The pain from deflation in no way excuses government pushing up prices so drastically, by artificially holding down interest rates. That. wasn’t done early in this decade for home ownership, it was done to keep the economy robust before the 2004 election.
Your experience explains why so many people fell for these sucker loans. They wanted a house, they saw they were falling ever further behind, and the economic policy of the Bush administration gave the benefits of improved productivity to the rich, not to the worker. In 2003 they might have held out, sure that the insane prices would come down, and in 2004 they found themselves even worse off. Is it any wonder that they fell for a slick salesman telling them that singing the loan was the only way to get into a house, and that they shouldn’t worry because in a year they’d have a bundle of equity?
No - but it is a fact that a decrease in prices is going to kill local government.
As I see DerTrihs has said, Prop 13 is a case of the people overruling government, led by that scumbag Howard Jarvis (may he rot in nonexistent hell.) Government knew that this was going to cause a problem, but the sheeple said “Baah, taxes are bad…” and now wonder why our schools suck. I can go on for hours about how Prop 13 is evil. And I benefit from it greatly, paying taxes on an assessment from before the bubble.
I don’t think there is any place in the US where raising property taxes is going to be a simple thing to do. Especially because the drop in values is not evenly distributed. My neighborhood, being older, has had few foreclosures and based on sales prices, has had a 10% drop at most. Why should we get a big boost in taxes to cover the drop for the people who overpaid?
Prices will go down - but it is not totally a good thing.
Not quite so easy. Many desirable places are built out. Builders who get one of the rare empty lots can charge premium prices in a desirable location. There was a run down shopping center in the next block which got turned into $1M crap houses (I toured the models.) Great for me, since it raised my property value, but increasing supply in a sense increased average prices.
When you have a small area where the jobs are, like Silicon Valley, houses close to this are priced higher than those far away. The places that grew up 50 miles away to let people buy a big house they can afford are now hurting the most, since more people with money still can move closer, and because gas prices have increased the commuting cost.
The reason Prop 13 passed was that those paying more in property taxes were not necessarily richer. I’m a bit richer - but nowhere near as much as my house has appreciated, but my neighbor is retired and not richer at all.
Property tax caps for retired people are a really good idea, but not for anyone else. But even those who are not retired may not be able to afford the double whammy of an increased tax bill. Given that I don’t believe in home equity loans, I might get some satisfaction from looking at what my house is worth today, but it doesn’t put any cash in my pockets.
BTW, business property is also covered by Prop 13, and since businesses don’t retire and move away, that really has hurt.
It’s an excellent idea. When the founders of a startup need more money, venture capitalists don’t just lend it to them, they get equity in the company. No reason the government shouldn’t do the same.
Well then, by all means let’s all pay higher taxes so we can bail out the mortgage holders and let housing costs continue to rise, be content with our diminishing relative incomes and the newly married couples and retirees can move into dumpsters. Sounds like a plan to me. Or, still preferably to me, we can let the cost of housing fall to affordable levels and folks could actually buy them and furnish them and improve them and spend the money left over in the economy at large. Living in a dumpster is still a dumpster, whether we have the Great Depression Part Deux or not. As I stated previously, things as they stand now are not sustainable, bail out or not.
I fail to see how this is a counterpoint to “let supply and demand dictate house prices”? Are you proposing that everyone should be able to cheaply live in Silicon Valley?
I was just talking about your ludicrous taxation scheme with a German office-mate. He finds the whole thing hilarious. Apparently in Germany, municipal governments derive most of their income from consumption taxes, and property taxes are very low.
" Aside from this Proposition 13 nonsense, Why would the government want taxes to discourage people from improving and increasing the value of their property anyway? Shouldn’t that be something to be encouraged? What a bizarre system. "
I don’t think it’s a bad thing for home prices to return to sane levels; in fact, I think it’s inevitable. Ever hear of tulipmania in Holland?
*At the peak of tulip mania in February 1637 tulip contracts sold for more than 20 times the annual income of a skilled craftsman. *
Seems crazy now, but some people do lurv to gamble.
People were purchasing bulbs at higher and higher prices, intending to re-sell them for a profit. However, such a scheme could not last unless someone was ultimately willing to pay such high prices and take possession of the bulbs. In February 1637, tulip traders could no longer find new buyers willing to pay increasingly inflated prices for their bulbs. As this realization set in, the demand for tulips collapsed, and prices plummeted—the speculative bubble burst. Some were left holding contracts to purchase tulips at prices now ten times greater than those on the open market, while others found themselves in possession of bulbs now worth a fraction of the price they had paid.
Speculation may be great while it lasts but when it crashes, somebody gets burned. I just hope it isn’t the average taxpayer.
Just saying that simple supply and demand does not result in stable pricing when the supply is severely limited. Long before the crash, there was a recognized problem that young people and those who weren’t high salaried engineers not being to afford to live where they work. In my town there are lots of multigeneration families, but not any more. No one came up with a solution. It is still true, since our prices aren’t going down very much - except for condos bought by those trying to find the cheapest housing. They got wiped out. About half the foreclosures listed for our town are around $250 K, while the median price excluding them is around $600 K. We had this gigantic drop in median sales price not from house prices declining so much as from the mix of houses sold.
He is right. Do a big renovation, and get your house price reassessed. Adding a few thousand bucks a year to your property taxes is a powerful incentive not to add a room.
For a more recent example, try Beanie Babies. People expected to retire on the damn things, before the fad ended. But people live in neither tulips nor beanie babies, so it is a bit different.
I don’t really understand how this is a problem. If they can’t afford it, they won’t live and work there, in which case, either the price will go down (less demand) or the companies that need them will pay them more (more supply). Isn’t that the whole point? I’m not seeing how propping up the high prices with subsidies is suppose to be a “solution”.
I’m pretty happy about it. I currently rent a house worth about 95K for $700 a month, and was worried during the housing bubble that the owner might consider kicking us out, doing some remodeling, and re-selling it or renting it for much more. Now I think he’ll be happy to continue to make some money off of this as it’s value plummets.
Sorry, we can’t move our schools to China for cheaper labor. How are schools going to pay teachers enough to live here, considering Prop 13? There have been attempts at subsidizing housing, but it hasn’t seemed to either work or keep up with demand. Plus there are plenty of engineers here to keep demand up, given the limited supply. Some rent (pretty expensive also) some live with their parents, and some are stuck paying $3.75 (cheap) and making 50 mile one way commutes.
The thread is about why deflation is bad. I think I gave plenty of examples. It will happen anyway, but it hurts lots of innocent people.
So your irrelevant tangents about China and fuel costs aside, what exactly is the end result you seek here? Reading the above, it sounds like the end result is that higher paid people who can afford to live in desirable areas will do that, and lower paid people who can’t, won’t. Isn’t that the desired outcome? Or are you suggesting that someone has an innate right to live in a desirable area just because they are teachers or nice folks or whatever?
To be honest, it sounds like another fake Bush style fuck you got mine “conservative” argument for socializing the costs and privatizing the profits.
I am reminded of the story of a man who wanted to sell his dog for a million dollars and his friends laughed at him but one day the man told his friends he had finally sold his dog for a million dollars.
What? Someone gave you a million dollars for your dog?
Yup.
A million dollars in cash??!!
Well, no, he gave me two cats, each worth half a million.
Something similar was going on here while everybody was going crazy selling one home and buying another.