Tuesday, December 29, 2009

Case Shiller Price Index - October 2009

From Case Shiller's Press Release:
“The turn-around in home prices seen in the Spring and Summer has faded with only seven of the 20 cities seeing month-to-month gains, although all 20 continue to show improvements on a year-over-year basis. All in all, this report should be described as flat.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s.
As of October 2009, average home prices across the United States are at similar levels to where they were in the autumn of 2003. From the peak in the second quarter of 2006 through the trough in April 2009, the 10-City Composite is down 33.5% and the 20-City Composite is down 32.6%. With the relative improvement of the past few months, the peak-to-date figures through October 2009 are -29.8% and -29.0%, respectively.
Prices declined in 12 of the 20 Case-Shiller metropolitan areas, and were flat in New York.

Case-Shiller House Price Graphs for October (Calculated Risk Blog)

In the Washington, DC area prices were fell -.4% (not seasonally adjusted) in October compared to September; Annually prices have declined -2.8%. I expect small price declines during over the winter months in the DC area.

Monday, December 28, 2009

Get to know your blogger

I'm on vacation this week. David says he'll post to the blog while I'm gone. In the meantime, get to know your blogger through Wikipedia user boxes. Click on the image to see the full-sized version.

Saturday, December 26, 2009

Updated housing bubble graph

For those who are interested, I have finally gotten around to updating my housing bubble graphs. The national graph now has a new feature: pre-bubble trend lines.

Click on the graph to view the full-sized version.

Friday, December 25, 2009

David Lereah Launches New Real Estate Blog

David Lereah launches a new blog called Real Estate Economy Watch.

Seeking Alpha has this to say:

Maybe not… but it appears that Lereah has launched a new venture… let’s call it a blog… with both an ironic title and a decidedly more realistic un-spun outlook.

Real Estate Economy Watch” is effectively a blog that hosts daily commentary on the housing market, tracks market data, and even specifically follows the course the “housing crisis”.

The title is ironic because it is reminiscent of “David Lereah Watch” a popular blog that relentlessly pounded Lereah during the heyday of the bubble crescendo.

The content, on the other hand, bears an unrecognizable skeptical edge.

Solid name for his site. I hope that it also contains solid content. Of course he cannot be trusted.

Wednesday, December 23, 2009

Bernanke criticized for ignoring housing bubble

Kevin Drum criticizes Fed Chairman Ben Bernanke for being complacent about the growing housing bubble. Nobel laureate Paul Krugman follows suit.

NAHB: Senate health care bill targets home builders

The National Association of Home Builders isn't happy with the Senate's version of the health care reform bill:
Home builders say they are unfairly targeted in the sweeping Senate health-care legislation that could mean coverage for millions of Americans.

"In their rush to pass massive health care reform before Christmas, Senate Democrats included a last-minute provision overtly targeting the construction industry, including home builders," the National Association of Home Builders said in an email alert to its 200,000 members Monday. "In order to find the 60 votes needed to pass health-care reform, a provision was slipped into the health-care bill to exclude the construction industry from the small business health-care exemption contained in the bill."

Employers with more than 50 employees would be required to offer insurance or pay a fine of up to $750 per employee if any employee obtains federal subsidies for coverage. But the builder group says the bill singles out the construction industry by "only giving construction firms an exemption from the bill's employer mandates if a firm employs less than five people. Every other industry is granted an exemption if they have fewer than 50 employees."

Tuesday, December 22, 2009

Home prices falling again?

This comes from Calculated Risk:
Earlier today I mentioned that the Fed started using First American CoreLogic's LoanPerformance House Price Index last year for the Flow of Funds report.

And also that LoanPerformance announced today that house prices fell 0.7% in October.

Since most people have been following Case-Shiller, here is a graph of the LoanPerformance index (with and without foreclosures) and the Case-Shiller Composite 20 index.
The LoanPerformance HPI with foreclosures is the red line, the LoanPerformance HPI without foreclosures is the blue line, and the Case-Shiller 20-city index is the green line. (The Case-Shiller index includes foreclosures.) Notice that both LoanPerformance indices show falling prices again, while the Case-Shiller index is showing slowing price increases. Click on the graph to see the full-sized version.

Consider this a Christmas present for bubbleheads.

Saturday, December 19, 2009


Morgan Stanley is immoral. (Just in case you didn't already know.)

Finally, a stimulus bill I can support. But why does Congress feel the need to tell states how to spend the money? Why not just give money to the states and let those closer to the ground level make the spending decisions. Does Washington, D.C. really know what's good for Wyoming better than the Wyoming state legislature does?

Friday, December 18, 2009

Bearish housing predictions

Predictions from Trulia CEO Pete Flint:
Next year "government interventions will start to disappear, shadow inventory will hit the market and mortgage rates will start to rise" to around 6 percent from under 5 percent, he said. "We're in a false state of stability."

Shadow inventory includes houses that banks now hold but have yet to put up for sale.

Double-digit unemployment will push more owners into foreclosure, further destabilizing the housing market and pressing prices down another 5 to 10 percent, said Flint.
Predictions from RealtyTrac:
Foreclosures could escalate to 4 million in 2010, RealtyTrac Senior Vice president Rick Sharga said.

"Unemployment, negative equity are driving factors, as is credit availability," he said. "We don't believe we will get back to normal levels of foreclosure activity on a month-to-month basis until probably the end of 2012, and we will still be going through the shadow inventory well into 2013."

Banks will place the unsold homes on the market at a measured pace to thwart prices on all homes from falling off a cliff anew, he said.

Thursday, December 17, 2009

Question for readers

Do you agree with Time's choice of Ben Bernanke as Person of the Year?

To paraphrase an old Paul Krugman saying, "Whom the Gods would destroy, they first put on the cover of BusinessWeek Time magazine."

By the way, here's a little Bernanke nugget from The Wall Street Journal's Real Time Economics blog:
In an extended interview with Time Magazine, Fed Chairman Ben Bernanke says he refinanced his own mortgage a couple of months ago at 5%, and switched from a floating rate, which the Fed chairman said “exploded” in cost, to 30-year fixed. Mr. Bernanke bought a 2,600 square foot house in 2004 for $839,000.

A conspiracy theorist might infer that Mr. Bernanke sees rates rising a lot in the years ahead. Why else lock in a low rate now? It’s also interesting that he had an adjustable rate mortgage whose cost exploded. Could the Fed chairman have been in an exotic mortgage with a rate that reset much higher?

Citigroup: No foreclosures during the holidays

Citigroup is suspending foreclosures for the next 30 days:
Citigroup Inc. will suspend foreclosures and evictions for 30 days in a temporary break for about 4,000 borrowers during the holiday season.

The New York-based bank said Thursday the suspension will run from Friday through Jan. 17. It applies only to borrowers whose loans are owned by Citi. Borrowers who make payments to Citi but whose loans are owned by other investors are out of luck.

"We want our borrowers to have a much less stressful time, to spend their time with their families during the holidays as opposed to worrying about their homes," Sanjiv Das, head of the company's mortgage division, said in an interview.

Monday, December 14, 2009

Ginnie Mae is an enabler of risky lending

From The Washington Post:
The trouble signs surrounding Lend America had been building for years. A top executive was convicted of mortgage fraud but still helped run the company. Home loans made by its headquarters were defaulting at an extremely high rate. Federal prosecutors alleged in a civil suit that the company falsified loan documents and committed fraud.

Yet despite these red flags, a little-known federal agency continued giving its blessing to Lend America, allowing it to do business in the name of the U.S. government. The Government National Mortgage Association, known as Ginnie Mae, authorized the firm to bundle its mortgages into securities and sell them to investors around the world — all backed by U.S. taxpayer money. ...

Lend America is hardly the only lender with a troubled record that Ginnie Mae has endorsed. The agency has provided taxpayer backing to at least 36 other mortgage companies with a history of reckless lending, fines or other sanctions by state and federal regulators or civil lawsuits, according to an analysis of government records, court documents and statistics in a HUD database.

Ginnie Mae's ongoing relationship with these firms allows them to swap the home loans they've made for new cash so they can make more loans, which can then be traded for even more cash to make even more loans. Housing experts say this dynamic turbocharges the type of bad mortgage lending that first helped trigger the financial crisis that battered global markets over the past two years. And ultimately, taxpayers are on the hook for the troubled mortgages. ...

More than a dozen lenders with Ginnie's endorsement have made loans that are now delinquent at rates far in excess of what regulators consider acceptable. And some of these lenders have been accused of misleading both borrowers and the government about these loans.

Sunday, December 13, 2009

CNBC: The Bubble Decade

CNBC has a new documentary about this past decade's economy called The Bubble Decade. Apparently it first aired last night, will air tonight and tomorrow night, and probably numerous times after that. Here's the synopsis:
In The Bubble Decade, a one-hour CNBC Original documentary, Correspondent David Faber reports on one of the most dramatic periods in the history of America’s financial markets. As the first decade of the 21st century draws to a close, Faber looks back at the tumultuous era, one marked by ambition and innovation, avarice and excess, and record highs – and lows – on Wall Street.

The sweeping story of the three economic bubbles that defined the decade begins with the tech bubble, its apex marked by AOL’s audacious takeover of Time Warner. The deal signified the heights and hope of the dot-com boom, a chapter that saw the creation of scores of high-flying internet companies, many of which would die an early death. The middle of the decade brought the housing boom and the formation of the real estate bubble. It was the age of easy money, with banks all too eager to fund new construction, and developers and homeowners all too eager to take on loans they couldn’t afford. The last bubble of the decade to burst was the credit bubble, exemplified by private equity firms awash in money and on the lookout for takeover targets. In some cases, these private equity deals and leveraged buyouts resulted in a lucky few making a fortune, with the targeted company loaded up with debt and ruined in the process.

The rollercoaster ride of the past decade is told through the people who lived it: some who made millions, some who lost millions, and some who did both. Faber profiles Internet entrepreneurs, real estate speculators, and corporate takeover specialists. In addition to reporting the taped segments, Faber will moderate two panels of key players who shaped the biggest financial stories of the decade.
It's hard to believe this decade is almost over. Each decade goes by faster than the last.

Show times:
  • Sunday, December 13th 10p ET
  • Monday, December 14th 8p ET

Saturday, December 12, 2009

The ethics of stiffing the bank

Megan McArdle gives her thoughts.

Prof. Karl Case retires

Wellesley College economics professor Karl Case, of Case-Shiller fame, retired from teaching yesterday:
The idea for the most influential measure of the nation’s housing market began in Karl E. Case’s living room about 25 years ago. ...

He grew obsessed with housing values and wanted to come up with a better way to measure them. Within a few years, Case and his colleague Robert J. Shiller of Yale University created what is now called the S&P/Case-Shiller Home Prices Indices, a measure based on repeat home sales that industry officials and economists rely on to gauge the health of the country’s housing market.

Case spun his ideas on home values into a series of papers, became one of the nation’s foremost specialists on housing, and imparted his passion to students, leading them on tours of Boston neighborhoods and requiring them to go through the process of buying a house as part of their course work.

Now the 63-year-old professor, suffering from Parkinson’s disease, has decided to retire, his last class scheduled for today. Case said his brain and body are not functioning the way they used to. He is slowly losing his short-term memory and can no longer remember the names of all his current students. ... "I can remember the names of every kid from 25 years ago," Case said. "All of a sudden I have a class now, and I don’t remember their names." ...

Case said he is going to keep talking about housing, even in retirement, and will work on the 10th edition of his textbook, “Principles of Economics.’’ He also plans to continue speaking at conferences.

Thursday, December 10, 2009

Foreclosure filings up 18% YoY; down 8% MoM

From CNN Money:
Foreclosure filings fell by 8% in November, making it the fourth consecutive month of improvement in the housing market.

There were 306,627 filings last month, according to RealtyTrac, an online marketer of foreclosed properties. That decline follows a 3% drop in October, 4% in September and 1% in August. ...

However, while there are signs of improvement, the industry has yet to turn around: Foreclosure filings were still a lofty 18% above November 2008's levels.

Wednesday, December 09, 2009

FHA: Helping the affluent buy housing

The Federal Housing Administration exists in part to make housing more affordable for low-income families. However, with the advent of the financial crisis the FHA has experienced mission creep. The first of its new missions is to help prop up housing prices, thus preventing housing from becoming affordable. The second of its new missions is to help high-income Americans buy homes. Since the FHA is currently on financially shaky ground, these new missions could end up coming at taxpayer expense.

The Washington Post explains the latter of these new missions:
CREATED DURING the depths of the Great Depression, the Federal Housing Administration has a long history of supporting homeownership in the United States. In recent decades, its mission has been to enable lower-income Americans to tap otherwise inaccessible mortgage credit. ...

What must be debated, and indeed challenged, is the stepped-up use of the FHA to boost demand for, and hence the price of, houses in the current crisis. This is true not only because of the fiscal implications; the FHA's reserves are currently below the statutory minimum, raising the specter of an eventual taxpayer rescue. It is true also because of the regressive distributional implications; the FHA is increasingly helping people who are decidedly not poor to buy houses that are anything but modest. ...

Even some fairly fancy condo buildings are now trumpeting FHA financing. As the New York Times reported recently, among those buying property with little or no money down, thanks to FHA, are investors and well-off people who could have come up with more equity. ...Whatever the additional risk may be, the federal government is assuming it in a way that facilitates the upward transfer of wealth.

When adopted last year, the higher FHA loan limits were billed as a temporary fillip to the housing market. But temporary subsidies have a way of enduring. ... This might help build a floor under the still-shaky housing market, as intended. But it would also complete the mission creep of the agency from one dedicated to upward mobility to one that also produces middle- and upper-middle-class enrichment.
The Wall Street Journal explains that Congressmen of both parties want these new missions to become permanent:
Lawmakers from high-cost housing districts, for example, want to ensure that the FHA doesn’t disappear from their neighborhoods. They’ve introduced a bill that would make permanent the higher loan limits that Congress temporarily expanded last year. ... [Barney] Frank said he thinks limits should be increased to around $800,000. ... Other lawmakers, meanwhile, want to bring back programs that allowed borrowers to receive FHA-backed loans without making down payments.
A traditional rule of thumb is that the price of the house you buy should be roughly three times your annual income. (Many of the homeowners who ended up underwater recently ignored this rule of thumb, looking only at their monthly payments instead.) Using this 3X annual income ratio, an $800,000 FHA loan would allow people earning up to $266,667 per year to qualify. Using a far more generous 4X annual income ratio, people earning up to $200,000 would qualify. These income levels are way above the U.S. median. Even in America's three wealthiest counties as of 2008—Fairfax County, Virginia, Loudoun County, Virginia, and Howard County, Maryland—these income levels are at least double the median household income.

So here's a question for readers: Since the FHA is knowingly offering huge mortgages with very little down payment (3.5%), and knows that such behavior led to massive defaults when banks recently did the same thing, is it morally ethically acceptable for a borrower to walk away from an FHA loan—leaving taxpayers with the bill—if he ends up underwater on his home?

Tuesday, December 08, 2009

Housing: Canada vs. the United States

Canadian vs. U.S. housing prices:

Canadian vs. U.S. delinquency rates:

Commentary from the source:
While it is difficult to disentangle the reasons why Canada avoided the subprime boom, some factors can be identified that may have contributed to the differences in the Canadian and U.S. subprime markets.

Perhaps the simplest story is that Canada was “lucky” to be a late adopter of U.S. innovations rather than an innovator in mortgage finance. While the subprime share of the Canadian market was small, it was growing rapidly prior to the onset of the U.S. subprime crisis. In response to the U.S. crisis, some subprime lenders exited the Canadian market due to difficulties in securing funding. In addition, the Canadian government moved in July 2008 to tighten the standards for mortgage insurance required for high LTV loans originated by federally regulated financial institutions. This further limited the ability of Canadian banks to directly offer subprime-type products to borrowers.

There are also several institutional details that played a role. The Canadian market lacks a counterpart to Freddie Mac and Fannie Mae, both of which played a significant role in the growth of securitization in the U.S. In addition, bank capital regulation in Canada treats off-balance sheet vehicles more strictly than the U.S., and the stricter treatment reduces the incentive for Canadian banks to move mortgage loans to off-balance sheet vehicles. Finally, as noted above, the fact that the government-mandated mortgage insurance for high LTV loans issued by Canadian banks effectively made it impossible for banks to offer certain subprime products. This likely slowed the growth of the subprime market in Canada, as nonbank intermediaries had to organically grow origination networks.

The Canada-U.S. comparison suggests the low interest rate policy of the central banks in both countries contributed to the housing boom over 2001–2006 and that a relaxation of lending standards in the U.S. was the critical factor in setting the stage for the housing bust. A caveat worth emphasizing, however, is that the Canada-U.S. comparison tells us little about what would have happened if U.S. monetary policy had been tighter earlier. Tighter monetary policy in the early part of the decade may have helped to limit the subprime boom by slowing the rate of house price appreciation over 2002–2006. The Canada-U.S. comparison does, however, highlight the practical challenge facing policymakers in assessing whether a rapid run-up in asset prices is a bubble or a “sustainable” movement in market prices.

November 2009 job losses: BLS vs. ADP

Via Mark Thoma, FT Alphaville questions the accuracy of the BLS payroll numbers released on Friday:
Just how amazing were the US payroll numbers released on Friday?

So amazing they’re verging on the (perish the thought) unbelievable, according to some analysts.

The consensus forecast among analysts for the November job loss had been -130,000, with even the relatively optimistic and sometime-clairvoyant economists at Goldman Sachs forecasting -100,000. The official data showed a fall of just 11,000 — about 90 per cent fewer than the consensus estimate.
Many months ago I began tracking the Automatic Data Processing payroll numbers in addition to those from the Bureau of Labor Statistics in order to satisfy those conspiracy theorist commenters who just don't trust the government's data. For November 2009, ADP and the BLS disagree by over 150,000 job losses.

Here's my graph of BLS data for this recession:

Here's my graph of ADP data for this recession:

Update: I just noticed that the BLS measures both private and government payrolls while ADP only measures private payrolls. However, even just comparing private payrolls, the disparity is roughly the same. ADP says there were 169,000 private nonfarm job losses in November, while the BLS says there were only 18,000 private nonfarm job losses—a 9-fold difference.

Thoughts on "too big to fail"

Economist and blogger Rebecca Wilder has some thoughts on "too big to fail" banks.

Monday, December 07, 2009

More bubbles to come

Robin Wells, a former Princeton University economics professor and current wife of Paul Krugman, says we will continue having financial bubbles:
The world is trapped in a global savings glut. It is both the source of our economic woes and an obstacle to the task of pulling ourselves out of the ditch. Worse yet, the glut's continued existence will feed a succession of asset bubbles until we confront it, head on, and find ways to soak up the excess.

Yes, we can blame the City and Wall Street for turning the global savings glut into fissile material. But that's like saying, "hyenas do what hyenas do". Given extraordinarily lax regulation and a flood of money to play with, bankers were just acting according to their incentive schemes. They merely took advantage of the opportunities the glut presented. The real culprits are thrifty Germans, and state-owned enterprises in China – along with governments of other countries, of course, turning a blind eye to the escalating problems. ...

What makes this a global glut is that the world as a whole is saving more than can be profitably invested. The corollary is that, eventually, those funds will earn less than nothing. And through financial engineering, those losses are now distributed around the world. ...

Until the savings glut is vanquished, asset bubbles and instability will be fed, exacerbating income inequality and favouring wealthy bankers and the Chinese elite. It will continue drawing resources away from productive sectors of the economy and channelling them into high-paying but socially useless financial engineering – or into yet more excess capacity.
If you've ever considered going into banking, perhaps it's not too late. Real estate agents may again be raking in the dough. And Bubble Meter may continue to have plenty to blog about.

Sunday, December 06, 2009

Bargain book about the financial crisis

Looking for an inexpensive Christmas gift for yourself or others? Just want something to read while traveling? The Two Trillion Dollar Meltdown is currently available from Amazon.com for only $4.55.

I haven't read the book, so I can't attest to its quality. I do, however, get a kick out of this 1-star reader review of the first edition from April 29, 2008:
"Trillion Dollar Melt Down" is about the 2007 sub-prime credit crisis. The huge problem, though, is that the book mostly proclaimed that the sky was falling in 2007 when it was written, but now - (mid 2008) when the book has finally reached the market - the sky still hasn't fallen, no recession has started, and unemployment is still very low. The book, then, seems like a short (194 pages), obsolete gimmick, raced to market, to capitalize on old fears about something that never happened.

Saturday, December 05, 2009

The unemployment rate declines!

The economy keeps getting better (or less bad). The unemployment rate actually fell in November, down to 10.0% compared to 10.2% a month earlier:

The year-over-year percent change in initial jobless claims has fallen below zero, which means employed workers are safer than they were a year ago:

November's month-over-month change in nonfarm payrolls was just about zero, the best it's been since December 2007:

Compare the above graph with a graph of ADP's numbers.

The year-over-year percent change in aggregate weekly hours worked is rising:

Permabears must be growling at the improving data.

Friday, December 04, 2009

2010 housing predictions

CNBC real estate reporter Diana Olick makes four predictions for the coming year:
  1. The residential housing market will dip again in mid-2010 before settling into a recovery in the back half of the year.
  2. Foreclosure inventory will be a lot higher than some predict.
  3. No more historic lows on the 30-year fixed.
  4. Commercial real estate will continue to suffer the ills of low vacancy rates, low rents and high default rates.

Thursday, December 03, 2009

ADP: November 2009 job losses

According to the ADP Employment Report, the month over month rate of job losses continued to decline in November. This graph shows the number of job losses in thousands:

Here are ADP's comments on the numbers:
Nonfarm private employment decreased 169,000 from October to November 2009 on a seasonally adjusted basis, according to the ADP National Employment Report®. ...

November was the eighth consecutive month during which the decline in employment was less than in the previous month. Although overall economic activity is stabilizing, employment usually trails economic activity, so it is likely to decline for at least a few more months.
Keep in mind that we need 100,000-200,000 job gains each month just to keep up with population growth.

Wednesday, December 02, 2009

Home sales contracts up in October

The number of home sales contracts surged in October, as home buyers tried to take advantage of the first time homeowner tax credit:
In October the National Association of Realtors recorded an unprecedented ninth consecutive month of increases in the number of signed contracts.

Although these are not closed sales, and some deals can fall through, signed contracts are a good indicator of where the housing market is headed.

Between September and October NAR's Pending Home Sales Index rose 3.7% to 114.1 from 110 in October. But the index is 31.8% higher than a year ago, when it was 86.6. That's the biggest year-over-year gain in the history of the index.

The PHSI is also at its highest level since March 2006, and the rise confounded expert expectations. A panel of industry analysts put together by Briefing.com had forecast a 1% drop in new contracts.

NAR's chief economist, Lawrence Yun, gives much of the credit for increased sales to the homebuyer's tax credit, which first-time homebuyers could claim to reduce their taxes by up to $8,000. ...

The credit had been due to lapse on Dec. 1, so many October buyers may have acted to get in under the wire.

Tuesday, December 01, 2009

Law professor: Walk away

A law professor encourages people to walk away from their homes:
Go ahead. Break the chains. Stop paying on your mortgage if you owe more than the house is worth. And most important: Don't feel guilty about it. Don't think you're doing something morally wrong.

That's the incendiary core message of a new academic paper by Brent T. White, a University of Arizona law school professor, titled "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis."

White argues that far more of the estimated 15 million American homeowners who are underwater on their mortgages should stiff their lenders and take a hike. ...

Better yet, you can default "strategically." Buy all the major items you'll need for the next couple of years — a new car, even a new house — just before you pull the plug on your current mortgage lender.
Scenario #1: You walk into a bank and take a bunch of money that doesn't belong to you. This is called theft.

Scenario #2: You take out a loan, promising to pay it back. Then, after you have the money, you decide not to pay it back. How is this not also theft?

I can completely understand not paying back a loan if you lose your job and are unable to pay back the loan. I can also understand if you get sick and end up with huge medical bills that make it impossible to pay back a loan. I can even understand not paying back a loan if the bank deceived you regarding what your payments would be.

However, if you decide not to pay back the loan simply because you overpaid for your house, then I consider that the moral equivalent of theft.

Keep in mind that being underwater doesn't mean you can't afford the monthly payments. It just means that the value of your house has fallen by more than the amount of your down payment (and any subsequent principal payments). A person who stiffs their lender because their investment didn't turn out as expected is scum. Just because you can steal from a bank doesn't mean you should steal from a bank.

Update: This is not just a moral issue. It's a practical one, too. Mortgage interest rates contain a risk premium. A society in which homeowners eagerly stiff the bank is a society in which it is riskier to lend. A society in which homeowners feel a moral obligation to repay their debts is a society in which it is less risky to lend. More risk means a higher risk premium, and thus higher interest rates. Less risk means a lower risk premium, and thus lower mortgage interest rates. Society as a whole benefits when everyone feels a moral obligation to fulfill their end of agreements.


"You buy this house and you will be rich."