March 27, 2012

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Here’s what we know about the housing market: You need some place to live and you have increasingly crappy options.

Renting, it turns out, is basically still expensive. If you’re inclined to buy a home, first check out David Leonhardt’s fantastic rent vs buy calculator, and then gird yourself to contend with a stream of ominous news. You can start with today’s Case-Shiller results (PDF), which indicate that home prices fell back to 2003 levels in January.

Of course, you won’t make your home-buying decisions based on national averages. No, Discerning Potential Home Buyer, you know that all real estate is local and can see, for example, that home prices in Atlanta fell 14.8% in the last year and that even coastal-elite-friendly enclaves like New York and San Francisco fell 2.9% and 5.9% respectively.

There’s been no shortage of housing bottom calls of late, including from Calculated Risk, Barron’s, Karl Smith at Modeled Behavior and a sometime-this-year prediction from BofA Merrill Lynch. (Please ignore Jim Cramer’s housing bottom call from June 2009.)

A market bottoming-out never intuitively feels like a buying opportunity, certainly not with 28% of all mortgaged homes underwater, reports of rising foreclosures in some of the country’s most populous areas and Shiller himself recently saying he doesn’t see “any reason to think that prices are going to start heading up dramatically now.”

So renters can console themselves with the fact that homes could very well be terrible investments, especially if your beloved hometown has “insufficient permanent employment to justify a constant level of demand for new housing stock.” One man’s perfectly timed purchase is another man’s financially crippling, several-hundred-thousand-dollar money pit.

On that note of searing optimism, on to today’s links.

Toobin: Obamacare “looks like it’s going to be struck down” – HuffPost
It’s up to Kennedy, and don’t rush to judgment on the court’s ruling – SCOTUS Blog
The small-business lobby’s million-dollar legal assault against Obamacare – WSJ

Since 1998, only 3 percent of hedge fund profits have gone to investors – FalkenBlog

Meet Romney’s hedge fund kingmaker, who says Argentina owes him $2 billion – Fortune
Related: Money Men – The 46 top Super PAC contributors – CNN Money

Private debt collectors made $1 billion working for the Department of Education last year – Bloomberg

Don’t build a paywall, just build a “velvet rope” – GigaOm

One drug to shrink all tumors – Science

DSK charged in French prostitution case – WashPo

Early retirement leads to increased mortality rates – VoxEU

Old Normal
Big and Cheap: How the Depression created 20th century American food – Bloomberg

EU Mess
There are now real worries that the European model of banking is fundamentally broken – WSJ

The Federal guarantor of $1.1 trillion in mortgages may need a bailout – Bloomberg

The Greg Smith Files
Help name a post-apocalyptic, dystopian coming-of-age thriller inspired by puppets – Dealbreaker

How the behavioral economics idea of the “nudge” could improve public policy – Economist
A great primer on Minsky’s “Financial Instability Hypothesis” – Economonitor

Popular Myths

Low taxes do not spur economic growth – Social Science Research Network

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Spooky looking Case-Shiller chart – an intact sequence of lower highs and lower lows. Does it go test the long-term support at 75? Is there a single bank in the US that could survive the experience if it did?

Posted by MrRFox | Report as abusive

75 is not a realistic long term number here. If you assume housing prices follow general inflation it would put you at an index of 130 at the end of 2011. So on a real basis, we seem to have gotten back to trend. The right value could be a bit higher or lower based on whether you thought housing was under/over valued in 2000 or if you think there’s a good reason housing wouldn’t track overall inflation.

Posted by Dan_K | Report as abusive

“75 is not a realistic long term number here. If you assume housing prices follow general inflation it would put you at an index of 130 at the end of 2011. So on a real basis, we seem to have gotten back to trend.” (DanK)

Well, ‘long as you’re sure “Happy Days Are Here Again”, I guess we can all relax. And write puts against Cash-Shiller??

Posted by MrRFox | Report as abusive

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