Decision Science News has a wonderful graphic on visualizing the housing bubble, using the Standard and Poor numbers. This is a really data-rich graphic, one of those that is both simple yet complex, and you can spend a lot of time thinking about what the different trajectories mean in terms of the extent and timing of the bubble. This is their first graphic–go to the website and read the rest of the presentation. A second, cleaner graphic calls out the ‘exceptional’ stories–a good way to build a narrative with graphics: first show the whole picture, then select what people should take away.
I’d like to know more about the bounce at the end of those numbers; every city gets higher, then crashes, then (for most, not all), there’s a bounce, then another fall.
The graphic was made with ggplot2, one of my favorite new toys for R.
Mortgage foreclosures in low-income and minority communities: Carolina Reid, Researcher from the San Francisco Fed
The takeaway: there is pretty good evidence from her foreclosure data, which she matched with HMDA data, that mortgage channel really affected the outcomes of high-cost loans for low-income and minority residents. She finds a strong and persistent effect of race on foreclosures, and then using both interviews and logistic regression, traces the differences in high cost loan usage by rates to the channel. Banks covered under Community Reinvestment Act requirements originated loans that were, for the most part, much lower cost to the borrower than ones that originated among mortgage brokers.
However–and this was a point that I think comes through very clearly—the mortgage brokers were more effective at outreach–unfortunately. For a cluster of her respondents in Oakland, almost all had originated their loans with a mortgage broker they knew from their church. In Stockton, many were able to use brokers they met on-site—but who spoke Spanish.
The importance of social networks here does not decline. Even with a house in foreclosure, the mortgage holders appear to be faulting the banks rather than the brokers.
It’s the question of outreach that interests me. If you are from a low-income background where your parents do not own a home, it’s hard to understand what is going on in the mortgage market. Mortgage brokers could be a positive force in these communities if they come from those communities–and were trained and licensed more thoroughly. The goal, I’m thinking, should be to help increase the “pipeline” and “pathways” to better credit and financial management–and then step into home ownership.
Rather than the narrative we have now, which appears to be “Those black and brown people couldn’t handle credit and caused the mortgage market collapse.” Um, no. Maybe they shouldn’t have taken the loans they did, but there was plenty broken about the system that didn’t involve them.
There is good evidence that suggests families can benefit tremendously from home ownership under the right conditions. Those condition preclude an unregulated feeding frenzy on secondary market right along with more and better up-front counseling.
The New York Times has in recent years begun presenting presidential budgets in interactive treemaps, and I think the presentation is really helpful and clear.
In transportation, all the funds fare well. Despite all the durm and strang, highways continue to capture a very large portion of the budget by either absolute or per person measures.
The big moves are obviously $5b for an infrastructure bank and the $8b for Federal Railroad Association, where Amtrack funds will get rolled into the Federal commitment to HSR, yielding a 53,000 percent increase for the FRA.
We’ll see how it all fares in the Congress.
In other HSR news, Governor Rick Scott joined the governors who have rejected the HSR proposal based largely on the trillion-dollar deficit. HT to Gabriel Rossman for that link.
Is Governor Scott wrong or right? (I have trouble remember it’s Governor Scott not Governor Rick.)
Anyhoozy. Let’s go back to the NYT Treemap again and see what’s what: who lost money, and how much debt is eating our lunch:
The National Endowment for the Arts (-13.1 % on an already small budget)
The National Endowment for the Humanities (also -13.1 % on an already small budget)
The Small Business Administration loses nearly half its already small budget (-44 %)
The Environmental Protection Agency loses 13 percent of its $9 billion budget. Compared to the billions thrown at HUD($37B), I’m rather appalled at this.
Nonetheless, Community Planning and Development loses 5 percent of its budget.
The Office of Vocational and Adult Education loses -17 percent.
Employment and Training Administration loses half of its budget. Half.
He proposes to cut the IRS budget by nearly a quarter, which is wonderful wonderful wonderful news because that allows for even more tax evasion than we currently have. This? This is sucking up to the Republicans to show how the White House is reaching across the aisle.
The interest on the public debt? It’s doing well. It’s up by 15 percent, to $470 billion (more than all the programs I just listed above) and about $4000 per person.
I’m thinking people are going to be losing work with all these cuts.
Ah, but all this HSR will create jobs jobs jobs! Investment you know. Education? Pshaw! We all know human capital is a complete waste on the job front.
The Office of Federal Student Aid gets a nice big bump, at least–51 percent. The statement is clear: kids going to college will have to borrow more and pay more ultimately for college, but the costs of borrowing will be lower.
I am not sure what the distributional consequences are of the education cuts, but I have a suspicion. And it’s not progressive, even though federal student aid is.
I personally do not value HSR more than I value the NEA, the NEH, the EPA, or education for adult learners—often the US’s most economically disadvantaged learners. What do you value?
HT to the Iowa Source
Well, while I was brushing my teeth, Matt Kahn went out and published another very interesting paper:
Kahn, M E. 2010. Do liberal cities limit new housing development? Evidence from California. Journal of Urban Economicsdoi:10.1016/j.jue.2010.10.001.
The finding? Cities with a higher score on liberal voting also permit less housing.
It’s less clear what this finding reflects. Kahn brings up Berkeley’s attempts at growth control–which in some ways make no sense from an anti-sprawl perspective because already developed areas should be taking more housing, not less, to direct growth away from fringe areas. As my former colleague Jesse Richardson says, Smart Growth is not birth control, and if urban areas are to grow not on the fringe than existing areas have to take their lumps.
Kahn’s manuscript may be an indicator that California cities are not taking their lumps.
So why is this a problem? It is more evidence that cities can cherrypick Smart Growth and New Urbanist principles to take what they like and leave what they do not: the line from the New Urbanism as that we could, with more density, get plenty of housing–some of it affordable–if we simply stopped allowing suburbs and we deconstructed single-use, residential zoning. Unfortunately, the application appears to be to shifting housing to other jurisdictions or restricting housing permits overall–a far miss from the sort of densification that the New Urbanist and Smart Growth advocates envisioned.
This is, of course, only if the connection to liberal voting and housing permits occurs via this increased willingness to take on growth controls. It could be something else, as Kahn doesn’t have regulatory structure.
The thing I love about Thomas Sowell is that I get six new research ideas every time I listen to him talk. He’s primarily a theorist: he’s not interested in testing the libertarian stories he’s strung together to conclude “Government is bad.” I am, however. It seems to me that there would be some interesting empirical work testing his assertions about California land values here.
So unlike my armchair theorizing earlier this week, the spatial origins of the foreclosure crisis are, according to Sowell, in California.
He makes me furious, and he makes me think. And he’s an amazingly productive scholar.
Richard Florida tweeted this story from the NYT, discussing the difficulties young people have finding housing in NY, and how they adapt. It’s just a bunch of stories, none of which really help us get a handle on anything.
My favorites, of course, have to do with the housing-transport tradeoff. This is what I mean when I say there are great transit commutes in NY, but there are also lousy transit commutes in NY, too:
But the commute is punishing. To get to his Frank151 job, which starts
at 11 a.m., Mr. Tolman leaves the house at 9:30 and walks 15 minutes to
catch the No. 7 bus. That takes him to the No. 1 train, from which he
switches to the 2, the L and the R before arriving at his office.
Via one of my brilliant PhD students, Elena Magglioni:
Depressing, yes — but the end of a dream? Not exactly. I have never quite understood what the American dream really means when it comes to housing. For some people, it means having a solid and fairly safe long-term investment that is coupled with the satisfaction of owning the house they live in. That dream is still alive. Others, however, think the American dream is owning property that appreciates by 30 percent a year, making a house into a vehicle for paying bills. But those kinds of dreams have become nightmares for the millions of foreclosed property owners who have found themselves sliding toward bankruptcy. But for people with a more realistic version of the American dream, buying a house now can make a lot of sense. Think of it as an investment. The return or yield on that investment comes in two forms. First, it provides what is called “net imputed rent from owner-occupied housing.” You live in the house and so it provides you with a real flow of valuable services.
You mean, it’s nice to own a house just because houses are nice to live in? It’s not just a cash cow for burning up equity to blow on Caribbean vacays? Or a vast capitalist conspiracy designed to dupe us into living in soul-destroying sprawl driving in our SUVs everywhere we go rather than living “authentic urban lives” in lofts and cafes where we debate the finer points of democracy and French philosophers and drink half-caff Fair Trade lattes, no foam?
I’m not sure I can live in a world where houses are discussed in any tone other than the histrionic.
Megan McCardle is doing a bit of whining over at the Atlantic about her search for a house, which–trust me, I get it, as I’m looking for a house in West Adams, which is no picnic. She writes:
The only way to break a lease is to be a single-family owner who wants to take occupancy. The bank has to let the tenant’s lease run before they are evicted, as well as give them ninety days notice of the intent to vacate the property. Given the difficulties of selling a house that cannot be shown, a lot of banks are choosing to do just that. Others are putting it on the market and then finding that, surprise! they somehow never can schedule a showing. Yet the banks are understandably unwilling to drag the tenants into court, which is very time consuming, and a huge burden on already overwhelmed administration.
This tone is one of the reasons I refer to “whining.” Yeah, I face the same problem. Of the few places that are for sale in West Adams, many are tied up in leases. But I actually think that protecting tenants from the financial irresponsibilities of landlords is a good thing, and while it’s not convenient, it does keep people from losing their housing, and even though you can’t tell it from US housing policy very often, one of the goals of housing policy should be to help people be sheltered rather than to help them be homeowners.
And as one of those renters who didn’t exercise my rights to refuse to have the place shown, let me tell you: we regretted our cooperation with our very nice and generally wonderful landlord as her entitled, lying scumbag of a realtor wanted in the place night and day and threw a tantrum when I finally said no because he “had buyers from out of town who couldn’t reschedule” so we gave in at incredible inconvenience to us. Turns out: the buyer from out of town was another realtor, from the Valley. Some realtors are just unethical, period, and the scummier they are, the more likely they are to treat renters like something they scraped off the bottom of their shoes.
Unlike my realtor who is simply awesome in every possible dimension of awesome: Bill Cooper with the Loft Experts.
McCardle’s other point I actually think, is a bigger problem for me:
The broader nationwide problem is that banks have a huge backlog of these bad loans, which means first, that they simply don’t have the adminstrative capacity to put them all on the market at once, and second, that at least in the case of the larger lenders, they are trying to dribble them out over time and avoid crushing the market.
For every real sale in West Adams I can find on Zillow or MLS, there are about 20 foreclosures, I’d say. And you can’t find anything about them. I’m not even talking about pre-foreclosures or places where you have to protect the identity of owner-occupiers still here. I’m talking places in full foreclosure, where banks just want you to hand them cash based on no information, not even a walk-through, and cash equal to the redonkulous mortgage they floated from 2004 to 2007.
So things are supposedly so great for new home buyers now, but in my experience, they really are not, and the same is true for McCardle as well it seems.
I’m trying to figure the economics of the shadow inventory for banks. I need to learn more about this. I’m wondering if banks are really holding on to the inventory to avoid crashing the market. It seems like there would be enough reason for banks to want to let their inventory go–rather than be the bank who winds up getting caught for “too long.” But there are also problems with being the first hold-out to let go. But it’s not like banks can expect to hold onto these houses for as long as it suits them without putting maintenance money into them: that’s a fast way to holding an asset that is worth even less than its compressed market value. I need to read more and think more to understand this problem. My suspicion is that banks are just overwhelmed by the management problem and haven’t figured out how to move the properties. In the case of West Adams, it’s a hot zone for foreclosures, particularly south of Exposition, and so holding on strategically would mean a pretty long hold-out horizon.
Anyway, this should give some backseat advice-givers pause about how “now is a good time to buy.”
HT to Andrew Gellman
I continue to be very interested in this question about who is defaulting, in the aftermath of fingerpointing at subprime lending. The Atlantic Monthly has a round-up of writing from around the web about the affluent defaulters. My favorite edgy quote:
Media Got It All Wrong Liberal blogger Duncan “Atrios” Black scoffs, “It’s a bit hard to comprehend that this housing/foreclosure crisis stuff has been going on for … years already. As is so often the case, the maintstream media got it completely wrong initially, painting it as a ‘subprime’ crisis due to bad behavior by unworthy brown people.” John Cole adds, “I can’t wait to hear how Republicans try to pin this … on black people and Fannie Mae and Barney Frank.”
My colleague, Richard Green, has a commentary on the new round of evidence on who is defaulting as well. Take a look.