The Collected Works of Author and Blogger Larry Roberts

Archive for November, 2016

California nimbys prevent the construction of housing needed for the next generation of Californians. Last month I wrote about how American Dream equates with home ownership, and the California Dream resembles the exclusionary policies of the landed gentry of Elizabethan England. Like the working classes of Elizabethan England, the working class in California is doomed to rent from the landed gentry -- the antithesis of the American Dream of homeownership. Besides the death of the American Dream and the creation of a permanent underclass of transitory renters, the California model of the neo-landed-gentry disturbingly excludes our children from the homeownership club, sentencing many of them to this new renting underclass. It's apparent that the people responsible for this mess, California Nimbys, don't love their…[READ MORE]

With millions trapped underwater, and with those with equity experiencing weak wage growth, most people choose to remain in their homes rather than moving up. Americans love their homes. Over the last decade, they became so enamored with their abodes that many decided not to leave. Prior to the housing bust, homeowners remained in place for a little over four years on average. Over the last decade, that timeline stretched to nearly eight years. Why are people staying in their homes so long? While some people undoubtedly found their dream home years ago, people retain their current home for reasons other than their affinity for it. Nearly 6 million people remain trapped in their entry-level homes they purchased a decade ago. Perhaps…[READ MORE]

At this point in history, the benefits of an overheating economy outweigh the detriments of a little inflation. The Federal Reserve controls the economy's gas pedal. They can step on the pedal by lowering rates to inject more fuel into the economic engine. They can also let off the gas by raising interest rates. For the last eight years, the federal reserve held the pedal to the metal, but even at top speed, the economy wasn't firing on all cylinders. Finally, the economy appears to be recovering from the 2008 recession. Unemployment is low, growth is stable, and wages are finally starting to rise. With as dismal as the economy has been for the last decade, many probably wonder why…[READ MORE]

By greatly reducing the tax advantage of mortgage debt, many high-wage renters may choose to remain renters rather than assume large debts to buy a house. However, by reducing taxes on lower-income Americans, Trump's tax plan should stimulate demand for entry-level housing. Over the years, I wrote several posts critical of the home mortgage interest deduction because it's an expensive tax subsidy that only serves to inflate house prices in areas dominated by high wage earners. While several options exist for modifying, replacing, or eliminating the subsidy, only one of these options is politically feasible -- and it's the one Trump proposed. As it stands today, only a small segment of high wage earners claim this deduction. In theory, this subsidy…[READ MORE]

The housing cycle probably hasn't reached a turning point because the far-flung suburbs haven't recovered yet. The old real estate adage says "you drive until you qualify." Potential homebuyers substitute to far-flung suburbs (exurbs) because high house prices push them away from more desirable markets closer to employment centers. Basically, if people drive far enough, they will find a house they can afford. This phenomenon causes many California homeowners to endure brutal commutes. The cost-push substitution effect explains why recoveries start in the most desirable neighborhoods closest to employment centers and radiate outward to the exurbs. In past recoveries, the most distant commuter markets fully recovered and even participated in the subsequent bull run (bubble cycle). One notable difference between this…[READ MORE]

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