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TMFBent (99.85)

Worst Whitehouse Bailout Defense I've Seen this Week

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February 27, 2009 – Comments (9)

Wow.

“If you live in a home that’s near one that’s been foreclosed, your home value likely has dropped by about 9 percent, which for the average home is about $20,000,” Gibbs told reporters Friday. 

According to the U.S. census, there were about 75 million owner-occupied homes at the end of 2008. By our math, that means that the $75 billion being spent to prevent foreclosures works out to about $1,000 per owner-occupied home. Which means you’re spending $1,000 in taxes to head of the loss of $20,000 on the value of your house. These days, that doesn’t seem like such a bad investment.

See that, everyone? We're giving you $19,000! All you need to do is give us $1,000 up front. Of course, you have to assume that this works (and it won't), as well as assume that the inflated prices we're trying to support were sustainable (they clearly aren't).

 

9 Comments – Post Your Own

#1) On February 27, 2009 at 5:17 PM, jesusfreakinco (29.58) wrote:

Where do I sign up?

JFC

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#2) On February 27, 2009 at 5:23 PM, Option1307 (30.45) wrote:

You've been on fire lately...

I'm glad you bashed Bush back in the day as well. It's nice to see you're an equal opportunity retard basher. You tell it how it is, regardless of your political affiliation. It just happens that Obama is the flavor of the month.

Keep it up!

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#3) On February 27, 2009 at 5:26 PM, oldfashionedway (39.14) wrote:

A stitch, in time, saves nine... or it could just be extortion.

Give the gov't a grand, and they promise you can keep a "paper gain" (pun intended) of $19K!

I'm with SpecBear-  They can stop helping now.

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#4) On February 27, 2009 at 5:30 PM, outoffocus (24.44) wrote:

I'm with SpecBear-  They can stop helping now

I dont blame Specbear for not changing his message.  Congress hasnt gotten the point yet.

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#5) On February 28, 2009 at 3:39 PM, BenGriffin71 (28.38) wrote:

Would you not agree that if the utility of a necessary good has not changed significantly, that the cost to produce that good is one important measure of its value?  That is, if you cannot sell an essential good for at least the amount required to produce the good, then the good is undervalued.

, It currently costs more to build a house than the amount for which you can sell it.

The only major component of housing prices that can easily fall significanly further is labor.  If you argue that the cost to build a house needs to fall further you are arguing for reduction in wages (not an increase in affordability).... or you are arguing in the absense of logic.

 

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#6) On March 02, 2009 at 8:40 AM, TMFBent (99.85) wrote:

No Ben, I wouldn't agree with that. Especially in the case of depreciating goods that, by and large, produce no cash flow -- for example houses.

History is quite clear on the matter. Houses are worth only so much, on average, that sum anchored to incomes and equivalent rents.

BTW, one could, by your argument, claim the automakers are "worth" the gross PPE amount on their balance sheets, no?

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#7) On March 02, 2009 at 10:43 AM, oldfashionedway (39.14) wrote:

Too much supply and/or not enough demand (housing, autos) results in lower prices.   The market is the ultimate determiner of what a product or service is "worth".  So yes, superficially, houses may be "undervalued".

A few short years ago, with the blessing of bankers and the Federal gov't, everyone and their brother were either building "spec" housing or trying to "buy and flip" a property,  which is part of why we find ourselves in the mess we're in currently. 

Mr. Gibbs has little credibility because of the track record of those for whom he speaks.

Housing prices in many markets were unrealistically high.  They are now adjusting lower in response to the current global economic slowdown.  Many will argue that the correction is warranted in light of the income of most middle-class Americans.  Some say housing prices have further to fall...

Most Americans have houses that are MUCH larger than they really need.   If we were to live more modestly housing prices might eventually stabalize at a sustainable level.  Even though I would argue FOR a couple's RIGHT to own a 5,000 square foot residence with 4 bedrooms and 3 1/2 baths, etc.  I would question whether such a choice is ultimately a financially and socially RESPONSIBLE one.

The so-called American dream of home ownership should be a economic POSSIBILITY for everyone.  However, not everyone is willing or able to make the long-term financial committments implicit in owning and maintaining a residence.  We have come to the point where it is socially acceptable to NOT honor your contractual obligation  to make monthly mortgage payments in the hope that the Federal government will come to your rescue and save you from the consequences of the misguided or misinformed financial decisions you previously made.

In a PERFECT world  housing prices would always predictably appreciate.  In the REAL world prices are cyclical and fluctuate above and below points that most economists would deem rational. 

 After looking at my IRA balance in the past year, I am confronted with the fact that I reside in the real world.

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#8) On March 13, 2009 at 6:50 AM, BenGriffin71 (28.38) wrote:

TMFBent:  You wrote:

>>>"No Ben, I wouldn't agree with that. Especially in the case of depreciating goods that, by and large, produce no cash flow -- for example houses....<<<</em>

Wow, there is so much with which to disagree in just the sentence-fragment that ends your first paragraph.

You call housing a 'depreciating good'.  While for the last two years housing prices have been depreciating, this is not the norm.  Even though the appreciation of the prior decade is excessive, houses are not depreciating assets per se.  It is normal and healthy for housing to appreciate at a rate similar to general inflation. Upkeep and obselescence  are typically more than offset by increases in value of the land/location.

Additionally it is important to distinguish between the direction of an assets price and the value of an asset.  If you believe the market is completely efficient, then there can be no difference between the price and the value.  If on the otherhand you believe market inefficiencies exit, then a good may be undervalued and the price may drop further while the value holds steady.... I belive this is a likely scenario for housing in the intermediate term.  That is, it is undervalued compared to repalcement cost, and yet will likely experience further decreases in price.

You then state that houses 'produce no cash flow'.  Just so that we are not sidetracked, I will also completely ignore investment properties.  The point is that this is a necessary good.  Housing is not a discretionary item.  You either own housing or make arrangements with someone who owns housing.

You continue....

>>>...History is quite clear on the matter. Houses are worth only so much, on average, that sum anchored to incomes and equivalent rents....<<<</em>

No. If you are talking about housing 'worth' as some quality other than price, by which housing can be under or over valued, then history is infact not clear, because it offers no perspective, as there is no historical measurement of 'worth' (not price) to consider. 

If you are instead equating worth to price (once again if this is the case then housing can be neither under nor over valued, and you have disproven your original point)  then history is in fact, quite obfuscated on the matter of correlating housing prices to income and rent.  There are simply too many other variables to consider.  Also, were your assertion true, we wouldn't have quite so many people whining that the ratio of median income to median house price was so out of whack... for so long.

You conclude.....

>>>...BTW, one could, by your argument, claim the automakers are "worth" the gross PPE amount on their balance sheets, no?<<<</em>

Why yes, one could make such a claim, provided one had first freed oneself of all traces of logic and reason.

My argument references 'essential' goods.  Essentials typically include: Food, Clothing, Shelter, Communication, Healthcare, Education, etc.  I have never seen anyone include 'Plants property and equipment of an automaker' in the list of essentials.  Even if you made the stretch that transportation was essential and that the automaker was necessary, why would one completely overlook all the other assets and liabilities and focus soley on the plant property and equipment in determining the worth of an automaker?

 

'Desperation is a stinky cologne'  Grady

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#9) On March 13, 2009 at 7:40 AM, Xciteddon (66.74) wrote:

Is a house an asset or a liability? That has been argued for a long time. Technically a house depriciates, just like your car, but your house keeps its value on the supply and demand side. If homes are in a good neighborhood where prices continue to climb and there is a demand they increase in value. If it is in a run down neighborhood, where crime is rampant, people don't keep up their yard, etc.. then there is little or no demand and prices decrease...Hence the arguement. I hope this sheds a little light. Have a great Day!

D

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