Items of Interest:
Reuters:
U.S. Senate banking panel passes housing rescue plan -- A U.S. Senate banking panel on Tuesday passed legislation that would create a new government-backed mortgage rescue plan and a new regulator for Fannie Mae and Freddie Mac.
Lawmakers passed the legislation on a vote of 19 to 2 after the top Democrat and Republican on the panel crafted a compromise that won broad bipartisan support.
The plan would enable the Federal Housing Administration to guarantee billions of dollars in refinanced mortgages for homeowners whose properties have fallen in value since they took out their loan.
The legislation would also create a stronger regulator for Fannie Mae and Freddie Mac...
Housing Wire: Senate Panel Approves Housing Relief Bill
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Mike Mish Shedlock / Minyanville:A Ticking Demographic Time Bomb -- The charts show the ratio of workers to non-workers will peak within the next four years or so in both the US and Canada. Workers vs. pensioners in the US is peaking now. Workers vs. pensioners in Canada has already peaked.
Fewer workers making less money than their parents will be supporting both social security and more importantly medical expenses (Medicare) for retirees. Retirees who think home prices will keep financing retirement need to start thinking again.
Home prices are falling and will likely continue to fall for another four years or so. That statement is based on logic presented in the following articles:
Boomers hoping to cash out on their homes, are two years or more too late in most places. Four years from now they'll be six years too late. To support consumption at the current pace, boomers will have to start cashing out their IRAs and stock portfolios. They'll also be looking to downsize autos and homes. When it comes to the latter, who are the buyers? What about the increasing tax burdens placed on the working force to support retirees? That backlash will be starting soon.
Interestingly, this demographic time bomb that is now about to go off has been known and understood for years, decades even. Nothing was done about it. Sadly, it's too late now. The only choices at this point are a cutback in promised benefits or increased taxes on the working population. I expect both are about to happen.
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Jeff D. Opdyke / Wall Street Journal:Where Home Prices Are Holding Up -- Downtown: It's been among the safest places to hide from the housing downturn.
Much has been made of the way the nation's real-estate bust is affecting some American cities far more than others. But even within a single metro area, changes in housing prices can show wild variations.
And in big cities, prices in the central cores often fare the best. Far-flung suburbs -- where home building exploded in recent years -- have more typically gotten hammered. In between is a patchwork of established suburbs and city neighborhoods peripheral to downtown that can be all over the map in terms of price declines -- or even increases...
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David Ranson / Wall Street Jrnl:You Can't Soak the Rich -- Kurt Hauser is a San Francisco investment economist who, 15 years ago, published fresh and eye-opening data about the federal tax system. His findings imply that there are draconian constraints on the ability of tax-rate increases to generate fresh revenues. I think his discovery deserves to be called Hauser's Law, because it is as central to the economics of taxation as Boyle's Law is to the physics of gases. Yet economists and policy makers are barely aware of it...
[Hauser] stated that "No matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5% of GDP." What a pity that his discovery has not been more widely disseminated...
The chart nearby, updating the evidence to 2007, confirms Hauser's Law. The federal tax "yield" (revenues divided by GDP) has remained close to 19.5%, even as the top tax bracket was brought down from 91% to the present 35%. This is what scientists call an "independence theorem," and it cuts the Gordian Knot of tax policy debate.
The data show that the tax yield has been independent of marginal tax rates over this period, but tax revenue is directly proportional to GDP. So if we want to increase tax revenue, we need to increase GDP.
What happens if we instead raise tax rates? Economists of all persuasions accept that a tax rate hike will reduce GDP, in which case Hauser's Law says it will also lower tax revenue. That's a highly inconvenient truth for redistributive tax policy...
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- Mary Had a Lamb, and a Jumbo Mortgage - Caroline Baum, Bloomberg
- Debt Squeezed Gen X Saves Little - USA Today
- Vulture Funds Buying Billions Worth of Foreclosed Properties - Seeking Alpha
- The Fed, and "Bubble" Troubles - Daniel Gross, Slate
- Shiller on the Psychology of Foreclosure - Calculated Risk
- Housing Weakness Colors Tuesday - Camilla Webster, Forbes
- Oppenheimer: Credit Crisis Will Extend Into 2009
- Fannie's New Down Payment Policy: Hoping Promise Comes True - Realty Check, CNBC
