelter only perspective

add in the likely direction of real lot values
out to the time horizon (your retirement and move to a condo )and ...
your mortgage payments till then...?

and the chances aren't even close to zero
you are sending good money
down a hole of now return
just to chase after bad money

thinking like a real estate investor
and
thinking like a provider
of a home sweet home
for your personal troop of human units
are two fairly unlike
--if nastily related--
processes

"Anyone not a moron, or blinded by dollar fever, has seen this mess coming since the early 80s."

now that is foolishness

are you claiming lot value appreciation
since the early 80's has now evaporated ??

are you claiming that a lot bought in 82 ans sold any time prior to 08
was a mistake

timing my friend is everything here

now of course calling out
" there will come a day of doom "
is wise in the way what goes up must come down is wise

but only if you got in and out over the last 27 years at least twice and timed it right ....

most homes bought in 83 had
changed hands by 07 ...no ??
-------

pompous sounding off here
like you're moses scolding brother aaron
strikes me as an act of supreme vanity

"we want the value of an hour of labor to be upgraded"
dis regard the prior comment...

THAT line is gospel truth
brother Parker

allahu akbar !!!

no one does
but they give a fuck if they lose on their investment

Obviously. Perhaps I should rephrase the question: why should anyone who doesn't own property care, particularly those currently renting or looking to buy?

that they will never see equity in that investment again only debt services that exceed comparable housing rental rates

That's not a given, even in a bubble market. It depends on what the long term cost of buying is compared to the long-term cost of renting from leechlords, the former being fairly predictable, and the latter anyone's guess.

what if "someone" has enough votes
to elect their prefered candidate

What if that "someone" is us?

that mission is about equivalent
to finding a cold table top fusion process

Inability to envision alternative means of finance is more a failure of imagination than a limit of reality. Immigrant groups often have their own private under-the-table financing networks where they help each other buy cars, establish businesses and send kids to school. I'm not sure what the term for this is but having seen one in action they are quite amazing.

My very silence shows I agree.

sean

2/3 of america lives on a lot they own

out vote em ??? "us" ain't enough
"why should anyone who doesn't own property care, particularly those currently renting or looking to buy?"
they shouldn't
lot rises will effect everyones
opportunity cost of shelter

if they're looking to move from rent to buy
this involves two motives
unit size type and local
usually rentals are not marketed to or designed
for that most kulack of dreams
a growing middle income familly household
with school age little pale monsters

choice here is overly constrained

but this is not the strategic voting block
in most communities
or most counties or states

voters often vote to tag commercial lots
and rental lots with higher tax loads
but the single family owner is the golden calf eh ??

and why make it easier for others
to have such a calf if you're the one selling
it to em

if we want to encourage the rent to buy move
we already do
if we want to encourage first time buyers
we already do

these targeted programs are social engineering
by fairly clumsy but effective means

lot values in general prolly go up some because of this
a borax win win
forbuying budding kulacks
and selling daddy karamazovs too

-------------
equity
2/3 of lot owners have a mortgage
so yes we got a class of equity owners
starting with the 1/3 that have no mortgage

how many have mortgages
exceeding the value of their house ???
ie minus lot value
(recall a lot can have negative value
detroit area maybe )

sean what percent of mortgaged lots
are under water
do you reckon ????
are they not praying for a rise ??

howmany if left to "market forces alone "
that are now under water
will re-surface too late
to benefit the current lot owner ??

since the path between now and then
as you suggest is "uncertain"
maybe it's not worth risking
the additional carrying cost*
( mortgage carry - rental equivalent )

ps
u seem eager to contradict the obvious here
why ???

does social reality annoy you
or simply do i annoy you ??

-------

"Inability to envision alternative means of finance is more a failure of imagination than a limit of reality"

i'll take that mini lecture to heart sean

imagineering is fun !!!!

-------------
example:

"Immigrant groups often have their own private under-the-table financing networks where they help each other buy cars, establish businesses and send kids to school"

the economics of this part of the informal economy is antique

familly
-- and to a far lesser extent friends --
related credit channels
is not something i've looked into
deeply
though we all prolly know a few examples
mine is a particular
thai restaurant
"credit daisy chains"

is this better then credit cards
for someone above ground ???
how is it better ??

what if your familly
like homey's
don't function like that ??

are you one of those micro loan utopians ???

god i hope not

"a liitle bit of do good
lets you down"
as the song sez
habitat for humanity
( so far minus 5 billion 995 million )

there really is a certain range of goo goo token activity
that makes MNC hegemony look open to better prospects
that are in fact bitter frauds
and pipe dreams

the anwer is really simple
uncle builds 40 million units of public housing in all shapes locations and sizes

assured minimum dwelling as right of citizenship

only objective block to that
if it's done gradually but unrelentingly
are the slum lords that
have a veto control
at the local gub level

and of course
the gated community vigilance committees

I want to go on record as saying I like "looksism" better than "lookism."

Meanwhile, old Bill Levitt was just about exactly right about the core political meaning of "home ownership." Combined with commercial TV, it's epic-win propaganda. It's a wonder we can still think at all.

sean what percent of mortgaged lots
are under water
do you reckon ????
are they not praying for a rise ??

That's a good question, and I wonder if anyone can really provide a firm answer. That's because a mortgage is a long-term investment and you would have to have some way of accurately predicting what the renter market is going to do over that same time period to determine if a particular house is truly underwater or not. That is hard enough to do for one house in one area let alone a reasonably accurate sampling of houses across the country. I have no idea how economists determine this, but the calculators I have seen on the Internet to determine if your house is underwater assume a number of factors which may or may not be reasonable. Such as:

1). That the value of your home won't increase over the next 30 years.
2). The monthly cost of renting a comparable house will only increase by 3 percent a year (not even accurate for rent-stabilized apartments in NY State).
3). You can take the difference between what you would pay for rent or a mortgage on an equivalent home and invest it somewhere with a guaranteed return of 8 percent a year.

They also ignore the fact that after you're paid off your mortgage in 20 or 30 years, you're basically done, but you have to keep on paying rent for the rest of your life, and so will your kids until they buy something of their own. Property taxes and repairs would be included in what you pay for rent so they are an equal factor in both cases.

howmany if left to "market forces alone "
that are now under water
will re-surface too late
to benefit the current lot owner ??

since the path between now and then
as you suggest is "uncertain"
maybe it's not worth risking
the additional carrying cost*
( mortgage carry - rental equivalent )

I would imagine quite a few. But whether you wish to gamble or not depends on how you view a house: as an investment, a home, a hedge against leechlordism, or all 3, and how far underwater you are—again, a rather uncertain determination. Where you live would also be a factor. Even from a pure, unsentimental investment angle, it isn't an easy question to answer. I am not Clio.

For me personally, it is worth it to pay a premium not to have to deal with landlords and their bullshit. If I had a home, I'd have to be severely underwater for it to be worth it for me to walk away. 10 percent or so? No way.

ps
u seem eager to contradict the obvious here
why ???

does social reality annoy you

What is obvious to you isn't so obvious to me, and vice versa. You seem determined to ignore the social reality of a few thousand years of landlord/tenant relations on planet Earth, where the tenants for some odd reason were always struggling to gain ownership of the land. Apparently, renting wasn't such a good deal and my personal experience in the tenants rights movement reinforced that reality for me. Your mileage may vary. If I'm missing something, no one here has managed to explain to me what that is, other than to imply my experience is all in my head. I realize the whole housing game is a scam, but which end of the deal—mortgage or renting—is a bigger scam should be our sole bone of contention here.

or simply do i annoy you ??

I confess to a bit of annoyance at your writing style. I would need the Rosetta Stone, psychedelic version to successfully decipher the cryptic, mystical archy on acid thing you do here. To be honest, I usually pass over what you write not because of the quality of your ideas, but because I have no freaking clue what you're saying half the time. I am too busy trying and failing to get your point to be annoyed by it.

"Inability to envision alternative means of finance is more a failure of imagination than a limit of reality"

i'll take that mini lecture to heart sean

I don't see why you're taking things personally, op. My comment was sufficiently general and applies to me as well as anybody else. I am simply syaing the failure to come up with alternatives doesn't mean they don't exist.

are you one of those micro loan utopians ???

Nothing wrong with micro loans in principle. Just in practice their exorbitant interest rates and short term repayment options make them little more than loan sharking without the bats and brass knuckles.

the anwer is really simple
uncle builds 40 million units of public housing in all shapes locations and sizes

assured minimum dwelling as right of citizenship

No argument there.

Not for the first time in our long friendship, Owen, I'm not following you. Would you rather see lot prices stay up? Not a rhetorical question.

I know, "good thing" and "bad thing" seem like childish categories. But sometimes childish categories are useful first approximations. If you had your druthers, Owen -- if you could push a button and make it happen -- which button would you push? Lot prices up, or down?

Maybe this is an idiotically oversimplified question, but for me there's absolutely no doubt. I'd drive 'em down to the point that a whole generation of people would be gun-shy about investing in real estate for the rest of their lives.

Somebody has to own the real estate. To create such a 'gun-shy' generation would fix ownership in the hands of present owners, their heirs and assigns for a generation. You must add more to your pushbutton definition or we remain in fantasy land.

The USA could take ownership of the land and hold it our interest. They have a poor record of stewardship though. Look at the Gulf oil spew or BLM practices in the US western lands.

correction: 'hold it in our interest'

"Somebody has to own the real estate."

Really? Why?

Maybe this is a legal construct -- there's no terra nullius, all terra is by definition alicuius. If Donald Trump doesn't own it, the bank does; or the People.

Okay. The law is the law, even if it is A Ass. But say the land, no matter whose it is, can't be sold for more than a penny an acre -- what's wrong with that picture, exactly?

mjs's 1:30am post:

Somebody ('the king') will buy it all with a loan from Citi. Then there will be a revolution with infinite bad outcomes.

I think that the 'dream' must be imagined differently, involving people demanding and getting representation, thus restoring the momentum of earlier reforms. This is the beginning.

The revolution/reaction pendulum must be avoided or the dream ends badly.

'Relatively' orderly markets that spin out the contraction of RE values over several years to bring the price of housing into line what the price would have been without the bubble would suit the fantasy very nicely. Federal investment in millions of efficiency apartments for tens of millions of retiring boomers who never really 'made it' but who refuse to just die off would make a lot of sense too. All the sensible regulation that Clinton stripped from FIRE sector should be restored. The mortgage interest deduction should be "medianized" so that the portion of the cost of any house that exceeds the cost of the median house is treated as a frill for tax purposes. (Medianization should be generalized to other categories of 'tax expenditure.') Usw....

Just a dream. I have a time horizon for all this befitting a bachelor uncle out of Chekhov.

mjs sorry i didn't get back quicker

i think lot values should be close to zero
but the
location value should be captured by a ground rent tax
i agree spec on lot values is a horror
and a uncle subsidized
source of kulackry ..
---as if we needed subsidized sources of kulackry---

the real value of lots on the otrher hand
i'd rather as of now stayed put neithe rising nor falling

while the product price level chugs away
cutting down the real value of that lot

i oppose any lot value drop because mortgages don't drop at the same time
a perfect example of fishers debt jacket
gaining burdensome ness as the product price level and with it the wage level slowly declines in a deflation

greece right now needs to have its price level relative to say the german price level drop
but not by deflation but by germany speeding up its inflation--not gonna happen eh --

the easy concept here

screw the creditor "class" not the debtors "class"

uncle in the last analysis could easily replace the private creditor class all by his lonesome and to great social advantage

imagine if greece could simply dial down its
debt because it was owed to its collective self not a string of french rentiers
driving the private holders
out of the game would be a sublation
not a draw back

sean

if i make things foggy its not intentional

i do often try to make fairly complex memes pocket size
but i guess one ought to make the meme deadly clear before compacting it
putting it in its till the end of time
suitable for fitting into
it's lutz bone
often leaves a complex meme enigmatic

i usually can unflod em fairly well
if i'm not getting too impatient

i think the land lord tenant relationship
has come a long way since the days of ivanhoe
and even of dixie jim crow share cropping

to rent shelter obviously can lack a certain anchored feeling
but i wouldn't confuse slum lords with suburban rentals

the point of walk away is to stiff the
corporate usury gang
if it causes lot values to drop and triggers
more walk aways i believe that is nothing less then the core mission

"For me personally, it is worth it to pay a premium not to have to deal with landlords and their bullshit. "

what you bring up is just how tenaciously
some will hold on to their very own personal lot
subject themselves to huge exactions
and father S is merely trying to ween them away from that barnicle like attachment

since he doesn't seem to be succeeding
then plan be is to butress lot values so
the self inflicted exactions are less horrible
to get out from under may take ten years but if we ran a swifter inflation rate it could take less time
and meanwhile nominal wages would be rising
at least relative to the fixed principal
amount and maybe if it's also a fix rate
the payments themselves

"The USA could take ownership of the land and hold it our interest"

uncle could start a land bank

and effectively take over as landlord/mortgage holder
on the lots of america
i posted up something to this effect a ways back

http://stopmebeforeivoteagain.org/2009/03/georgica.html

itself prolly too brief

but the key is to see human value in a house
somewhere that is your where

but the lot ought to be simply yours for the tax on it
and the tax on it ought to be the ground rent as near totally as possible and what is the ground rent
the market value for say one year of controling --occupying --that patch of mother earth

we must somehow ration her surface and
a variable tax per square foot
does the trick quite nicely
now this tax could get smmuggled in disguised as the interest payment on a land mortgage
are you seeing where this goes
we could transition to this quite easily

vide in the link to
of
an offer no home owner dare refuse

btw the way the logic of this could lead to a subsidy
ie in detroit if you bought a certain house you'd get payments from uncle for buying it

because unlike other loans uncle's land bank loan can have a negative rate of interest
but oh well 'nough imagineering for the moment

"But say the land, no matter whose it is, can't be sold for more than a penny an acre -- what's wrong with that picture, exactly? "

how do you ration it then

answer the structure above it takes on the value like a transmigrating ghost
and now you haven't succeeded in snuffing out location speculation

you just have to charge full value
per time unit for occupying it
by a purchase price a rental price
or ...tah tah ..by a ground rent tax

a property tax of sorts
like local gubs charge on our homes now

though its not separated from the tax on the house
which by the way i oppose
houses should no more be taxed then cars
or any other durables
and
as a funding source for local services
particularly
imagine the value of a poor community's housing stock
supporting the local schools
nursery thru grade 8 say
what a fine multi generational circle of doom that is

the transition is the problem

how do you convert the mortgage now on the lot
into a ground tax like system

enter uncle's land bank

i must confess something

u read these marvelous total solutions of mine and gasp

" oh my god
walking around with all the answers
to big problems
right there in his head
must be an aweful responsibility"

it isn't

no one cares about answers
they wallow in the problems

last thing they want to contemplate
is how absurdly easy it might be
technically
to solve these "intractable"
problems
when its obviously
completely impossible politically

i think the land lord tenant relationship
has come a long way since the days of ivanhoe
and even of dixie jim crow share cropping

True enough, but the exploitive nature of the relationship remains the same. The only difference is the quality of the rentals (which may even be worse than Ivanhoe in many cases), your rights, the price and the degree of force you can expect if you fail to pay the rent. Other than that, it's the same shit, different era.

to rent shelter obviously can lack a certain anchored feeling
but i wouldn't confuse slum lords with suburban rentals

I wouldn't confuse the quality of the rentals in question, but the relationship is essentially the same. You are still an indentured servant to a landlord in either case, but pay a premium for a better deal in suburbia than you would likely get anywhere else. But you can also expect a lot of the same landlord bullshit in a suburban rental as you do anywhere else, sometimes worse. When the bubble struck up my way there was a massive wave of evictions of tenants by landlords looking to cash in on the bubble. Many of those people ended up homeless. The lack of a "certain anchored feeling" is perfectly justified. The roof over your head can be removed on a landlord's whim.

the point of walk away is to stiff the
corporate usury gang
if it causes lot values to drop and triggers
more walk aways i believe that is nothing less then the core mission

Leading to what, exactly, a nation in which we are all renters and the banks own all the land? I suspect the result of that will be more Ivanhoe than Utopia. The only thing that keeps landords in check is the fact people have alternatives nowadays. Most people own their own shelter, and if landlords squeeze too hard renters can often move in with family, friends or find roommates, or possibly buy their own place. Landlords can of course squeeze pretty hard before any of this happens, but it is still an option. Once the banks own the land, there will be nowhere to run. They can prohibit tenants from doubling up, and pretty much charge whatever the market will bear.

There is no such a thing as screwing a bank. Banks gamble with someone else's money, not their own. If they win, they keep the profits. If they lose, they lose your money, not theirs. You can screw Fannie Mae, the FDIC and the bank's depositors, but the banksters themselves have already cashed in and at worst, you can only cause them to fail to win as big as they would have otherwise hoped. But there is no "lose" for the usury gang. They only lose when they become lamppost ornaments, which rarely happens.

"For me personally, it is worth it to pay a premium not to have to deal with landlords and their bullshit. "

what you bring up is just how tenaciously
some will hold on to their very own personal lot

Land is a necessity of life. The fight to possess it is the history of the human race. Nothing unique about homeownership in this regard. People will fight tenaciously to hang on to a rent-stabilized apartment in the slums, too. Any question as to why?

subject themselves to huge exactions
and father S is merely trying to ween them away from that barnicle like attachment

People who rent are subjected to huge exactions as well, have lesser rights, no right to possession beyond the lease period and those exactions are for life, as opposed to 20 or 30 years for a mortgage after which you own something that protects you and your descendants from further exactions. Indentured servant to a bank for 20 or 30 years versus intergenerational servitude to landlords. I vote for the former.

since he doesn't seem to be succeeding
then plan be is to butress lot values so
the self inflicted exactions are less horrible
to get out from under may take ten years but if we ran a swifter inflation rate it could take less time
and meanwhile nominal wages would be rising
at least relative to the fixed principal
amount and maybe if it's also a fix rate
the payments themselves

A swifter inflation rate will drive up the cost of rentals and make hanging on to a home with a fixed interest rate more desirable. In the case of hyperinflation, it might benefit the banks for people to walk away so they can rent the properties at a better rate than the mortgage payments they would get otherwise. I have this crazy idea that everything we see in the media is what the elite wants us to see, and the media doesn't seem to be too shy about letting people know about this whole "underwater" thing and pointing out that yes, you can walk away. Do they know something we don't?

sean just what are you adding here
to what i responded to in the first place

" A swifter inflation rate will drive up the cost of rentals "

one can hope if not expect rentals to rise
slower then wages and the prices of other household products

" make hanging on to a home with a fixed interest rate more desirable"

didn't i say that ??

-------

the notions you have of rental market dynasmics
versus the mortgage market
strike me
as lopsided

a mortgage is in what way less onerous
month to month ??
if you pay less for the same quality of shelter

landlords have to lease their property to some one
why do you think tey face less competition for tenants then mortgage companies face looking to originate mortgages ???

land was valued because you could live off it not just on it
now it's merely a located "plane"

u really however make MJS point nicely

america needs a walk away movement to get over their post yeoman yoemanic fee simple fetish

if instead of paying down the principal
on your mortgage you jump ship
rent and with the saved income
invest in a mutual fund
what's the diff in thirty years ??
you could buy a condo then too eh ??

recall the equity build up now is negative
for an indefinite period ahead
" principal payments " are earning you nothing
that amounts to equity
so long as you are still underwater

the walk or stay calculation
certainly has several variables
and obviously you need to assume some things here
but you are picking trends over the next thirty yyears
that assume a return
to the price dynamics of the last thirty years
is that justified ???

-------

"the degree of force you can expect if you fail to pay the rent"
obviously far less today then in
serf times no ???

the renter has the freedom to pick up stakes anytime maximum exposure
the security deposit
how is that as immobilizing
as an underwater house ????

"You are still an indentured servant to a landlord "
what ???

a payment to a mortgage company that is higher for the same quality of shelter is less onerous less burdensome ???

" pay a premium for a better deal in suburbia than you would likely get anywhere else"
i don't think the rental cost of comparable shelter is higher per month sean as i understand it its lower

---
"Land is a necessity of life"
no shelter quite often is merely
a utlity of life
eating is a necessity
ask the homeless
i'm repeating myself
but land as the source of food
is not at issue here

only control of a location and its shelter

"There is no such a thing as screwing a bank"
of course there is
the question becomes will uncle not only bail out the innocent depositors but the bond holders stockholders
and most importantly the executive team that pulled off the swindle and crash
a catastrophic walk away
would undoubtly send heads rolling on wall street
if you don't think so
there is the point where we seriously differ

the people already are enraged
by the great bail of 08-09
further overt massive bailing would lead to pitch fork time in my estimation

" I have this crazy idea that everything we see in the media is what the elite wants us to see, and the media doesn't seem to be too shy about letting people know about this whole "underwater" thing and pointing out that yes, you can walk away. Do they know something we don't?"

what are u saying here ??
they want us to walk away ???

I noticed that two items on the SMBIVA blog roll no longer work: Creative Destruction and Progressive Reports Now.

Are you out there Oxy?

oops! constructive destruction. typical link clicker inattentiveness.

one can hope if not expect rentals to rise
slower then wages and the prices of other household products

You can hope for anything you like, but considering that real wages have been fairly stagnant for the last few decades whereas the real price of housing has skyrocketed, why would you assume that would be any different in the future, particularly if we enter into a period of severe inflation?

" make hanging on to a home with a fixed interest rate more desirable"
didn't i say that ??

You did, but you don't seem to realize that a fixed rate mortgage is a hedge against inflation.

the notions you have of rental market dynasmics
versus the mortgage market
strike me
as lopsided

Ditto

a mortgage is in what way less onerous
month to month ??
if you pay less for the same quality of shelter

The monthly cost of a fixed rate mortage is the same throughout its life, whereas rents have historically increased over time to where the rent that is cheaper today will be a lot more expensive tomorrow. I'll demonstrate the math in a bit. Plus, the rent keeps going up and still has to be paid long after your mortgage has expired.

If renting were cheaper over the long run than owning, no landlord could make money. Yet somehow, they do. This fact may not hold true for those buying during a housing bubble, in fact, such a person might lose his money, but that depends on the degree of disparity between owning and renting and the inflation rate over the next 30 years. There is no stock answer to this question, you have to do the math and hope your assumptions are correct.

landlords have to lease their property to some one
why do you think tey face less competition for tenants then mortgage companies face looking to originate mortgages ???

There is greater turnover in the rental market than the mortage market, which along with the fact that 2/3 of all housing is owned rather than rented might indicate a preference for owning.

land was valued because you could live off it not just on it
now it's merely a located "plane"

It is a means of shelter now just as it always has been. The fact you can't raise crops in your condo doesn't mitigate its value as shelter against the elements one iota.

u really however make MJS point nicely

america needs a walk away movement to get over their post yeoman yoemanic fee simple fetish

So far, I am seeing lots of assertion and little evidence to back this point. Better a yeoman than a serf.

if instead of paying down the principal
on your mortgage you jump ship
rent and with the saved income
invest in a mutual fund
what's the diff in thirty years ??
you could buy a condo then too eh ??

Probably not, unless you assume your house and that condo will be the same price in 30 years as they are today, and there is no stock market scam or crash over the next 30 years negatively effecting the value of your mutual fund, and the rate of inflation will be relatively low. If it is high, you will get raped renting versus buying, even compared to a severely underwater mortage. It all depends on these variables, and you have to look at this on a case-by-case basis and hope your assumptions will be true for the next 30 years.

recall the equity build up now is negative
for an indefinite period ahead
" principal payments " are earning you nothing
that amounts to equity
so long as you are still underwater

Let's remember that your rent earns you nothing as well, it is entirely negative It is impossible to answer this question one way or the other without looking at a few real world examples, and plugging the numbers into a rent vs buy calculator. Without a doubt, if your mortage is higher than comparable rent and you plan to sell in a few years, you will likely get burned on an underwater mortage. In 30 years, however, depending on the disparity between the two and the inflation rate, your monthly rental may be higher—–astronomically higher with double-digit inflation--than your fixed monthly mortage payment. After 30 years, your mortgage payment is zero, while the rent will likely keep going up.

the walk or stay calculation
certainly has several variables
and obviously you need to assume some things here
but you are picking trends over the next thirty yyears
that assume a return
to the price dynamics of the last thirty years
is that justified ???

I don't see where assuming a return to the way things have been over the last 30 years is justified. If anything, the concept of being underwater depends on this assumption. My assumption is that things are going to be a lot worse inflation wise, whereas real wages will either stagnate or fall. If my assumption is right, then being able to lock in a fixed rate mortage is a great hedge against that event, even if it means you pay more now per month than for a comparable rental.

"the degree of force you can expect if you fail to pay the rent"
obviously far less today then in
serf times no ???

Never implied otherwise. But homeless is homeless, and the elements will kill your ass as dead in 2010 as in 1210. Shelter is no less a necessity now than it was then.

the renter has the freedom to pick up stakes anytime maximum exposure
the security deposit
how is that as immobilizing
as an underwater house ????

You're right, and that is really the only advantage of renting versus owning: the flexibility of being able to move on relatively little notice, even though you can usually kiss your security deposit goodbye. The disadvantage is that you have to pay out the ass for life for this privilege. versus 20 or 30 years for a mortgage.

a payment to a mortgage company that is higher for the same quality of shelter is less onerous less burdensome ???

Probably not in the short term. But in 30 years, that rental payment might be a lot more than the payments on a fixed rate mortgage, which after 30 years will be zero. I wouldn't anticipate paying the same rent today as you will in 30 years, not would I anticpate paying zero for rent in 31 years. I would need a rent vs buy calculator to illustrate this convincingly and I can't seem to find one.

"Land is a necessity of life"
no shelter quite often is merely
a utlity of life
eating is a necessity

You can't be serious, op. You are arguing semantics here. Shelter is a necesstity of life. Few if any humans can survive indefinite exposure to the elements. Even our caveman ancestors understood this fact. Those that didn't never got to be our ancestors.

ask the homeless
i'm repeating myself
but land as the source of food
is not at issue here

Thousands of homeless people die of exposure every year in this country. Those that don't are often in extremely poor health or at least very miserable. Those who survive of necessity must have been able to find shelter at least some part of the time, however primitive. They may have dumpster-dived for food as well but that hardly means food is a "utility." To think I was laughed at when I asked the question "walk away to what, a tent in the woods?"

"There is no such a thing as screwing a bank"
of course there is
the question becomes will uncle not only bail out the innocent depositors but the bond holders stockholders
and most importantly the executive team that pulled off the swindle and crash
a catastrophic walk away
would undoubtly send heads rolling on wall street
if you don't think so
there is the point where we seriously differ

You're missing the point that they've already cashed in. Over 70 percent of mortgages have been securitized, meaning the bank has sold them to Fannie Mae. etc and pocketed their profits. The banksters have already gotten filthy rich, they have already stolen trillions. The worst that can happen now is that they fail to steal trillions more. We are not getting our money back, and the price of walk-aways, if they are not covered by Uncle, will fall on depositors, Fannie Mae and bank shareholders—like pension funds. They will not fall on the shoulders of a single bankster. Those banksters may never get the chance to rape us like this again, true, but do they need to?

the people already are enraged
by the great bail of 08-09
further overt massive bailing would lead to pitch fork time in my estimation

Maybe so, but that is the only event in which banksters lose. But I expect most will read the the tea leaves and flee to safer pastures before that happens.

" I have this crazy idea that everything we see in the media is what the elite wants us to see, and the media doesn't seem to be too shy about letting people know about this whole "underwater" thing and pointing out that yes, you can walk away. Do they know something we don't?"

what are u saying here ??
they want us to walk away ???

Possibly. Whether that is profitable or not for them depends on what inflation is like over the next 30 years or so. Let's do some math:

1. Bank sells a fixed-rate mortage with $2,000 a month fixed payment for 30 years, versus renting that place at $1,500 a month now subject to annual increases over the next 30 years consistent with inflation.

At 3 percent inflation, the mortage on the house versus monthly rent will be:

Year one. $2,000 M
$1,500 R
10 years: $2,000 M
$2,015 R
20 years: $2,000 M
$2,709 R
30 years: $2,000 M
$3,640 R
31 years $0
$3,750

Now let's look at 15 percent inflation:

Year one. $2,000 M
$1,500 R
10 years: $2,000 M
$6,068 R
20 years: $2,000 M
$24,549 R
30 years: $2,000 M
$99,317 R
31 years $0
$114,215R

If the banks are anticipating high inflation in the future, which is not an unrealistic assumption given the fact there is a finite supply of Chinese and Arabs and Uncle is going to have to fire up the printing presses sooner than later, it would clearly be far more profitable for the banks if owners with fixed rate mortgages walk away and return the property to the bank to be rented at a vastly inflated rate.

Even if we assume that rentals will go down over the next few years, which is possible given the huge drop in demand, over the long run I expect inflation to win out and produce numbers like this, even if not quite so high.

"You can hope for anything you like, but considering that real wages have been fairly stagnant for the last few decades whereas the real price of housing has skyrocketed,"

sean that passage demonstrates a complete lack of comprehension of what i wrote

i am talking wages vs house prices
nmot "real " anything
purely relative numbers
relative rates of increase
and it is precisely this trend of wages
increasing less rapidly then house prices
and rental rates increasing slower then house prices
that has all of a great sudden stopped and reversed itself
with house prices actually falling
even as wages stagnate

the long run trend ---obviously --
shows a relationship between waqges
and house prices
as it does for example between earnings and stock prices

after a long interval above that trend the fairly sound conjecture is a period of correction
unless some one can establish a good explanation of why that long term trend might have motified itself
and even then they'd need to show what the new trend might be

obviously the new trend ratio of rates
if there is one
can be unknown for now
example:
we have a very unclear trend
in health premiums to wages ratio
since the advent of medicare
and tehcno medicine and the drug revolution
however no one has suggested there is no limit to this new emerging ratio
nor that the suburban lot has a similarly revolutionary basis for rate ratio change

at any rate it is more then just likely
the upwardly changing ratio
--in the recent period --
between house price increases and wage rate
increases
will settle back toward longer term trend

and that is what makes me suggest "
a "different ... future"

and if " we enter into a period of severe inflation?"
which i doubt that will only allow the adjustment of the ratio to happen faster
sustainable product inflation comes from wage inflation
currency devaluation that alters the prices of imports and exports
and resource price bursts
like oil is wont to throw at us
are not in themselves sustainable trend inflation fuelers
only a wage price spiral can do that
and as i suggested if ewe get such a spiral cookin and house lot prices don't move as rapidly
then the longer term trend ratio will
arrive all that much sooner

"you don't seem to realize that a fixed rate mortgage is a hedge against inflation."
no the real property mortgaged real property
is the hedge
the fixed rate mortgage
-- among other things--
is the price of that hedge

"a mortgage is in what way less onerous
month to month ??
if you pay less for the same quality of shelter"
sloppy wording
if your wages are rising the burden
of a mortgage with a fixed payment is less

"the rent keeps going up and still has to be paid long after your mortgage has expired."
you ned to seperate out carry cost --interest payments from amortized principal payments
recall the principal payments could for a renter go into a portfolio investment too and at the end you'd have the appreciated value of that portfolio to compare against the appreciation of the house and lot combo

"If renting were cheaper over the long run than owning, no landlord could make money."

wrong you forget the landlords property ie his or her lot
will appreciate in value too
the land lord can have his tenant carry
the mortgage and maintenance
but yes if the land lord bought in a bubble period the same long run dynamics hoit her too
vide the commercial real estate sector today

"during a housing bubble
... a person might lose his money, but that depends on the degree of disparity between owning and renting and the inflation rate over the next 30 years."

now you circle back to square one here

"There is no stock answer to this question, you have to do the math and hope your assumptions are correct."
see above for reason to expect a return to trend by wages increasing faster then house prices

landlords have to lease their property to some one
why do you think tey face less competition for tenants then mortgage companies face looking to originate mortgages ???

they don't
both sides of the market may stagnate
but if so the present over priced homes
that are underwater suggest
a one time default
to get out of the debt combined with a rental for shelter..
come on is this hard to grasp or do you just need to hold on to your home owmers bias
against all odds

"There is greater turnover in the rental market than the mortage market, which along with the fact that 2/3 of all housing is owned rather than rented might indicate a preference for owning."
the preference and amateur speculation has led to the present hung up over mortgaghed housing stock
these are precisely the behavior patterns that have caused the misery
default now hgets the owners into the rental market and out from under their bolder of debt

land was valued because you could live off it not just on it
now it's merely a located "plane"

"It is a means of shelter now just as it always has been. The fact you can't raise crops in your condo doesn't mitigate its value as shelter against the elements one iota."
who said it does
please sean try to understand b4 refuting here

if i said sean you have two choices
shelter but no food for a month or
no shelter and food
which would u take

hence my notice of the homeless problem
versus say a starvation problem
--in the irish famine there were plenty of trees to sleep under
a plot of land allowed one to grow something to ....eat !!!

Better a yeoman than a serf
the renter is hardly a serf
i suggest the serf metaphor applies better to the guy stuck tied to a mortgage and the house lot that it encumbers

next comes a very confused patch of inconsistent speculations:

"..unless you assume your house and that condo will be the same price in 30 years as they are today, and there is no stock market scam or crash over the next 30 years negatively effecting the value of your mutual fund, and the rate of inflation will be relatively low. If it is high, you will get raped renting versus buying, even compared to a severely underwater mortage. It all depends on these variables, and you have to look at this on a case-by-case basis and hope your assumptions will be true for the next 30 years. "

simple clarity here

rentals may rise but only if wages rise equally
and yes if the inflation is high enough it is squeezing down the real cost of the mortgage
we have no argument here

if we get such an inflation
and house prices and rentals participate in this equally with wages
the shrinking relative value of the mostgage
might make the owner of the lot better off
then the renter defaulter
but again only if the gap between renting and buying closes
and its that gap till closed that needs to be assessed and compared to the real value
of the mortgage at the end of the planning period

"Let's remember that your rent earns you nothing as well, it is entirely negative"
as is the net interest payment on the mortgage

"Without a doubt, if your mortage is higher than comparable rent and you plan to sell in a few years, you will likely get burned on an underwater mortage. "
at last a toe hold of agreement

"In 30 years, however, "

how many real households have 30 year plans
what is the likely hood of a move
in say less then ten years
the anchoring to a location in say michigan for another 30 years
might not be wise job opportunity chasing
for example

"depending on the disparity between the two and the inflation rate, your monthly rental may be higher—–astronomically higher with double-digit inflation--than your fixed monthly mortage payment."
sean you act like ths calculation is made in a void

we have history here
you need to think about inflation trends
wage trends
lot value trends and rental trends
and credit trends

all of these now suggest underwater is likely to last a while
and the cost of anchorgae and excess debt payments
might prove very unfavorable

at any rate
the walk away movement if it gained momentum
could chrash the lot market
and realize its own forecast
that is mjs's point i think

After 30 years, your mortgage payment is zero, while the rent will likely keep going up.

the walk or stay calculation
certainly has several variables
and obviously you need to assume some things here
but you are picking trends over the next thirty yyears
that assume a return
to the price dynamics of the last thirty years
is that justified ???

I don't see where assuming a return to the way things have been over the last 30 years is justified. If anything, the concept of being underwater depends on this assumption. My assumption is that things are going to be a lot worse inflation wise, whereas real wages will either stagnate or fall. If my assumption is right, then being able to lock in a fixed rate mortage is a great hedge against that event, even if it means you pay more now per month than for a comparable rental.

"the degree of force you can expect if you fail to pay the rent"
obviously far less today then in
serf times no ???

Never implied otherwise. But homeless is homeless, and the elements will kill your ass as dead in 2010 as in 1210. Shelter is no less a necessity now than it was then.

the renter has the freedom to pick up stakes anytime maximum exposure
the security deposit
how is that as immobilizing
as an underwater house ????

You're right, and that is really the only advantage of renting versus owning: the flexibility of being able to move on relatively little notice, even though you can usually kiss your security deposit goodbye. The disadvantage is that you have to pay out the ass for life for this privilege. versus 20 or 30 years for a mortgage.

Posted by Sean | May 16, 2010 6:35 PM

Posted on May 16, 2010 18:35

Sean:
a payment to a mortgage company that is higher for the same quality of shelter is less onerous less burdensome ???

Probably not in the short term. But in 30 years, that rental payment might be a lot more than the payments on a fixed rate mortgage, which after 30 years will be zero. I wouldn't anticipate paying the same rent today as you will in 30 years, not would I anticpate paying zero for rent in 31 years. I would need a rent vs buy calculator to illustrate this convincingly and I can't seem to find one.

"Land is a necessity of life"
no shelter quite often is merely
a utlity of life
eating is a necessity

You can't be serious, op. You are arguing semantics here. Shelter is a necesstity of life. Few if any humans can survive indefinite exposure to the elements. Even our caveman ancestors understood this fact. Those that didn't never got to be our ancestors.

ask the homeless
i'm repeating myself
but land as the source of food
is not at issue here

Thousands of homeless people die of exposure every year in this country. Those that don't are often in extremely poor health or at least very miserable. Those who survive of necessity must have been able to find shelter at least some part of the time, however primitive. They may have dumpster-dived for food as well but that hardly means food is a "utility." To think I was laughed at when I asked the question "walk away to what, a tent in the woods?"

Posted by Sean | May 16, 2010 6:49 PM

Posted on May 16, 2010 18:49

Sean:
"There is no such a thing as screwing a bank"
of course there is
the question becomes will uncle not only bail out the innocent depositors but the bond holders stockholders
and most importantly the executive team that pulled off the swindle and crash
a catastrophic walk away
would undoubtly send heads rolling on wall street
if you don't think so
there is the point where we seriously differ

You're missing the point that they've already cashed in. Over 70 percent of mortgages have been securitized, meaning the bank has sold them to Fannie Mae. etc and pocketed their profits. The banksters have already gotten filthy rich, they have already stolen trillions. The worst that can happen now is that they fail to steal trillions more. We are not getting our money back, and the price of walk-aways, if they are not covered by Uncle, will fall on depositors, Fannie Mae and bank shareholders—like pension funds. They will not fall on the shoulders of a single bankster. Those banksters may never get the chance to rape us like this again, true, but do they need to?

the people already are enraged
by the great bail of 08-09
further overt massive bailing would lead to pitch fork time in my estimation

Maybe so, but that is the only event in which banksters lose. But I expect most will read the the tea leaves and flee to safer pastures before that happens.

" I have this crazy idea that everything we see in the media is what the elite wants us to see, and the media doesn't seem to be too shy about letting people know about this whole "underwater" thing and pointing out that yes, you can walk away. Do they know something we don't?"

what are u saying here ??
they want us to walk away ???

Possibly. Whether that is profitable or not for them depends on what inflation is like over the next 30 years or so. Let's do some math:

1. Bank sells a fixed-rate mortage with $2,000 a month fixed payment for 30 years, versus renting that place at $1,500 a month now subject to annual increases over the next 30 years consistent with inflation.

At 3 percent inflation, the mortage on the house versus monthly rent will be:

Year one. $2,000 M
$1,500 R
10 years: $2,000 M
$2,015 R
20 years: $2,000 M
$2,709 R
30 years: $2,000 M
$3,640 R
31 years $0
$3,750

Now let's look at 15 percent inflation:

Year one. $2,000 M
$1,500 R
10 years: $2,000 M
$6,068 R
20 years: $2,000 M
$24,549 R
30 years: $2,000 M
$99,317 R
31 years $0
$114,215R

If the banks are anticipating high inflation in the future, which is not an unrealistic assumption given the fact there is a finite supply of Chinese and Arabs and Uncle is going to have to fire up the printing presses sooner than later, it would clearly be far more profitable for the banks if owners with fixed rate mortgages walk away and return the property to the bank to be rented at a vastly inflated rate.

Even if we assume that rentals will go down over the next few years, which is possible given the huge drop in demand, over the long run I expect inflation to win out and produce numbers like this, even if not quite so high

i intended to plow thru all of
sean's points and refutations
but i stopped
and then forgot to erase the rest of his body of work

i guess so what is in order

i doubt sean given his track record here
of assuming the other side in a dialogue lacks even the simplest of notions
it would be hard to get to agreement anyway

it is always better to establish the grounds where agreement exist with folks
that are be strong inclination
refutationists
being one myself ...of sorts
i quite understand its charms

but in a "duel"
wher no blood is possibly drawn
the carving up of the "opponent"
requires the opponent
" to see " for them selves
they've been carved up

entering a discussion with cherished positions only adds to the probability
the carved up one
will not see their carving no matter the degree of dismemberment

a lesson to us all i suspect
in particular myself
on other issues than this of course

here i enter merely as advocate
an agent not a principal

own or rent has no greater claim either way on me then any other economic decision

ther politics here on the other hand could not be more obvious

a mass walk away movement would more then just
stop traffic eh ??

or well it doesn't exist

bored so i continue

"I don't see where assuming a return to the way things have been over the last 30 years is justified."

i said the opposite sean if you followed me that would be obvious
i don't expect nor does the market seem to expect a return to house lot value boom times

" If anything, the concept of being underwater depends on this assumption."
what ???
underwater would be a temporary hiccup if the lot boom resumed
and we got back to the recent price dynamics

anyhow ...

" My assumption is that things are going to be a lot worse inflation wise, whereas real wages will either stagnate or fall. "

If my assumption is right, then being able to lock in a fixed rate mortage is a great hedge against that event, even if it means you pay more now per month than for a comparable rental."

so we have wages stagnating
in real terms or nominal terms ??

if real then nominal wages keep up with general product inflation
and the burden of a fixed mortgage payment falls
so far so good
for vthose with fixed rate mortgages
now we gget the race between rental rates
and mortgage payments

if the rental payments quickly over take the fixed mortgage payments
the sean barnicle astrategy is vindicated
if not well we'll get binto that with sean's numerical example down the column here

"homeless is homeless, and the elements will kill your ass as dead in 2010 as in 1210. Shelter is no less a necessity now than it was then."

are we really talking in such stark terms here ??
the walk away is not homeless she's now a renter

the renter has the freedom to pick up stakes anytime maximum exposure
the security deposit
how is that as immobilizing
as an underwater house ????

".. The disadvantage (of rental living)
is that you have to pay out the ass for life for this privilege. versus 20 or 30 years for a mortgage."

sean if you take the difference between rental and mortgage payments and invest it
then make the comparison
you are looping back again

you earlier went so far as to suggest the investment could crater too
so pick treausries with an inflation index in the coupon rate

"in 30 years, that rental payment might be a lot more than the payments on a fixed rate mortgage,which after 30 years will be zero"

no one can dispute that
but how relevent is it to reality today

" I wouldn't anticipate paying the same rent today as you will in 30 years, not would I anticpate paying zero for rent in 31 years. "

again beyond doubt

"I would need a rent vs buy calculator to illustrate this "

i agree we could use a calculator
though some simple greater than less than analytics might be more enlightening
and verbally we've done that

" "shelter quite often is merely
a utlity of life
eating is a necessity"

You can't be serious, op. You are arguing semantics here. Shelter is a necesstity of life. "

look sean you compared the serfs thirst for fee simple lots and i pointed out they lived off them as well as on them
and thus they were NOT a good comparative to a home owner with a tuny grass lot

"Thousands of homeless people die of exposure every year in this country. Those that don't are often in extremely poor health or at least very miserable. Those who survive of necessity must have been able to find shelter at least some part of the time, however primitive. They may have dumpster-dived for food as well but that hardly means food is a "utility." To think I was laughed at when I asked the question "walk away to what, a tent in the woods?" "

that i actually find too typical of the bleeding heart goo goo in rage mode to notice
this walk away is for job holding kulacks not lumpens

if lumpen life is relevent here
in any way
it is precisely to pre empt the possible road to self ruin
a marginal kulack with an insecure job
might be on
if trying to carry a house and lot
for say another five years or so

then comes this

act of mild presumption

i'm quoted :
"There is no such a thing as screwing a bank"
of course there is
the question becomes will uncle not only bail out the innocent depositors but the bond holders stockholders
and most importantly the executive team that pulled off the swindle and crash
a catastrophic walk away
would undoubtly send heads rolling on wall street
if you don't think so
there is the point where we seriously differ"

then comes this fairly sean-common

act of mild presumption

"You're missing the point that they've already cashed in."

really ???
they can't be reached by the civil justice system ??
they have nothing to fear if the whole set up crashes again ??

" Over 70 percent of mortgages have been securitized, meaning the bank has sold them to Fannie Mae. etc and pocketed their profits. "

not untrue about some orf the dreck
but not my point
if these insiders game of the last 30 years blows up again
i dare say the chance heads will role look to be signifigant enough to send the thieves to the exits

"The banksters have already gotten filthy rich, they have already stolen trillions. The worst that can happen now is that they fail to steal trillions more. "
no the worse is their system wiped out replaced by a utility concept
and their gig never getting restored
perhaps even in their childrens life time

"..the price of walk-aways, if they are not covered by Uncle, will fall on depositors, Fannie Mae and bank shareholders—like pension funds. They will not fall on the shoulders of a single bankster. Those banksters may never get the chance to rape us like this again, true, but do they need to?"

the point is to end the system
going after the last generation of private bankster thieves would just by show trial sport
the oportunity to end the private hi fi system would again be firmly on the table
and it is precisely the public burden this
implosion would trigger that would motivate
a massive public rsaction
the ball would be back in play
the crisis of corporate capitalism back at full volume

and u seem to agree
since you respond to this by me

"the people already are enraged
by the great bail of 08-09
further overt massive bailing would lead to pitch fork time in my estimation"

with this:

"Maybe so, but that is the only event in which banksters lose. But I expect most will read the the tea leaves and flee to safer pastures before that happens."
let us be thankful the srepents have departed
then
if so the great wlak away has gone the limit of fond hopes

" I have this crazy idea that everything we see in the media is what the elite wants us to see, and the media doesn't seem to be too shy about letting people know about this whole "underwater" thing and pointing out that yes, you can walk away. Do they know something we don't?"

then this comes

my question:

"what are u saying here ??
they want us to walk away ???"

answer:

" Possibly. Whether that is profitable or not for them depends on what inflation is like over the next 30 years or so. "

here we get some babylonian "math"
using a 15% annual
rate of monthly rental increases

after which this analysis:

"If the banks are anticipating high inflation in the future,"

and sean here doesn't mean in five years
which to a corporate ceo is eternity
"if we assume that rentals will go down over the next few years, which is possible given the huge drop in demand"

--to his side with a massive walk away
rental demand oughta rise some in certain spots even as it falls in others
but... any who ...)

btw
high inflation
ie 15% compounded for decades to sean is
".. not an unrealistic assumption given the fact there is a finite supply of Chinese and Arabs and Uncle is going to have to fire up the printing presses sooner than later "

a gem that
worthy of the grand M. Bouvard himself

grand scheme consumated:

" it would clearly be far more profitable for the banks if owners with fixed rate mortgages walk away and return the property to the bank to be rented at a vastly inflated rate."

sean

you might consider spending some more time on this strategm
so far i'm not convinced
a mass snuffy smiff walk away
is actually
the seceret plan of wall street

boink:

I escaped blogtopia, for reasons which relate only thematically and not substantively to this thread's debate: who owns what; who retains possessory interest; and what is real vs what is ethereal.

I'm not sure I have a solid position on Baker's theme, on MJS's take on it, or on op's take on it.

Reading Sean's arguments with op, I end up siding with op. I see Sean making distinctions that are without difference of meaningful substance to me.

However, for the first time maybe, I am starting to understand op's angle on American Economics, when he seems to suggest the Amerizombie Populace has had a bellyfull of bailouts and a walkaway movement would force Uncle Sammy to bail out some sector -- either the beleaguered borrowers, or the banksters. And if I'm understanding op correctly, I think I agree with him that an additional bailout of the banksters may be the straw that breaks the Amerizombie (camel) spine and causes people to rethink who has what rights, in reality, compared to what they have believed as their Enduring Myth Born in Childhood.

As to the latter posts by op (vs Sean) --

Commentary on predicting wage stagnation as an abstraction is worthless IMO because it lacks reference. What wage? For what line of work? At what level of experience? In what locale?

In my town there has been big growth in the 12 years I've been here. Average house price has gone from somewhere just below $100k to something like $250k in the decade 2000-2010. The number of houses costing well above 2010 has something to do with that. Used to be you could count on one hand the houses that could fetch over 500k. Now you'd need an army of hands and feet to do the counting, and probably would be better off with a good calculator.

I quit working as a daily 9-5er lawyer in mid-2003 and didn't start looking for employment under another's wing until mid-2008. From mid-2008 to late 2009 I went without work despite holding a lot of experience and several degrees in varied fields.

So whose "economy" is growing in my town?

* "developers"

* health care people

* telecommuting "dot-commers"

* university employees and especially those in the business, communications, and law schools

* service people who serve the above groups of workers

* short-term "boomlet" merchants hawking overpriced trifles to the newly arrived yuppies

At the low end of the town's economy, wages are shrinking. Not just stalling. Shrinking.

More employers are withholding benefits and making employees buy their own insurance, etc.

More employers are using temps.

COLAs are not matching actual costs of living here (see housing price discussion above).

Oxy,
Righteous dude! You're back! Still swinging! But what about
Amber and Holly?
Regards, Boink

boink --

Amber and Holly (and Suresh, Jayne, Felicia and Randall) are on sabbatical. They are in the PRN "war room" strategizing on how to boost the Green Economy in the wake of the Deepwater Horizon oil rig/well disaster. Clearly, simply buying a Prius won't be enough. Exactly what they're planning, well that's anyone's guess. Amber has asked me to give PRN a new "look" when it returns from its sabbatical, so maybe I'll give Amber what she wants. She can be persuasive, especially when she utters that magical phrase, "the Noble Democrats."

I was going to offer a point by point rebuttal to op's post, but once I started i saw I was just repeating myself. To settle this argument, which basically comes down to whether it is better to rent or buy, you need a rent vs buy calculator. The best one I could find is here:

http://www.nytimes.com/interactive/business/buy-rent-calculator.html

With this, you can plug in any variables you like, and see whether it fits your own neighborhood and situation or not. All of the variables here are things op or I mentioned, such as monthly increase in rents due to inflation, or the opportunity cost of a higher monthly mortgage payment versus investing the difference between that and a cheaper monthly rent. My only problem is that it lists utility costs for owning but none for renting, and does not assume that maintenance or renovations will be charged to the renter, which they often are. Even most rent stabilized apartments in New York allow landlords to increase the rent to cover the cost of capital improvements.

It also doesn't allow for any of the usual landlord shenanigans, like heavily jacking up the rent after the first lease has expired, and assumes the money saved by renting in the beginning can be invested in a mutual fund with a guaranteed rate of return of 8 percent over 30 years. No possibility of losing your shirt in the market in this model, or in op's argument. So the graph errs heavily in favor of op's viewpoint.

In this debate, I have acknowledged a number of circumstances in which op might be right, and I am wrong. I haven't noticed op list a single circumstance in which I might be right, and he might be wrong. Instead, he has dismissed my various scenarios with a wave of his hand, neti-neti style, as is his custom in this forum.

Unfortunately, that isn't going to convince anybody but the fan club.

op dismisses the idea that we might have severe inflation in the future as "Babylonian math," but you can see from examples like Chile from 1980 to 1994 that sustained double digit inflation is quite possible even without a wage spiral. In fact, wages decreased in Chile just as they are in America right now.

http://www.indexmundi.com/chile/inflation_rate_%28consumer_prices%29.html

Let's assume op is wrong here, and try plugging some of those numbers into the default example and look at what you get. Try 6 percent inflation in rental prices. Does it look like renting is a better deal?

Now in fairness, the default example is only slightly underwater, but then, the model also assumes a modest 3 percent inflation rate over 30 years. Try making the home price 250,000, which would make it 30 percent underwater and any advantage to owning disappears. This illustrates my point that whether or not op is right, as he is in the latter example, depends on how far underwater the mortgage is.

Now lets assume inflation goes up to 6 percent for that same 250,000 house example, but there is only a 1 percent increase in house value over the same time. Even with that assumption, owning is clearly the better option in the long term, as has been my point all along. If house prices increased at the same 6 percent as rents, owning is a far better deal after just 3 years. The difference between owning and renting here is $1,321,524 over 30 years.

So who is right or wrong here largely depends on your assumptions about inflation. With the government massively in debt, with our jobs base gone, it is not a question of if, but when the government starts printing money. I expect that is going to lead to increased inflation, op apparently doesn't.

As for a walk away movement leading to a revolt, that is certainly a possibility. But if any of the inflation scenarios I offered above are true, walking away won't be a viable option for most, and it could potentially serve the interests of the banks for people to do so as they can clearly make more money renting out foreclosed properties than sitting on mortgages with low interest rates.

sean
good response over all
but you seem to not get the real wage nominal wage distinction here

"Chile from 1980 to 1994 that sustained double digit inflation is quite possible even without a wage spiral. In fact, wages decreased in Chile "
either side in a wage/profit
price spiral can lose
value added share
wages or profits
after a few turns up the barber pole
but nominal wages must rise only less after time then prices
chile had plenty of nominal wage increases
they just never equaled price increases
so in the end profit share rose

the fixed mortgage underwater home investment
is indeed very inflation rate sensitive
but its a poor bet
i doubt many trained or experienced observers expect we'll see galloping inflation
under either head
of the present bi partisan macro policy regime any time this decade
and without brisk inflation
in products wages and rentals
i think sean agrees prospects for misery among underwater home owners looks protracted
ie decade length perhaps

beyond that
ie schol boy drills on 30 year prospects exceeds the sensible time horizon
but at any rate
simply anticipates a shelter move by 65
and n the 30 year view
is restricted to those now under 35

btw
ask one of these younger sort
if he or she looks ahead that far

i think it's a mistake to see seans points as one side mjs and mine as the other

sean has demonstrated the point clearly

the walk away movement is in part
aimed at folks with seans ownership bent

only dramatic action will ween them away from their house lot owner's
masochistic self anchorage

perhaps we need to increase
the clarity of vision
of
home ownerships
b4 they recognize
the promethian rock like exactions
they subject themselves to

they being essentially unbound to the rock but in fact hugging on to it
only makes the calamity of it all
that much more exasperating to watch

are we here writing for "the working class"
i submit this is aimed precisely at you
a pwog

Good to know someone is out there working to save us kulaks, yeomen and pwogs from ourselves. We're unworthy! We're unworthy!

again we are writing for intellectuals
here
not
our class betters the wagelings
the world historical agents of social progress

As opposed to the Egghead Einsatzgruppen, would-be tough-love administrators of the national 12-step program to wean us kulaks, yeomen and goo-goos off our fetishes and addictions. Heavy on the tough, light on the love, though, as compassion is but a bourgeois affectation of rage-addicted goo-goos and church ladies. To make an omelet, heads must be cracked. Lots of 'em. There is no room for sentimentality, or real-world concerns, particularly not of the kulak variety. The more these sinners suffer, the faster they can hit bottom and begin the process of recovery.

That's been a real winning formula for social progress, alright.