Posted by Jonathan J. Miller -Tuesday, July 21, 2009, 9:12 AM
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One of the untold stories of the success of the NYC housing market of the last decade (obviously separate and apart from the credit boom) was the attention to detail. In the early 1990s my relatives in the midwest saw NYC as a scary place with tourists getting stabbed on the subway, graffiti, homeless everywhere, city services a mess and public spaces in disrepair. I grew weary of “New York Bashing” in the media. In 1991, my father was mugged twice in broad daylight on a weekday afternoon outside of my old office on 45th and Fifth Avenue.
There is a great article by George L. Kelling in City Journal called: How New York Became Safe: The Full Story A citywide effort, involving many agencies and institutions, helped restore order.
New York City figured its way out of a seemingly hopeless situation. Young families were fleeing to the suburbs in droves. I always viewed this success through the lens of the efforts by NYC government, but thats only a party of the story. Many individual organizations focused on their own turf and made a difference.
I feel that this laid the ground work to stem the exodus from the city, improve city revenues and encourage residential development.
In sum, a diverse set of organizations in the city—pursuing their own interests and using various tactics and programs—all began trying to restore order to their domains.
My concern now is that severe budget cutbacks and a weak economy could undo many of the gains in the improvement in the quality of life many living in the city have experienced. This was a phenomenon also seen in other metro areas, but in my limited travels, more of the improvements of the past decade were a result of the credit boom whereas the boom in NYC began in the late 1990s.
Posted by Jonathan J. Miller -Sunday, July 5, 2009, 11:51 PM
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This weekend I ripped through a terrific book The Secret Life of Lobsters by Trevor Corson written back in 2004. Even if you’re not a fan, I marveled at how he could take a mundane subject and weave an interesting (true) story on how the Lobstermen of Maine have kept the production elevated for the past several decades, despite consistent claims of overfishing. (Incidentally my lobster pots were stolen this weekend, plus we had 30 family members over to our house for the 4th for a lobster/clam bake.)
No one on either side really knew whether cyclical declines in the number of pounds caught were natural or induced by man.
In other words, this is all about subprime lending.
While trying to find my interview on NPR about last week’s market reports (I was unsuccessful) I stumbled upon an interview with the Trevor Corson last week (the day our report was released) without using keywords such as “lobster,” “fishing” or Maine.
(about 38 seconds in)
He correlated the sharp drop in Lobster prices this year with the bankruptcy of Iceland via subprime lending. It’s worth a listen.
And here’s his related piece in The Atlantic magazine. Fascinating.
Basically, lobster prices have maintained a high price level for the past decade until the past year because a large portion of the catch was diverted to processing plants in Canada keeping supply of fresh lobsters restrained. These plants were mainly financed by Icelandic banks, who were ultimately driven under because of the subprime mortgage meltdown and now abundant production of lobsters are driving down the price for us.
Sound familiar?
Oversupply of housing driving down prices correlates to the “V-notch” technique to increase the lobster population. I won’t even bring up the V-shaped recovery“, since I’m still full from our lobster bake.
Somehow it all comes back to lobsters.
Posted by Jonathan J. Miller -Tuesday, June 30, 2009, 10:51 AM
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Two interesting articles for Matrix readers to take a look at…
In the current issue of the New Yorker, there’s a terrific article by James Surowiecki called Caveat Mortgagor who discusses the potential legislation to create a consumer protection agency for financial products comparing it to the birth of the FDA.
Bankers and Wall Street won;t like it because it hampers their ability to be innovative. Of course some innovation got us where we are here today. However, innovation is not bad per se and I’m realistic in that such regulation will not eliminate financial collapse, but rather, I see it as a way to reduce the odds of such a collapse.
I do worry that consumers will develop a false sense of security with investing since many can’t figure out a simple interest rate.
In finance, third parties—like debt-management services and mortgage brokers—are often conflicted at best and corrupt at worst. And buying a house is far more complex, and confusing, than picking out a refrigerator. This doesn’t mean that a consumer-protection agency could have averted the current crisis—given the widespread conviction that house prices would rise forever, disaster was probably inevitable—but it might have saved some from the financial equivalent of Elixir Sulfanilamide.
More important, negative-amortization loans, prepayment-penalty mortgages, and option ARMs all made it easier for people with low incomes and poor credit to buy houses, and for people to buy bigger houses than they otherwise could have. Serious regulation will mean that fewer people can buy homes.
He concludes with “a simple lesson: if you don’t understand the deal you’re making, don’t make it.”
Alyssa Katz, author of “Our Lot: How Real Estate Came to Own Us” is interviewed in Salon.com today in a piece called Who’s to blame for the housing crash? …good intentions and mass delusion that led to the real estate boom.
Here’s the first two questions of the interview:
Isn’t homeownership actually good for you? I thought it was the panacea for almost all social ills, it drove the crime rate down, educational achievement up, and so on.
Yes, well, homeownership is only as good as the amount of home you actually own, and I think the big problem in the last generation or so is that Americans have turned to more and more and more debt to reach for the American dream…
Does this mean that we shouldn’t actively encourage homeownership, using government money or government policy?
I think there’s nothing wrong with using government money, policy, pressure, all those tools to make homeownership more of a possibility than it would otherwise be in the marketplace, simply because the market left to its own devices discriminates aggressively. It rewards people who already have wealth, who have already had a leg up economically, and it’s great to give other people the opportunity as well.
The problem is that homeownership is the only housing policy that this country has ever shown any commitment to. Renters are treated miserably.
Posted by Jonathan J. Miller -Sunday, June 14, 2009, 10:46 PM
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Professor Robert Shiller took time out from his busy schedule when he was in New York to pay me a visit and let me interview him for The Housing Helix Podcast.
I invited him after I read his recent Op-ed piece in the New York Times, Why Home Prices May Keep Falling.
Dr. Shiller is well known for many things, including his New York Time’s bestselling book: Irrational Exuberance and his widely referenced monthly state of the housing market tool, The Case-Shiller Index. But he also continues to write about the housing market, having released two books over the past two years:
Last year’s The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do about It
and this year’s
Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism
I hope you enjoy his insights.
Check out this week’s podcast.
You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.
Posted by Jonathan J. Miller -Friday, June 12, 2009, 10:34 AM
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I had the pleasure of speaking with Barry Ritholtz of Fusion IQ and The Big Picture weblog. He’s a wealth of information and never pulls any punches in his characterizations of the current economic mess we find ourselves in. Listening to Barry speak about this whole situation and reading his book is much pretty much required.
The Big Picture is the leading financial weblog with must-read content and it boasts a huge following (self-included).
Barry recently released a terrific book: Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy. I highly recommend it.
Check out this week’s podcast.
You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.
Posted by Jonathan J. Miller -Sunday, June 7, 2009, 10:37 PM
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This week I speak with Dan Gross, a senior editor and columnist at Newsweek and he writes the “Moneybox†column for Slate. Dan covers economic topics in his columns and has written a number of books with the most recent available as an eBook titled “Dumb Money: How Our Greatest Financial Minds Bankrupted the Nationâ€
Keywords and phrases from Dumb Money:
- [BSH] Bourgeois Suburban Heaven
- Stray hedge fund managers scrounging for food
- Trumpensfreude
We also talked about the second home market and wondered whether the commercial real estate market was the next shoe to drop.
Check out this week’s podcast.
You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.
Posted by Jonathan J. Miller -Wednesday, May 6, 2009, 12:34 AM
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You’ve got to admire people that go out on a limb and call a market as a contrarian and turn out to be right. It’s a lucrative opportunity for those that are able to monetize it.
There is a lot of discussion lately about a slower pace of decline and that the end may be within the few years. The recession is expected to end at the end of this year and unemployment is expected to top out in about 18 months. In other words, there is plenty of room in the tank for financial opportunities for negativism.
Some notables who seem to continue to do well are:
The Housing Bubble Blog and others like it were screaming that the bubble was going to burst. They were right, despite all efforts by NAR to keep them in check. Ben Jones is one of the most prolific content posters and has the gold standard blog name for the subject. I’ve linked out and have been checking in with his work since late 2005. Although he is a free lance writer, his content appears to be collected by copying full articles from primarily newspapers and magazines around the country – with little or no analysis. Yet he’s consistent and finds a broad array of the key articles of the day. He still attracts hundreds of commenters on every post and all kinds of theories and ideas are shared. He takes donations and has banner ads. He’s created a grass roots feel.
But site traffic is down by more than half over the past year. Are people tiring of the negative?
Professor Robert Shiller, who is a very nice person and has published some terrific work on the wealth effect, economic psychology to name a few, was able to capitalize on the contrarian perspective with his book Irrational Exuberance and the subsequent update to include housing. He called the NASDAQ and housing market bubble correctly and has since released two additional books.
According to Shiller we are looking directly in the face of an enormous “speculative bubble” and the question is not whether stock prices will fall but when!
He tirelessly promoted the S&P/Case Shiller Home Price Index which has become the defacto standard for housing indexes by virtually all news outlets and economists. Despite his efforts and those of S&P, the trading markets for which the index was created, has yet to gain significant traction.
Nouriel Roubini, economics professor at NYU who is also known as Dr. Doom, has been spot on in his calling of the housing bubble. He was so blunt and negative that he quickly gained many detractors.
By late 2004 he had started to write about a “nightmare hard landing scenario for the United States.†He predicted that foreign investors would stop financing the fiscal and current-account deficit and abandon the dollar, wreaking havoc on the economy. He said that these problems, which he called the “twin financial train wrecks,†might manifest themselves in 2005 or, at the latest, 2006. “You have been warned here first,†he wrote ominously on his blog.
I’ve heard his consulting firm RGE Monitor is doing well but I have no way to confirm.
When he spoke at a convention in New York, several people quipped to me that they needed to jump out of a window because the world was ending.
Roubini was known to be a perpetual pessimist, what economists call a “permabear.â€
He’s been hard to find fault with, and he fights with Jim Cramer calling him a buffoon. His recent opinion piece in the WSJ called We Can’t Subsidize the Banks Forever was strong, yet was also called to task for misquoting the IMF.
However this info was just released which makes Roubini right once again::
Regulators have told Bank of America that the company needs to raise roughly $35 billion in capital based on results of the government’s stress tests, according to people familiar with the situation.
Thus, I answered my question. The gravy train for pessimism is still in the station.
Posted by Jonathan J. Miller -Wednesday, April 29, 2009, 10:55 AM
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My friend Dan is at it again – he claims to be on the “C” list of regular guests on MSNBC Countdown – now he’s achieved the pinnacle of every writer’s dream, to be interviewed by Stephen Colbert. He’s humping his new book, Dumb Money.
Colbert Nation summarizes:
Daniel Gross urges rich cable TV personalities to buy steaks, cigars and whiskey.
Very salient interview and I must say, very entertaining.
Posted by Jonathan J. Miller -Tuesday, April 14, 2009, 1:03 AM
3 Comments
I always thought the word crisis wasn’t the right word for the situation we find ourselves in these days. I see this more as a housing reset. It’s when the issue crosses over into the mortgage/credit arena, then we are in a crisis – sort of a technical malfunction. Massive de-leveraging = a crisis I suppose.
There’s a good article in Forbes called, oddly enough: “The Housing Crisis Isn’t A Crisis.”
This brings us to Zywicki’s disagreement with the Obama administration. Treasury Secretary Timothy Geithner, Director of the National Economic Bureau Lawrence Summers and the other adepts in the administration all argue that the bursting of the housing bubble amounts to a national tragedy. According to President Obama himself, the “crisis” is “unraveling homeownership, the middle class and the American Dream itself.”
…and we start to realize how much power the financial services sector wields over Washington policy makers. This is best explained in Simon Johnson’s piece in The Atlantic called The Quiet Coup.
Of course many find it easier to simply blame the person in closest proximity in this fun piece in Salon by Erica Ferencik called They shoot real estate agents, don’t they? Erica bills herself as “a recovering stand-up comedian and featured guest on NPR’s “Morning Stories.” I recently plugged her recent novel, “Cracks in the Foundation” which is a good read. Erica promised me an Orange Julius or a mention of my eventual first book in her blog, whichever comes first.
Posted by Jonathan J. Miller -Monday, February 16, 2009, 12:06 AM
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In this crazy economic world, we are probably in dire need of some levity. Erica Ferencik (pronounced “forensic” – certainly one of the most interesting last names around), a former stand-up comedian and active real estate agent working hard in this tough environment, has written her first book, Cracks In The Foundation.
Since I began blogging here in 2005, I have been sent many books to review. I don’t review the majority I receive but I end up referencing them if I liked them and include other books I have read whenever possible. I enjoy the process so keep sending ‘em.
I had the pleasure of speaking to Erica a few weeks ago and found her to be disarmingly interesting and made me want to read her first book Cracks In The Foundation which she sent me. It’s gotten great reviews.
I enjoyed the book and highly recommend it.
Given her background, I can only imagine the application of humor in her current profession. Perhaps when buying or selling a house, besides professionalism, one can also expect the experience to be fun.
After all, we are all in the outhouse at the moment. Why not enjoy it?
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