Policy

Urban Inequality Could Get Worse

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President Obama's stated objective to reduce inequality, as laid out in public addresses and budget plans, is a noble one. The growing income gap – not only between rich and poor, but also between the ultra-affluent and the middle class – poses a threat both to the economy and the long-term viability of our republic.

But ironically, what seems to be the administration's core proposal, ratcheting up the burden on "rich" taxpayers earning over $250,000, could have unintended consequences. For one thing, it would place undue stress on the very places that have been Obama's strongest supports, while providing an unintended boost to those regions that most oppose him.  read more »

Why Homeownership Is Falling – Despite Lower Prices: Look to the Job Market

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By Susanne Trimbath and Juan Montoya

There’s something about “Housing Affordability” that makes it very popular: Presidents past and present set goals around it. The popularity of this perennial policy goal rests on the feel-good idea that everyone would live in a home that they own if only they could afford it. Owning your own home is declared near and far to be the American Dream.

Recently, however, it seems that Americans’ aren’t all having the same dream. Despite improving conditions of affordability, home sales continue to decline.  read more »

The Panic of 2008: How Bad Is It?

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Just how bad is the current economic downturn? It is frequently claimed that the crash of 2008 is the worst economic downturn since the Great Depression. There is plenty of reason to accept this characterization, though we clearly are not suffering the widespread hardship of the Depression era. Looking principally at historical household wealth data from the Federal Reserve Board’s Flow of Funds Accounts of the United States, summarized in our Value of Household Residences, Stocks & Mutual Funds: 1952-2008, we can conclude it’s pretty bad, but nothing yet like the early 1930s.  read more »

The Decline of Los Angeles

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Next week, Antonio Villaraigosa will be overwhelmingly re-elected mayor of Los Angeles. Do not, however, take the size of his margin – he faces no significant opposition – as evidence that all is well in the city of angels.

Whatever His Honor says to the media, the sad reality remains that Los Angeles has fallen into a serious secular decline. This constitutes one of the most rapid – and largely unnecessary – municipal reversals in fortune in American urban history.  read more »

Housing Bail Out Part Deux: Just Another Financial Con Job

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Last night I wrote about the Obama Administration’s housing bail out. But, I hate to say, there’s more to tell you – and it’s actually worse. In addition to the giveaways to mortgage holders, we also have to consider the federal government effectively offering to give a credit default swap (CDS, remember those?) to the banks.  read more »

Death of the California Dream

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For decades, California has epitomized America's economic strengths: technological excellence, artistic creativity, agricultural fecundity and an intrepid entrepreneurial spirit. Yet lately California has projected a grimmer vision of a politically divided, economically stagnant state. Last week its legislature cut a deal to close its $42 billion budget deficit, but its larger problems remain.  read more »

Responsible Home Buyers, Why Be Frugal?

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I was laying in bed this morning, listening to discussions of the Homeowner Affordability and Stability Plan, the 2009 version of a Homeowner Bailout. (The 2008 version was spent on the banks.) I listened closely because I had to decide if it was worth getting out of bed to earn the money to pay my mortgage or not. Like all those bankers that got a bailout, I was wondering if it might be worth more to me to default on my mortgage than to pay it.  read more »

Housing Downturn Moves Into Phase II

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The great housing turndown, which started as early as 2007, has entered a second and more difficult phase. We can trace this to Monday, September 15, 2008 just as October 29, 1929 – “Black Tuesday” – marked the start of the Great Depression. September 15 does not yet have a name and the name “Black Monday” has already been taken by the 1987 stock market crash. The 1987 crash looks in historical perspective like a slight downturn compared to what the world faces today.

On September 15 – let’s call it “Meltdown Monday” – the housing downturn ended its Phase I and burst into financial markets leading to the most serious global recession since the Great Depression. Indeed, International Monetary Fund head Dominique Strauss-Kahn now classifies it a depression.  read more »

Oregon Fail: With Hard Times Ahead for Business and Real Estate, It's Time to Look Small

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There is something about Oregon that ignites something close to poetic inspiration, even among the most level-headed types. When I asked Hank Hoell recently about the state, he waxed on about hiking the spectacular Cascades, the dreamy coastal towns and the rich farmlands of the green Willamette Valley.

"Oregon," enthused Hoell, president of LibertyBank, the state's largest privately owned bank, from his office in Eugene, "is America's best-kept secret. If quality of life matters at all, Oregon has it in spades. It is as good as it gets. It's just superb."  read more »

The Recession: Fuzzy Thinking Delays A Recovery

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I keep hearing how the current recession will end in 2010 because the average United States recession from 1854 to 2001 has been 17 months. This is silly for a variety of reasons.

One reason is that there is no average recession. Post-World War II recessions have lasted from a minimum of six months to a maximum of only 16 months. If we were to apply the “average recession” logic to post World War II recessions, the current recession, which the NBER — the National Bureau of Economic Research — says started December 2007, would have ended 10 months later, last October.  read more »