Coyote Blog

Kevin Drum and the left think falling savings rates are all ... wait for it you are going to be shocked with surprise ... Reagan's fault.  OK, you are not surprised, since in left-world everything that is not Bush's fault is either Reagan's, Wal-mart's or Exxon's.

Paul Krugman looks at this chart of the personal savings rate in the United States and concludes that Reaganomics is the most likely reason that it fell off a cliff....

But I'd point to two other things that Krugman mentions: financial deregulation and stagnant median wages.  Those seem like much more likely villains to me.  Starting in the late 70s, middle class wages flattened out, which meant there was only one way for most people to support the increasing prosperity they had long been accustomed to: borrowing.  At the same time, financial deregulation unleashed an industry that marketed itself ever more aggressively on all fronts: credit cards, debit cards, payday loans, day trading, funky home mortgage loans, and more.  It was a match made in hell: a culture that suddenly glorified debt; an easy money policy from the Fed that made it available; a predatory financial industry that promoted it; and middle-class workers who dived in to the deep end without ever quite knowing why they were doing it.So, yeah, Reagan did it.  Sort of.  But he had plenty of help.

This is a great variation of the classic "I know what caused bad trend X -- everything I was against before I learned about bad trend X."  The following was my response in the comments:

1. The chart on the left starts out at 8%. Drum picked a recession peak as his starting point, a clever trick, but it appears that when Bush 1 left office the number was still about 8%. The largest fall seems to be in the Clinton years. For which, by the way, I don't "blame" Clinton any more than Reagan, certainly not without any real evidence or understanding of the mechanism involved.
2. Drum's "consumers are all stupid pawns of electronics retailers and credit card companies" wears thin at some point.   It's funny how everyone thinks this is true... of everyone else, but not himself.
3. Let me posit an alternative. The 1980s and 1990s saw huge percentage increases in asset values, both equities and homes. This began just about at the time the savings rate dipped. I would posit that consumers, in their mental calculation of savings, included paper gains on these assets. These paper gains are not, to my knowledge, included in savings rate numbers (you can be sure that is true because, if they were, savings rates would have dropped in late 2008). Thus consumers saved less money from their paycheck (which is measured, so it showed a drop in savings rate) while they considered themselves still to be saving as much or more as previously, because they were counting paper profits on assets as savings.  The big decreases coincide with the 80's bull market, the 90's bull market / internet bubble, and this decades housing bubble.

My explanation in number three will look even better if we see an increase in savings rate over the coming years as consumer expectations about asset value changes are made less exuberant by the recent burst bubble.  A fascinating chart would be to plot savings rate against some measure of consumer expectations of future asset price increases.  I bet they would correlate pretty well.

I have seen several folks of late testing out a meme that opposition to health care reform is mostly about churlish unwillingness to help people.  My sense is that this is dead wrong.

As a strong libertarian, that may well be my motivation.  But the vast majority of Americans accept and support the government safety net and generally will support reasonable expansions of it to address true need.   I think most Americans would be willing to help people who honestly need financial aid to pay the health care bills.  This is particularly true for children -- you don't remember people going ballistic over SCHIP, do you?

I am not representative.  The vast center of this country is willing to accept, even embrace, increased government interventions in the right cause.  I forgot to blog on it, but remember that poll a few weeks ago that a majority of Americans think the government should required that women take their husbands last name after marriage?  I think the notion that there is any kind of sizable block of small government libertarian type folks out there is simply a myth.

So health care intervention and spending can be sold - again remember SCHIP but also the prescription drug bill.  I think the Administration is having trouble selling it in this case for two reasons:

• They are having difficulty showing people who truly are not getting care.  Sure there are a lot of people who are uninsured, but I think that meme has been around enough for people to deconstruct.  Who isn't getting care?   Sure, for some folks getting care is a real hassle, but there are arguments to be made that accepting charity should not be that easy (remember the old Welfare?)  And sure, some folks have financial straights and can even face bankruptcy over health care bills, but our bankruptcy laws are incredibly generous and when tens of thousands are facing bankruptcy because they bought too many TV's on their credit cards, it almost seems honorable to face bankruptcy over your wife's cancer treatment.
• The second problem is what I call the public housing problem.  In the late 1960s, Americans were concerned about the poor and homeless and spent billions to build housing projects for them.  It turns out that this doesn't work out so well, but that is not my point.  My point is that Americans could be convinced to spend money to build poor people government homes.  BUT their position would have been very different if investments in public housing required the rich and middle class who were paying for the program to move out of their homes and into public housing as well.That is the fear that I think much of America has today.  If asked, they would likely pay to provide government health care in an instance where it was demonstrated that health care was entirely lacking.  They would likely suspect that such care, like much of public housing, would suck, but as it was being offered to someone who supposedly had nothing, it would represent a net improvement.  But they don't want to move into the projects themselves, and frankly don't understand why agreeing to help poor people afford more health care also means they have to move into the government system themselves.

Today's issue in Arizona:  Should our public utility be required to provide line extensions to new homes "for free" (meaning paid for by existing rate payers) or should homebuilders, developers, and home buyers have to pay the real marginal cost of their utility infrastructure.

It is another of those subsidy issues where "visible" jobs (ie jobs in new home construction) are held out as justification, while "invisible job losses (ie from higher electricity rates to existing customers) are not even mentioned.

One of the biggest sticking points in the case is whether it is fairer to charge new developments the cost of new lines or simply charge the existing 1.1 million APS customers higher monthly rates to fund free lines.

Proponents of free lines said it would only cost customers 80 cents a month for APS to reinstate free lines, but APS officials said that if growth picks up as the economy recovers, customers could be charged an average of $45 a year to fund free lines.

Why is this even a point of discussion?  A small group of people are attempting to make the majority buy them some goodies. The argument, as always, is that when the price of these goodies is spread across lots of people, its not really very much per person.  It is almost as if the rest of us are being made to feel churlish for not agreeing to fund their next housing development.

I am far, far, far from being an anti-growth guy.  But I agree with the anti-growth guys in one respect - it is perfectly reasonable for new developments to pay for the full incremental infrastructure cost of their development.

I am really left speechless by this.

The Children's Secretary set out £400million plans to put 20,000 problem families under 24-hour CCTV super-vision in their own homes.

They will be monitored to ensure that children attend school, go to bed on time and eat proper meals.

Private security guards will also be sent round to carry out home checks, while parents will be given help to combat drug and alcohol addiction.

Around 2,000 families have gone through these Family Intervention Projects so far.

It actually undershoots the mark to call this "Orwellian," since in "1984" the government monitoring was aimed mainly at combating subversive thought and behavior.  But the Brits are going one better, monitoring families to make sure their kids are eating their vegetables and getting to bed on time.

Incredibly, the oppositions response is that this is... not nearly enough intervention!!!

But Shadow Home Secretary Chris Grayling said: "This is all much too little, much too late.

"This Government has been in power for more than a decade during which time anti-social behaviour, family breakdown and problems like alcohol abuse and truancy have just got worse and worse."

Is there any voice left for individual liberties in England?  Am I missing something here?  This seems simply horrible.  Is there at least due process involved, such that such measures can only be imposed as a result of a criminal conviction (I don't think so, from my reading of the story and comments -- I think this is like Child Protective Services in the US, with a lot of not-subject-to-due-process intervention powers, but maybe my UK readers can fill in more detail).

I liked this from the comments:

These cameras should be in MPs homes so we can see what the scumbags are up too.

Ditto for Congress.  And how about a Lincoln Bedroom cam?

Hat Tip:  Engadget

I absolutely love my Kindle, and take it wherever I go.  I particularly like the wireless feature, such that within 60 seconds of wanting a book anywhere in the country I can have the book.

But the recent events surrounding Amazon retroactively removing books from people's Kindles without their knowledge has me really worried about the model.  I have, by the way, no doubt that there were serious legal issues that forced them to take these steps in this case.  But considering the number of book burnings we have seen by religious nuts and totalitarians and statist-wannabees in even the last century, it is scary to me that we've actually made eliminating a book from peoples' homes so much easier.

Ray Bradbury was creepy enough, with his teams of book burners in Fahrenheit 451.  But even in that book the burning was a struggle.  There was conflict, effort, resistance.   How much worse is it now if books can disappear at a keystroke?  It is a cold sort of horror, like being unable to fight against a germ warfare attack without even the ability of a heroic stand against an invading army.

Update: I have read various places that Bradbury has said his book was not about censorship and the state but about TV and pop culture destroying books and reading.  That it is more of a book of low-culture vs. high culture.  Anyone know the truth of this?

It doesn't matter to me.   I am a fan of both high and low culture (I am reading Les Miserables but last night I took a break to watch a rented copy of Underworld).  If folks can read Huckleberry Finn as a Gay novel, I can read Fahrenheit 451 (while listening to my well-worn Rush 2112 CD, of course) as a critique of censorship and totalitarianism.

The other day I was having a discussion with a smart, well-informed woman who tends to be a bell-weather for Democratic talking points.  When asked about the recession, I said something like this:

The story for banks, corporations, and people are all the same -- everyone has too much debt, everyone took on too much in expectation of things going up and up.  With flat or even down expectations, everyone is now trying to clean up their balance sheet.  They are spending less, building equity and reducing debt.  And the economy is going to slow as a result, no way around it.   I went on to say that I was not only opposed to the stimulus bill in particular, but I was offended that the government would try to interrupt this deleveraging process.  The government had essentially made the decision that if individuals won't spend, then the government will take their money in the form of taxes and spend for them.  And if no one wanted to have debt, the government would go about and take debt on in the name of everyone.

She responded that she thought it was ironic that after the government had worked so hard for so many years to tell people to save more, and that they are only doing it now when it was counter-productive.

Forget for now the whole Keynsian "saving is counter-productive" argument, and focus for a minute on the government communication effort around individual debt.  There is no doubt that to the extent that the government has verbally communicated on individual debt, is has generally been to encourage savings and not take on expensive consumer debt.

But verbal communications are generally the least effective form of communication in the economy (Ralph Nader and his theory that we are all zombies to corporate marketing notwithstanding).  In fact, markets don't communicate via words.  They commucate with price.  Prices are the giant semaphores of the free market, and they are extraordinarily powerful communication tools.  Do people drive less or turn down their thermostats after Jimmy Carter gives a fireside chat about energy conservation in his little cardigan sweater?  No.  People conserve more when prices go up.   When gas prices go up, prices are telling consumers that gas is now scarcer vis a vis demand, and it may be time to conserve.  The same goes for every other thing we buy.  In fact, the only things we actually run out of  (water in a drought, electricity during summer brownouts, gasoline in the early 1970s) are all commodities where the government interfered with and/or severely restricted the ability of retail prices to move with demand.  In these cases, the government tends to substitute public exhortations for pricing signals  (for example, you can't escape water use guilt ads in California).  But these never work as well.

It is the same with personal savings.  The government in its verbal communications may have been saying to save, but what were its actions saying?  The Federal Reserve followed a long-term policy over the last decade of keeping interst rates artificially low.  Low interest rates send a clear and powerful dual message -- save less (because the returns are low) and borrow more (because borrowing is relatively cheap).  Federal tax breaks from mortgage debt and  Federal programs to provide looser credit with lower down payments to less qualified buyers made debt even more attractive vs. savings.  And numerous federal programs helped encourage home buying, while local government zoning and anti-growth ordinances helped keep home prices going up and up.  Every action the government took said "save less, take on more debt."  Is it any wonder their actual verbal communication was ignored?

The AntiPlanner has an update on the New London, CT development that spawned the notorious Kelo case.  In short, they tore Ms. Kelo's house down against her will, and then the whole development deal fell through.  The city now has a nice vacant lot.

The homes of Susette Kelo and her neighbors have all been torn down or removed. But, except for the remodeling of one government building into another government building, virtually no new development had taken place in the Fort Trumbull district by May, 2008.

Having spent at least $78 million on the Fort Trumbull project, the city had awarded development rights to a company named Corcoran Jennison, which planned to build a hotel, an office complex, and more than 100 upscale housing units. The developer had until November, 2007, to obtain financing.

When that deadline lapsed, it received an extension to May 29, 2008. In desperation, the developer sought an FHA loan of $11.5 million. When that didn't work and May 29 came and went, New London revoked the agreement.

Via a reader:

An auction that netted $7.5 million in bids on 56 distressed Utah properties fell through last week after the owners -- three banks and two private lenders -- decided they may get a better deal by holding out for the government's bailout plan.

"There were buyers, but we couldn't sell the homes because free enterprise has gone out of the market," said Eric Nelson, founder of Las Vegas-based Eric Nelson Auctioneering.

His company on Sept. 30 put up for sale 56 foreclosed properties and lots, most of which are in Utah County.

The auction, held in Salt Lake City, attracted thousands, including 200 bidders who bid between $275,000 and $615,000 for 10 luxury homes in Midway and Murray that were appraised at between $525,000 and $652,000. They bid between $26,000 and $100,000 for 44 custom lots in Mapleton, Elk Ridge, Lehi, Alpine, Ogden, West Haven and Willard that were valued between $112,000 and $290,000 a piece.

The most-expensive properties on the auction block included a $1.2 million unfinished home in Draper, which attracted the highest bid at $615,000, while a 62-acre parcel in Park City that's valued at $3.5 million, snagged the highest bid at $1.125 million, said Eric Taylor Nelson, the company founder's nephew.

But all those bids were rejected late last week...

"This has never happened before. In the 25 years we've conducted lender-owned auctions, we've consistently closed over 95 percent of all high bids," Nelson said.

"The stock market's historic drop last week and the bailout plan are some of the main reasons why the lenders rejected the bids," he said. "They're thinking, 'Why sell the properties for 50 cents on the dollar when they may get 75 cents or 80 cents through the bailout?' "

At first, I thought this was an interesting article in the battle of urban planners against suburban "sprawl."  Here is the voice of the often silent majority, who like suburbs and don't want a bunch of high-density mini-Manhattans :

Jones and his neighbors moved to Laveen's low-scale subdivisions in
hopes of finding a suburban life near the heart of the Valley, where
they could enjoy large, affordable homes a few miles southwest of
downtown Phoenix.

"We had the opportunity to buy a brand-new home we could afford, and
we had a view of downtown," Pacey says. "The potential to make this as
wonderful as other areas of Phoenix is huge."

The story has the typical highly-connected former politician turned developer (is there another kind?) using his unique access to his old zoning cronies to manipulate regulation for personal profit:

Then Paul Johnson, a former Phoenix mayor, proposed taking a mostly
vacant 27-acre parcel a few blocks east of Jones' home and building 517
apartments and townhouses on it.

The property was zoned for one house to the acre. It abuts a
two-lane road where the speed limit, when two nearby schools are in
session, is 15 mph. And the nearby intersection of 27th and Southern
avenues, which provides access to downtown Phoenix, is still controlled
by stop signs.

Schools in the neighborhood already were overcrowded, and residents
were concerned about the police's ability to keep up with calls for
service. Where were all these new people going to go?

"They've done so much building in Laveen that the infrastructure has
not kept up," says Jones, an auditor who had no previous involvement in
civic affairs.

Despite a resident outcry and opposition from Michael Nowakowski,
the councilman who had just been elected to represent the district, the
council approved the rezoning 7-1 on Dec. 19.

Johnson gets extra bonus points as the urban-chic villain, expressing the superiority of sitting in cafes to, say, having a back yard.

As a former mayor, Paul Johnson is familiar with residents' arguments against high-density developments.

"They feel that any time you have additional density, that it means
a lower quality," he says one morning over coffee at Biltmore Fashion
Park. "The counter to that is this."

Johnson gestures across Camelback Road to the high-rise apartments and townhomes near 24th Street.

"I look out across the street, and there's a lot of density there,"
he says. "But I'm also sitting in a pretty nice cafe. I have a nice
place to sit. And there's a lot of other people here who think it's a
nice place."

But it turns out that there are no good guys in this story, as is often the case for your poor libertarian correspondent.  Because, the opponents of such development are turning to the ballot box, converting property decisions from individual ones made by the property owner to group decisions made on election day.  What can be built on this particular property may well be decided at the ballot box, just as I discussed another parcel of land whose fate will be decided not by its owner, but at town elections in November.

Sometimes, the reaction to government control is a bid for de-regulation.  But more often, it merely results in a scrap for power, as parties ignore the question of whether the government power should exist at all, and instead fight over who gets to wield it.

For the most part, it has been up to city councils to decide how
much density one neighborhood can tolerate. If Jones is successful,
they could lose some of that power.

"It speaks to the age-old dilemma of representative democracy versus
direct democracy," said Paul Lewis, an assistant professor of political
science at ASU. "There's always an issue with land use because what
might be in the overall interest of the city might still be seen as a
detriment to its immediate neighborhood."

This is all very depressing.  No mention of any age-old question between individual rights and government power.  For these guys, the "city" and the "neighborhood" are somehow real entities with more rights than actual people. 

For centuries we have had a perfectly serviceable approach for determining who gets to decide what gets built on a piece of land:  ownership.  If one wanted to control a property, she/he bought it.  But the desire to control property without really owning it is a strong one, and a driving force for much of government regulation.

Mark Perry has had a series of posts of late presenting the hypothesis that high rates of home ownership in the US may be detrimental as it reduces labor mobility.  The argument goes that homeowners have a harder time moving for new jobs than renters do.

Homeownership
impedes the economy's readjustment by tying people down. From a social
point of view, it's beneficial that homeownership encourages commitment
to a given town or city. But, from an economic point of view, it's good
for people to be able to leave places where there's less work and move
to places where there's more. Homeowners are much less likely to move
than renters, especially during a downturn, when they aren't willing
(or can't afford) to sell at market prices. As a result, they often
stay in towns even after the jobs leave. And reluctance to move not
only keeps unemployment high in struggling areas but makes it hard for
businesses elsewhere to attract the workers they need to grow.

The argument makes sense on its surface, but I am having a bit of trouble buying into it (though I will admit that as an American, I am steeped in decades of home-ownership-boosterism, so I may not be approaching the problem without bias).

On the plus side, the selling a home and buying a new one certainly has more costs than switching apartments, particularly if you add in a moving premium for home owners who can accumulate a lot more stuff than apartment dwellers and the switching costs due to emotional attachment to the current house.  Also, on its face, the argument is similar to criticisms of the economy of the antebellum south, where too much capital was invested in land and assets tied to the land.

However, I see a couple of problems with it.  First, its hard to find an increase in structural unemployment rates in the past decades to correlate to the increase in home ownership.  Second, the costs to change homes has been falling of late as the government-protected Realtor monopoly is finally being broken by technology and commission rates are falling.  Third, my sense is (though I can't dig up the data) that the average time in a home is dropping, meaning homes flip owners more frequently, again indicating a decreasing barrier to moving.

I would, however, be willing to accept that in a high home ownership regime, falling home prices and lengthening for-sale times could exacerbate an economic downturn by slowing mobility and thereby slowing the correction.  I would have argued in the past that this was offset by home equity as a savings tool and a source of cash in difficult times, but that could be different this time around as mortgage policies have tightened, drying up the ability to convert equity to emergency cash.

San Francisco has a ballot initiative this November to seize all PG&E transmission lines and assets in the city such that all city power comes from a new government owned utility.  Further, the initiative would require that this new entity get 100% of its power from renewables, particularly wind and solar, by 2040.  It is similar to a 2001 initiative.

All due respect to PG&E's private property, but I would love to see this happen.  If I were governor, I would be seriously tempted to encourage them to proceed, with the only proviso that no one else in California be allowed to sell electricity to San Francisco on the hugely unlikely possibility that there might be a day without sunshine in San Francisco.   (I find it hilarious that San Francisco's solar future is trumpeted in the "fog city journal.")  This might actually be a big enough disaster that even the media would have trouble ignoring its spectacular failure.  It would also do wonders for the Arizona and Nevada economy, as major industries would move our way.

I am sure San Francisco is well on their way to success.  After all, the city just completed its largest ever solar project. 

            The solar system is expected to generate 370,000 kilowatt hours of
electricity annually, enough to power 80 San Francisco homes.

Wow.  It can power 80 whole homes, as long as its not night time or winter (when it is seldom sunny in SF).

From the AZ Republic:

A 27-year-old Avondale man has been arrested on suspicion of causing
a massive power outage last summer in Goodyear's Estrella community.

The outage knocked out power to nearly 4,000 homes for 19 hours June 18, 2007, when Goodyear's high reached 115 degrees....

According to police, officers arrested the suspect on a tip from the
public. He reportedly told investigators he cut down the pole because
he enjoyed the sparks it made.

Unlike many libertarians, I don't blog about gun rights much.  Some think this odd, but in my mind this is like saying it is odd that a female blogger doesn't blog much about abortion.  I have always thought it was pretty clear that the 2nd amendment protects an individual right to bear arms, but it's just not a subject for which I have much passion  *shrug*

However, I did find this hilarious.  Megan McArdle passes on the District of Columbia's petulant response to the Heller decision:

Here's what they're proposing:

* Allowing an exception for handgun ownership for self-defense use inside the home.
   
* If you want to keep a handgun in your home, the MPD will have to
perform ballistic testing on it before it can be legally registered.

* There will be a limit to one handgun per person for the first 90 days after the legislation becomes law.

* Firearms in the home must be stored unloaded and disassembled, and
secured with either a trigger lock, gun safe, or similar device. The
new law will allow an exception for a firearm while it is being used
against an intruder in the home.

* Residents who legally register handguns in the District will not
be required to have licenses to carry them inside their own homes.

OK, so I can have a handgun in the home solely for self-defense, but this self-defense weapon must be stored unloaded, disassembled, and locked.  The only time it can be unlocked and assembled and loaded is "while it is being used against an intruder".  Jeez.  In the time it would take to unlock, assemble, and load the gun, I could probably build some McGyver device out of dental floss, a TV remote, and a couple of Thin Mint Girls Scout Cookies to just blow them up.

Postscript: I have never been that confident in my ability with a handgun.  TV portrayals notwithstanding, I find them very difficult to handle accurately, and they require a lot of practice which most casual owners don't pursue.  In my case, I find this a more realistic home defense weapon.

OK, here is the story to date:  Paradise Valley is a small, very wealthy town within the boundaries of Phoenix.  There is no commercial development allowed in the town except for a series of golf resorts, of which there are a number.  The town had one last large tract of unbuilt land, owned by the Wrigley heirs, I believe, that has for years been zoned for a resort.  There was an auction several years ago in which the land was sold for some figure north of $70 million to a group who wants to build a Ritz-Carlton resort, a hotel chain notorious for bringing riff-raff into communities ;=).  The Ritz group unanimously obtained all the town council and planning board approvals it needed to build.

Except now a ballot initiative will be voted on by the town residents in November as to whether to allow them to build a resort on their own land that is zoned for a resort (my previous report, complete with Zillow maps).  This action is consistent with the absolute resistence that every resident's attempt to do a major remodel of their house encounters from various community groups and zoning bodies.

One lesson, of course, is that local participative democracy can be just as much a threat to individual rights as the worst dictatorship  (though this is not a new lesson -- it was in fact learned in Athens when it was first tried).  But a second lesson is just how short-sighted this is.  I am sure residents convince themselves in each such individual effort that they are somehow protecting their property values.  But in sum, the effect of multiple such efforts is to make people reluctant to invest in property in the town, fearful that some citizens group or zoning body will take control of what they can do with their land. 

I live about 4 houses away from the Town of Paradise Valley in the city of Phoenix, though most of my neighbors and even the US Postal Service think I live in PV.  It used to be, about 10 years ago when I moved in, that living outside the PV boundary was considered a negative.  There was a big enormous value gradient between the nearest PV home and mine, based as much on snob appeal of the address as anything else.  Now, however, the gradient is reversing (hurray for my home equity!)  Real estate agents in my neighborhood who used to hide the fact that the homes are not actually in tony PV (shame on them) now use it as a selling point.  My remodel contractor breathed an enormous sigh of relief when he found out that I was, in fact, not in the town of PV.

Help me out, readers.  I seem to remember there was a name for an economic game where the profit maximizing strategy when playing once was different than if one were playing multiple times in sequence.

PS - If you are confused why a town would consider a Ritz to be bringing down the neighborhood, see here, complete with Zillow maps where not a single surrounding home is going for less than $1.8 million. 

Arizona voters will have a chance to raise the price of a new home and reduce the choice they have in the marketplace with an initiative on the ballot this November:

The proposed measure, which requires more than 153,000 certified
signatures to qualify for the statewide ballot, includes a 10-year
warranty on new homes and gives homeowners the right to choose which
contractors with a decade-long, complaint-free record do repair work.

Having shopped from time to time for a new home, I can say that such homes with extended warranties from quality companies do exist in the marketplace - some builders offer this kind of warranty, and some do not.  All this bill is doing is reducing choice.  It is requiring that consumers no longer be offered the choice of a new home without a 10-year warranty, and will require that all homes carry this more expensive option.  I am sure that what people voting for this bill will hope for is that they will be getting today's less expensive house but with a 10-year warranty added, but that is not the way it works.

Second, this will virtually eliminates the small independent builder.  Though they do not produce a large percentage of the total homes, small builders, often individual investors with a single property, are still an important part of the market.  You might say, surely this is just an unintended consequence!  Well, what if I told you the AFL-CIO, the largest organizer of construction workers in large home builders, is the #1 financial supporter of this bill?  That information might change this from an unintended consequence to the #1 rationale behind the bill.

Finally, one can easily argue that the law is forcing people to pay for something that may well have no value.  Individuals trying to game the system can easily start a company, build some houses, pay off owners, fold up the tent, and move on to a new entity.  Consumers are left with a 10-year warranty from a company that no longer exists.  Which is how the roofing game is played by the bottom-fishers in that industry.  Which means customers have to shop around for well-established companies with long track records and good products, which, if they did so, would obviate the need for the bill in the first place.

Provisions give homeowners the ability to sue without the threat of
being responsible for a builder's attorney and expert fees and require
builders to disclose their relationships with financial institutions.

Just what we need - another industry where the plaintiffs have zero cost to launch any frivolous suit they want.

Yet another would require that model homes reflect the types of properties that are for sale.

I have no idea what this means.  Are there really buyers who are dumb enough to walk through a model, say this is the house they want, and then blandly accept a home that is totally different?

What I perhaps found funniest about the article was this bit of political positioning:

The campaign, called the Arizona Homeowners Bill of Rights
Committee, formed in the midst of this year's housing-mortgage
meltdown. And the committee has attempted to draw links between
financing and construction troubles.

"These same companies that build shoddily also were involved in the
housing-mortgage crisis. They were on both sides of this equation. They
were financing homes above people's means and selling homes that were
defective," said Richard McCracken, an attorney for the measure's
sponsor, the Sheet Metal Workers' International Association, Local
Union 359.

This is kind of a hilarious stretch - talk about guilt by association.  Of course, the bill has nothing to day about mortgages, but since homebuilders were associated with those bad mortgage guys, we should feel free to do anything we want to them.

It is interesting that with home prices and gasoline prices going in opposite directions, the media can declare both trends to be disasters for Americans.  Via Scrappleface:

The U.S. housing crisis reached fever pitch this month, with potential foreclosures up 48 percent compared with May 2007.

The devastation of receiving foreclosure notices has now swept
through a full 2/10ths of one percent of American homes. About 1/10th
of one percent of owners may lose their homes. For some of those
people, it's actually their primary residence in jeopardy, rather than
a second home, rental property or vacation condo.

 

To add insult to misery, mortgage rates skyrocketed this month to
6.32 percent, a shocking figure a full third of what it was during the
Carter administration.

As a result of the flood of homes on the market, real estate agent
commissions have dipped precariously, and home buyers increasingly
wrestle with the guilt of paying bargain prices for excellent
properties.

Market analysts say home prices could plummet as much as another 10
percent by the end of 2009, leaving first-time home buyers to face the
specter of owning a more spacious residence. The additional square
footage inequitably boosts the burden of cleaning, heating and air
conditioning.

The Anti-Planner links an article by a Federal Reserve Bank economist on the housing market in Houston and how it is affected by zoning:

"Given that Houstonians had access to the same new types of
mortgages as the rest of the country and that Houston has had greater
population growth than other large metros, we might expect price
appreciation to be stronger in Houston than elsewhere," says the
article. "However, the opposite has been true."

The reason? Houston's lack of zoning and its large supply of land
available for development allowed builders to respond to easy credit by
increasing the pace of construction. Slow and unpredictable permitting
processes prevented builders in many other regions, including Florida
and the Pacific Coast states, from similarly stepping up production.

While some cities and regions have further delayed construction by imposing adequate public facilities or concurrency ordinances, Houston allows developers to create their own municipal utility districts.
Through these districts, the developers install the sewer, water, and
other facilities needed by their developments and charge the property
owners over time.

The result is that housing prices did not bubble, and they are not
significantly declining today. As of the fourth quarter of 2007, in
fact, they were still increasing. Anecdotal evidence from local
realtors and developers indicates that the tightening credit market has
soften the demand for homes under $200,000, but homes above that price
are still selling well.

Whatever correction Houston faces, says the article, "takes place in
the context of prices that are squarely in line with local construction
costs and without the painful supply-induced downturn under way in many
other markets." This leaves Houston relatively immune to the ups and
downs of housing prices experienced in regions with planning-induced
housing shortages.

I need to think a bit about how that relates to this.

So much of government regulation boils down to the protection of politically connected incumbent competitors against new competition.  This is an astonishing example, sent in by a reader:

BEMIDJI, Minn. - Assistant House Majority Leader Frank Moe says people
who rent out their lakefront homes may be hurting the state's resort
industry.

The Bemidji DFLer has authored a bill ordering the
state's tourism agency to study whether the increased competition is
hurting resorts. It's now awaiting Governor Tim Pawlenty's signature.

If you are willing to make up your own bed, there are a lot of reasons why private home rentals are a more attractive vacation option than resorts, particularly when you consider the high price of those ancillary resort services.  Why the government needs to be involved in what is, to my eyes, just a normal consumer preference is beyond me.  This last line caught my eye:

The state's resort industry is struggling as lakefront property values
soar but the market restricts what they can charge for cabin rentals.

Uh, OK.  I have the same problem -- land for cabins and campgrounds in areas people want to spend the weekend is really expensive, labor costs are up, but rental rates remain low.  So what?  Through their preferences and how they translate to prices, consumers are saying that there is better uses for prime land than lakefront rental cabins.  I can accept that.

The city of Phoenix's $97 million subsidy for the developers of a new Phoenix shopping mall has been ruled by a local judge as being "'undoubtedly' in the public interest."  Even weirder, the developers lawyers are so mad at having their largess questioned that they are demanding the Goldwater Institute pay them $600,000 in attorneys fees as punishment for even questioning whether funding private mall parking lots that would have been built anyway is really in the public interest.

The subsidy, which I described in more detail here, provides $97 million for the construction of a parking garage at a new mall in North Phoenix, with the only condition being that the mall owners provide free parking in the garage to the public.  I can think of only three reasons this would be in the public interest:

1.  Without the subsidy, the mall might not provide enough parking
2.  Without the subsidy, the mall might charge for parking
3.  The parking garage could serve other surrounding businesses or homes within walking distance

Now, some of you on the coasts may be confused about this, so let me give you one other piece of background.  There are hundreds of shopping malls in the Phoenix area, from local strip malls to huge mega-malls of the type in this case.  At least 99.9% of the parking at all of these malls has been paid for with private funds.   Every one of these has plenty of parking.  This might not be the case in Boston, where land costs are high, but here in Phoenix, land is relatively cheap and malls are plentiful -- If I can't find a parking space, I would just go to a different place to shop.

Further, do you know the total number of these spaces at mall in Phoenix that are not free?  Zero.  OK, there may be one mall downtown that charges money to park, but for any mall in the area in which this one is being constructed, it would be insane to charge to park.  There are just too many competitor malls with free parking.

Finally, as to #3, look at the satellite view here.  Enough said. 

So the city paid $97 million in return for nothing of value, or at least nothing of value that the mall owners would not have provided on their own out of their own self-interest.  The only thing that I can identify the $97 million bought was possibly influencing the decision of one store (Nordstrom's) to locate in this particular development rather than 1 mile away, over the city line in another development planned in the City of Scottsdale.

About the numbers:   I really can't get away without taking on this statement in the same article:

According to its developers, CityNorth is expected to generate $1.9 billion in annual economic activity

In 2005, the metro Phoenix area had a GDP of $160 billion dollar.  The retail component of this is about $12 billion.  So this one mall / real estate project in one small part of Phoenix, one of hundreds just like it all over town, will increase our city's GDP by over 1% and in particular increase the city's retail output by 16%.  Sure.  I really wish our local paper would be just a tiny bit more credulous about printing these numbers from promoter's press releases.

I am increasingly convinced that John McCain believes in nothing, or at least believes in nothing strong enough that he can't turn a 180 on the issue if the polling numbers move the meter hard enough. 

The plan would retire old
loans that homeowners no longer can pay and replace them with less
expensive, 30-year, fixed-rate mortgages that are federally guaranteed.
McCain said families would gain "the opportunity to trade a burdensome
mortgage for a manageable loan that reflects the market value of their
home."

In line with
his concern about bailing out speculators, McCain's proposal would
apply only to homeowners who took out sub-prime mortgages after 2005
for homes that are their main residence. They would need to have proved
they were credit-worthy at the time of the loan.

I hope everyone else is enjoying the notion of "sub-prime mortgages" where the borrowers were "credit-worthy at the time of the loan." 

Don't buy property in Paradise Valley (a suburb of Phoenix, near Scottsdale) if you actually expect the property to be fully your own.  Even the smallest revisions of your home can require multiple appearances in front of the town council.  By some odd statistical anomaly, property owners with friends in the city government seem to get these changes approved more readily than those without such influence. 

Anyway, things just get worse if you own a lot of land in PV. 

A residents group is preparing to launch a voter referendum against the
planned Ritz-Carlton, Paradise Valley Resort, claiming the project's
residences are too dense....

Scottsdale-based Five Star Development wants to build a 225-room resort
hotel, 15 1-acre home sites, 46 luxury detached homes and 100 patio
homes on about 105 acres northwest of Scottsdale Road and Lincoln Drive.

This really isn't very high density, but this can be a very flaky town.  One thing you have to realize is that I can't remember the last new home I saw go up in PV that was less than 5000 sq ft and 10,000+ sq ft is not at all unusual.  This may be one of the few cases where a town is trying to keep out the Ritz Carlton because its customers will bring down the neighborhood, lol, but that is exactly what is at work here, in part. 

Now I know you think I am exaggerating when I say the locals are worried about a Ritz-Carlton bringing down the neighborhood by attracting the unwashed, but here is the Zillow sales page for the area -- the vacant lot in the lower right is the property in question.

This piece of land has been empty and zoned for a resort for years.  I know it was zoned for a resort long before this sale because I was stuck in traffic court all day and had nothing to stare at but the town zoning map  (don't ever speed when crossing PV).  The buyers purchased this land several years ago (I think from the Wrigley family) after ensuring the zoning was solid.  If the town's residents wanted something else on the lot, they should have bought it themselves.  But it is ever so much cheaper to instead use your political influence to tell other people what they can and can't do with their property.

Another thought:  It is nearly an article of faith among libertarians that devolving government to the smallest possible unit enhances freedom.  Well, here is an example where it does not.  Not state or even city would pass a ballot resolution to change the zoning on one small piece of land.  But it is entirely possible this could pass in a town of just a few thousand people.

Now, I will confess to be a lover of quite modern home designs, but with that in mind, I really think that this design is a breath of fresh air in manufactured homes.  A lot of people are buying these as vacation homes or cottages for land they have bought, either permanently or as a temporary solution until they build their dream vacation home  (Don't click the "decor" button though - it seems that furniture design for manufactured homes is still stuck in the 50's).

The looming federal government takeover of health care as proposed by most of the major presidential candidates will be far worse than anything we have seen yet from government programs.  Take this example:  In the 1960's, the federal government embarked on massive housing projects for the poor.  In the end, most of these projects became squalid failures.

With the government housing fiasco, only the poor had to live in these awful facilities.  The rest of us had to pay for them, but could continue to live in our own private homes.

Government health care will be different.  Under most of the plans being proposed, we all are going to be forced to participate.  Using the previous analogy, we all are going to have to give up our current homes and go live in government housing, or least the health care equivalent of these projects.

Think I am exaggerating?

One such case was Debbie Hirst's. Her breast cancer had metastasized, and the health service would not provide her with Avastin,
a drug that is widely used in the United States and Europe to keep such
cancers at bay. So, with her oncologist's support, she decided last
year to try to pay the $120,000 cost herself, while continuing with the
rest of her publicly financed treatment.

By December, she had
raised $20,000 and was preparing to sell her house to raise more. But
then the government, which had tacitly allowed such arrangements
before, put its foot down. Mrs. Hirst heard the news from her doctor.
"He looked at me and said: "˜I'm so sorry, Debbie. I've had my wrists
slapped from the people upstairs, and I can no longer offer you that
service,' " Mrs. Hirst said in an interview...

Officials said that allowing Mrs. Hirst and others like her to pay
for extra drugs to supplement government care would violate the
philosophy of the health service by giving richer patients an unfair
advantage over poorer ones.

Patients "cannot, in one episode
of treatment, be treated on the N.H.S. and then allowed, as part of the
same episode and the same treatment, to pay money for more drugs," the
health secretary, Alan Johnson, told Parliament.

Here is the poll question I would still love to see asked:

Would you support a system of
government-run universal health care that guaranteed health care
access for all Americans, but would result in you personally getting
inferior care than you get today in terms of longer wait times, more
limited doctor choices, and with a higher probabilities of the
government denying you certain procedures or medicines you have
access to today.

The AP does a great job in this story reporting absolutely everything but the most important fact:

The Supreme Court has refused to offer help to Hurricane Katrina
victims who want their insurance companies to pay for flood damage to
their homes and businesses.

Wow, those insurance companies suck, and they have the Supreme Court in their pocket.  The only teeny-tiny fact missing is that the people suing had policies that very explicitly did not cover flood damage.    They sortof acknowledge this but say the insurance companies should pay anyway, because the flood was caused by a broken levee and that somehow is not really the same kind of flood, sort of.  Or whatever. 

People have been defaulting on mortgages for all of recorded history.  In Roman times, such a default could well result in the mortgage-holder getting sold into slavery, so things have improved a bit.  But seriously, people default on their mortgages all the time.  So what makes those currently in default more deserving of taxpayer aid than those before them or after them?  I mean, other than the fact that the press is paying attention to these particular defaults?  A similar question was reasonably asked of 9/11 victims who scored government compensation when victims before or after of other transportation accidents and building fires have not been so rewarded.

I challenge any politician to answer this question with an answer other than "well, these people are in the media spotlight right now and as a politician, I want to be in the spotlight with them."

Update: More analysis here, including the bright side of the burst housing bubble:

Countrywide wants to be
able to take its loans that the market won't accept and refi them under
FHA or FNMA. That's what this is all about. Don't forget that.

It's
not about homeownership. Let's look at the latest 25th percentile
(starter homes) list prices for a range of CA cities, compared to the
price in January 2007:

LA: $365,000/ $429,920
OC: $414,900/ $499,000
Riverside: $259,900/ $335,000
Sacramento: $229,900/ $316,477
San Diego: $325,000/ $392,279
San Francisco: $380,000/ $468,376
San Jose: $489,950/ $580,589
Santa Cruz: $489,000/ $577,400

What
you see above is great news for all the people who would like to buy
homes without going bankrupt a few years down the line. It's VERY bad
news for banks and financial companies that made the original bad loans
without bothering to check whether the borrowers could pay the danged
loan. You figure out who this country should reward - responsible
aspiring home owners or stupid banks.