Like the Pillsbury Doughboy, “It juts out somewhere else”
Chuck Ponzi May 8th, 2007
As lawmakers are considering reform, it appears that they are at least considering our concerns about unintended consequences… how lending reform often makes it harder to borrow, not easier in the future. Attempts at helping borrowers most often hurts them. It’s the Chuck Ponzi Law of Unintended Consequences.
MSNBC reports:
Congress is looking at potential reforms to risky home lending practices, although a House subcommittee hearing on Tuesday suggests lawmakers are still sorting out the complex workings of the mortgage market and wondering whether reforms will be necessary or helpful.
With the number of foreclosures nationally jumping 47 percent in March from a year ago, lawmakers are weighing whether new lending rules are needed or whether the market is already in the process of self-correcting. The task of crafting reforms is made more complicated by the long list of players involved in mortgage transactions.
“There is a very complicated web of contributors to this issue that makes it very difficult and unwieldy to unwind,” said Rep. Melvin Watt, D-N.C., at Tuesday’s hearing of the House Subcommittee on Financial Institutions and Consumer Credit.
Watt and other committee members said Congress needs to avoid unintended consequences of trying to fix the housing market.
“It’s kind of like the Pillsbury dough boy,” Watt said. “If you push in one place, it juts out somewhere else.”
In Economics, we refer to this as the law of “there’s no such thing as a free lunch”
If real estate agents and mortgage brokers had to have a securities license things would be different.
I wonder if some speculation would go away if the capital gains tax on real estate were adjusted.
Actually, if people had to prove their income, or their income was reported to the IRS, maybe it would stop.
I’m curious how having a securities license would change how real estate agents and mortgage brokers do business.
As far as speculation, it’s already gone away because appreciation has gone away.
I’m thinking that Live and Work meant the equivalent of a Safe Harbor Statement… something that is printed on every form, repeated in every conversation, and required training. A stringent licensing as well as realistic penalties for breaching fiduciary duty would go a long way to making people better decision makers about homes.
The big concern is that we will be funding a bailout because people didn’t know there was risk… after all, Gary Watts’ 15% for 2006 was “in the bag”, and it’s “a little piece of heaven in ‘07″ with a projected 8% increase. If he had to answer to a regulatory body for his predictions, he would be out of the business pretty quickly.
The government didn’t cover my stock losses, why should they cover losses on housing?
People have lost money on houses since the beginning of time. What makes this time different?
Chuck Ponzi
How much are Fannie and Freddie involved with this whole mess? If these top tier buyers of mortgages had higher standards on the loans they bought, perhaps the middlemen wouldn’t be so eager to lend money to anyone with a pulse.
There’s a big misconception that Fannie and Freddie’s securities are backed by the government. Isn’t it Fannie Mae who hasn’t released an earnings statement since 2005 because of bad accounting?
Buckle your seatbelts, put your seat backs and tray tables forward, because we’re in for one hell of a ride.
From today’s article ( Press-Enterprise).. wanna laugh ?
The National Association of Realtors said Tuesday it expects existing home sales of 6.29 million in 2007 and 6.49 million next year, lower than sales of 6.48 million in 2006. The median price for existing homes is also forecast to dip 1 percent to $219,800 this year but to rebound 1.4 percent in 2008.
Several economists who watch Inland Southern California have predicted housing prices would fall by as much as 5 percent before the end of the year.
The group anticipates new-home sales of 864,000 in 2007 and 936,000 next year, down from 1.05 million last year. The median new-home sales price is forecast to remain unchanged at $246,400 in 2007, and then gain 2.2 percent next year.
so… home prices will increase in 2008… hmm… muahahahaha
You know I was wondering about the long long haul.
I realize we are talking about what a poor return real estate is right now. However, it still remains a way of transfering wealth from generation to generation.
Of Course we are looking at population declines so that may not hold so true. Still in the thousand year war we are fighting against the ancients in China, Europe and India… A maintained house will provide economic benifits for a long long time.
Kind of a long long term socialogical effect of housing investment.
Sorry… off topic.
Kind of thought of Chucks remarks about the US being new to repression of the masses.