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Shared REO Nights.
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Daily Digest for October 31st
10-31-2009 by dan
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Daily Digest for October 30th
10-30-2009 by dan
Shared GMAC has been nationalized.
Shared Is Amazon an Oligopolist?.
Shared YouTube – Lolita – Stereophonics.
Shared YouTube – Uprising.
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House ATM and Prices
10-29-2009 by danI often wonder about the price level of certain goods that are closely tangled up with home equity, or rather, the ability to extract home equity.
I haven’t seen any statistics on this yet, but from all of the news about the housing bubble, it appears that a large portion of homeowners refinanced their houses to extract equity for purchases. GDP and employment numbers were skewed by this equity extraction, and I believe that there are quite a few goods and services that have also been skewed, but there is no easy way to measure this.
Here’s a list of goods and services that may have inflated prices because of historic equity withdrawals. These things are likely overpriced right now, and we might see them come down in price over the next few years.
- College tuition. Since this is something that parents would be paying for, it seems logical that home equity would be an inflator of tuition prices. Money is fungible, so even if they weren’t directly extracting equity to pay for college, the existence of the equity funded another purchase that wouldn’t have occurred if the money had been reserved for tuition.
- Major construction/remodeling projects. It’s easy to extract equity to add on to your house if all the contractors and real estate actors tell you that you’ll get the value back and then some. Smaller projects, like replacing a roof or a bathroom remodel, are probably included here, too.
- Mid to upper level cars. I can’t think of a worse idea than extracting equity from a house and buying a BMW, but I’m sure it happened, and it helped to justify a premium on the price of luxury and mid-level cars.
- Vacation packages like Disney, Carnival cruise, etc. Imagine if you had to pay real money for these! I bet they’d cost less. It’s probably not hard to tack an extra 5 grand onto your equity extraction refinance so that you can take the kiddies to Disney World.
- Down payments for houses in the lower end. I would guess that parents that provided down payment assistance for their children used the house ATM for some of that money.
- Large Screen TVs.
- Home-Gym equipment.
- Basically any luxury item that costs 1000 or more.
Tags: Economics, Finance, Money | Comments (2)
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Daily Digest for October 29th
by dan
Shared How We Roll.
Shared Shazam: not magic after all.
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Daily Digest for October 28th
10-28-2009 by dan
Shared CobraHead In Action.
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Unintended Consequences
10-27-2009 by danFirst, a link to an article that is used as a conservative’s example of high tax rates driving away the very tax base they are relying on:
http://www.nypost.com/p/news/local/tax_refugees_staging_escape_from_qb4pItQ71UXIc0i6cd3UpK
I have a slightly different read on that, though. Notice that the peak of exodus happened in 2005, around the peak of the housing bubble. I think it is entirely possible that this “exodus” was more a function of financially literate folks “realizing” their real estate gains by selling the house and moving to a cheaper neighborhood. You could probably read that as dodging taxes, but I think that the more primal motivator here is realizing the massive gain in home equity.
Second, a link to an article on the NYT about Hank Greenberg starting up AIG2:
http://www.nytimes.com/2009/10/27/business/27aig.html
This seems really douchey on the surface. He’s clearly plundering a company that is down for the count, possibly even from his own failures as a CEO (it is possible that when he left AIG initially there was no contingency plan in existence, and most of the operational knowledge was in his head). The worst part is that it isn’t AIG that will lose business to AIG2, it’s the taxpayers that bailed the crap company out.
On the other hand, this seems to be a very strong argument against propping up “too big to fail companies” like AIG. This is definitely an unintended consequence of bailouts and executive pay caps. I like to think that the tax payers would have had a better chance at getting repaid if the government had just nationalized AIG, broken it up, and been done with it.
Tags: Business, Economics, Money | Comments (0)
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Daily Digest for October 27th
by dan
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Daily Digest for October 24th
10-24-2009 by dan
Shared Information vs. Confusion.
Shared City of Carlsbad Strikes Again?.
Shared How the other 75 percent lives.
Shared Sources of Randomness.
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Daily Digest for October 23rd
10-23-2009 by dan
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Daily Digest for October 22nd
10-22-2009 by dan
Shared Frontline – The Warning?.
