Malkiel

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591 Comments

    • Mon Apr 7th 11:51 AM
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      Roubini Now Says House Prices to Fall 30%
      In past real estate downturns the differential between salary and mortgage leverage was nowhere near as high as it is in certain cases here; someone really needs to parse this in detail and determine how far under water a buyer has to be before they'll consider walking away. In past downturns having your home decline 15% wasn't usually a disaster, the loss usually put you under by less than a year's salary, and you stay put or took an acceptable loss to sell. If we have generation of owners who's loss of equity amounts to multiple years of salary, that may--or may not--change the thought process. I wouldn't believe anyone, even experienced real estate or lending professionals, can really make an educated guess here on how the most bubbled borrowers will behave, or how many there even are...
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    • Thu Apr 3rd 11:06 AM
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      Zillow Aims to Disrupt Lending Market With Its Mortgage Marketplace
      Anyone who's taken out a mortgage or refinanced in the last few years has been treated to an avalanche of offers from unscrupulous mortgage and insurance brokers flooding their mailbox. It's likely that these predators and scam artists will be the pool of interested parties on the other end, not legitimate mortgage companies. Zillow has a great concept web site that still doesn't work right for the home listing end, so they should concentrate on fixing that part of what they do. They also need to explain to the growing unhappy portion of their users just how their "zestimates" of home values are calculated, because it's patently unfair to the homeowners to have to negotiate with buyers over an estimate made in black-box fashion that they can't argue against.
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    • Tue Apr 1st 17:59 PM
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      How Far Will House Prices Fall? Implications From the Latest WSJ Survey
      Let's see if those Wall Street guys who complain about academics can interpret THEIR graphs with that level of mathematical competence...
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    • Tue Apr 1st 17:30 PM
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      Henry Paulson Begins to Trash His Own Reputation
      Everyone knows by now that all cabinet-level appointees in the Bush administration are bullied into submission by Bush and Cheney when they decide to launch some policy. Paulson snapped to recently because someone in the background, usually Cheney, made it clear that that's what he was to do. The Bushies have destroyed the careers of a whole generation of Republicans, including Powell and Rice, by treating them as neocon clerical workers. Paulson will at least have a lucrative career to return to after his reputation is broken...
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    • Mon Mar 31st 17:52 PM
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      Sellers' 'Hopeful Overvaluation' Dragging Out Housing Bust
      It looks like there's as much reality denial going on among people who want to bash sellers as there is among sellers. Only a person who's never actually bought or sold a house can go on talking about sellers in the abstract as though they are people of unlimited resources who can just pull cash out of the air to cover the upside-down first mortgage when they're trying to buy a different house. I don't know how many transactions involve people who have a mortgage on an existing house who must sell that house in order to be permitted a mortgage on a different house, but it must be a sizeable portion of the market. Most homeowners in every income bracket will not be permitted by a mortgage company to close on a new house unless they are prepared to pay off the mortgage on the existing house as part of the transaction; if they're upside down on that first mortgage by a couple of year's income (say, $150,000 on a $650,000 house that can now only sell for $500,000), then they certainly won't have the savings to close. Their only strategy can be to market at a price which incurs the loss they can take. Railing about "hope not being a strategy" is deliberate denial of the issue in order to keep your hatefest going. And hate is no more rational than hope...
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    • Mon Mar 31st 11:32 AM
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      Checkout Line Display Material: 'Idiot's Guide to Improving Your Credit Score'
      It's comical to read people with high school diplomas from 4 decades ago bloviating on the state of education in America today. Been in a classroom since, say, 1965? Today's college undergrads receive better economic education than any prior, the problem is they've been brought up in an environment where the right-wingers who have prevailed since Reagan have offered up unlimited credit and consumption as a god-given right and duty. The emotional and psychological trump the analytical every time when it comes to economics, and that was as true of your generation as it is of the current generation. If you want the young to have the right values then they need right examples (my one-sentence summary of Artistotle's Nicomachean Ethics)...
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    • Mon Mar 31st 11:25 AM
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      Talk of Recession is Just Talk
      It has been commented on elsewhere that the "official" definition of a "recession" only works as a trailing indicator and in the current environment there's a serious need for some real-time indicators to tell policy makers where the trend is going. Nobody's going to apologize to you for not hewing to the classic academic definition of a recession because everybody's too busy working with what trends they can see to head one off. You should be thanking them for making the effort because they're busy saving your miserable job in cubeville pretending what you don't like isn't real...
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    • Mon Mar 31st 11:06 AM
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      Sellers' 'Hopeful Overvaluation' Dragging Out Housing Bust
      Given that this is an economics-based website I don't quite understand why competent analysts (my assumpution, perhaps some of you guys aren't?!) don't even take cognizance of the decisive technical fact for large numbers of homeowners when making these observations about pricing: homeowners, unlike institutions, can't simple write off monetary losses. Some of these homes have lost as much value as one or two year's worth of the homeowner's salary, a huge order of magnitude. There won't be a closing on a new house unless the homeowner can pay off the mortgage on the house they occupy as part of the deal, and when you're upside down over a year's salary on the current mortgage that's not going to happen. Many homeowners, perhaps most homeowners who are stuck on their price stay that way because they have no other viable strategy in the marketplace than to keep paying the current mortgage and wait for a buyer at the price they need to leave without becoming homeless and penniless...
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    • Fri Mar 28th 12:54 PM
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      Read It Here First: Illogical Home Sellers
      It isn't irrational behavior on the part of sellers to refuse to lower price if the lower price puts them seriously upside down. Sellers who are only slightly upside down may be willing and able to pay the loss to effect the sale, but in this overpriced market many are sitting on paper losses orders of magnitude greater than their annual income and the only rational strategy which staves off ruin, so long as they can meet the monthly mortgage payment, is to continue advertising at a price they can accept while occupying the home. This is why I originally expected it to take much longer for prices to fall as to increase; upside-down owners will bide their time hoping to outlive the market conditions, as many have in past real estate downturns. What seems to be driving prices down so fast recently is that foreclosed homes (where the mortgagee has been taken out of the pricing equation) are the ones selling. 40% of finalized sales in LA last month were foreclosures. The stubborn upside-down sellers are not going to follow the price curve willingly because they can't, so it will take a very long time, years and years in many cases, for them to acknowledge the market trend...
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    • Fri Mar 28th 12:30 PM
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      Upside to Falling Prices: Housing Affordabilty Index Reaches 4-Year High
      I tend to believe the 20% down payment assumption is there because that was a standard assumption back when the index was started, but it really needs to be reconsidered--most housing in all income brackets for a couple of decades has been bought with much smaller down payments, such as the FHA 5% or 3% or 0% ARMS, because 20% has never been realistic for most buyers. You simply wouldn't have a housing industry if we stuck with the 20% standard, given the heavy inroads that other forms of credit have made on consumer habits for a couple of generations...
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    • Mon Mar 24th 11:45 AM
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      Double Whammy: Bank Card Companies May Be Next
      Credit card fees and interest rates need to be capped by government regulation because experience proves that consumers are generally not able to calculate the effect of exorbitant rates on accelerating their debt and payments, and it isn't in the interest of the market to disable consumers by rate gouging. Consumers should be shielded from gouging and lenders should be prevented from making lending terms that are usurious. It's part of the package of reforms that need to be made and the collapse of the current economy and the end of GOP rule will be the moment when these things happen. And all of us, including the whining free-market libertarians, will be better off for it...
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    • Mon Mar 24th 11:37 AM
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      The Fed: On the Cusp of Moral Hazard
      Notice how "moral hazard" only seems to apply to behavior that might hurt the interests of the fat cats? Insulating CEO's from the effects of their actions by granting bonuses out of merit and golden parachutes hurts the interests of shareholders and is a classic example of "moral hazard" but it never gets called that. Calling for the crucifixion of homeowners and shareholders while upholding the privilege of capitalists is the hypocrisy built into our present economic order...
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    • Thu Mar 20th 11:03 AM
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      Bear's Creditors Were the Ones Bailed Out
      Another Wall Street guy who doesn't get it about the Fed--the Fed is a political entity that belongs to Washington, not a financial entity that belongs to Wall Street. The Fed may be chartered as independent, but in practice they bow to the political will of Congress and the President, and the political consensus in Washington was that action was needed, so there was going to be action. You Wall Street pure-market conservatives waste your breath every time when you recommend inaction because politics is driven by calls for action from main street, and Washington can't ignore that, and the Fed ultimately can't ignore that.
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    • Thu Mar 20th 10:46 AM
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      Consumers Union’s Approach to Improving Drug Safety Surveillance is Misguided
      I have a layman's suggestion that harkens back to another old way of doing things--there shouldn't be any television advertising of prescription drugs to a general audience, so let's ban that. The whole idea of prescription drugs is that mediation is needed, so let's keep the physicians as the gatekeepers of what prescription drugs should be used to treat various conditions. It isn't appropriate for the drug industry to be encouraging desperate patients to be hounding their doctors about the new drug flavor of the week for their particular condition...
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    • Thu Mar 20th 10:28 AM
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      Time to Sit on Your Hands
      The only sure thing out there right now is fungible goods--if you were going to buy a car or a big flat-screen tv or new appliances and put it off, go out and snap up those babies now before your cash shrinks in value some more. The prices on that stuff wasn't going to discount much when the recession comes, and you'll feel good about buying those when there wasn't anything else good to do with your money...
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