Wednesday, March 24, 2010

More Cash for Clunkers bashing

Ph.D. economist Rebecca Wilder echoes Calculated Risk and me in her contempt for last year's cash for clunkers program, calling it "the most economically atrocious piece of legislation in 2009."

Also, even in a fiscal mess, California is wasting taxpayer money.


  1. James this isnt your site is it?

    According to this, the house I want to buy (which sold in 2002 for 430,000 and is selling today for 685K) is worth 311-330K today.

    Does anyone really believe this is even remotely possible?

  2. Anon:

    Sounds like you're having a crisis.

    Let me help you a little. I have learned in life that something is worth what someone is willing to pay for it.

    That doesn't mean it's worth that for everyone. For example, my wife has a fascination with large diamonds, something I find completely worthless. Does that mean the diamond is worthless, or priceless? It's worth what someone is willing to pay you for it.

    The house may be worth 330K to someone, but it's worth 685 to the owner.


  3. The house may be worth 330K to someone, but it's worth 685 to the owner.

    Chuck - I understand that. In fact, since its under contract, I will go one further and say its worth that to the Buyer.

    That wasnt my question though. My question was based on that chart which assumes houses at the end of the bubble will revert to their inflation adjusted price - which as of today is 311-330K

    I find that to be ridiculously pessimistic - especially in light of the sheer lack of inventory and the rapidly rising incomes we see in this area.

    Hence my question - can anyone seriously think that the house, worth 430K in 2003, worth 700K at the peak and now worth 685K today, will ever ever see 311-330K as that site predicts?

  4. There is no single formula to calculate home prices. A home bay be in area that went to gentrification or became less appealing. A new train stop to the city may have been added or taxes may have gone up significantly make the place less attractive.
    I do believe that we are at the start of a second dip in home prices with higher interest rates and persistent high unemployment. This will not affect all homes the same way.
    My advice is compare the price of renting to the price of ownership, find a home you like and you can afford and buy it.
    If it makes more sense to rent don't buy!!
    The NAR says the population is growing so there is an increased need for homes. Today, I heard that more and more multi-generation families share one home. The real and shadow inventory of homes for sale is huge.
    My opinion is that there is almost no up potential but still plenty of down potential.

  5. Anonymous said...
    "James this isnt your site is it?"

    No, that's not my website.

  6. Anon - I think we all know it will never get that low. The website very well could be flawed, choosing a poor baseline. Or (given the home's drop of approx 5% to date) im guessing its in the immunozone where (as the other anon said) there was a lot of gentrification and (as you said) alot of very solid income growth.

    In hindsight yes, many of us were too pesimistic in our estimates of price drops. Still, we learn from our mistakes and move on. Perhaps you should too.

  7. Watch the unemployment numbers closely for a given area, as that will determine what the housing market does in that area. When you see large local companies hiring sales people and marketers, this is a good sign. Relying on govt numbers to tell truth is a loser's game.