Reader Request: What Happened to All That Value?

I LOVE receiving feedback from readers, good or bad. Lately I’ve had trouble thinking of original ideas to write about. When I used to write every week for the Standard-Speaker, I never lacked for topics because readers emailed me all sorts of questions and opinions. I hope “Reader Request” will become a regular feature, but of course…that all depends on you, doesn’t it?

A reader asks: My 28-year-old son just purchased his first home. He has a job but makes very little money. Nonetheless, he was able to make this important first investment because the house was available for sale as a result of foreclosure. This economic circumstance reduced the price of the house to the point that, inspite of his meager means, he was able to afford it. Where did the difference in the foreclosed debt and the value in excess of the price he paid in the transaction come from? Ironically, he is entitled to the Government’s $8k tax credit for first-time home buyers which he did not need to affect the purchase. Continue reading “Reader Request: What Happened to All That Value?”

Don’t Ask a Journalist to Explain Real Estate Economics to You, Part I

No offense to David Streitfeld, but I won’t be asking him to manage my investments anytime soon.

Streitfeld, a New York Times reporter, declares, “Real Estate’s Gold Rush Seems Gone for Good.” He interviewed several economists who warned that “home ownership will never again yield rewards like those enjoyed in the second half of the 20th century” — or, at least, that’s the conclusion he drew from the interviews.

Streitfeld asked all the right people. Dean Baker told him, “People shouldn’t look at a home as a way to make money because it won’t.” Robert Shiller said, “People think it’s a law of nature” that home prices must go up, but it isn’t. Barry Ritholtz warned, “People shouldn’t be holding their breath waiting for it to happen again.”

All three of those guys predicted the housing crash. They know what they’re talking about…but does Streitfeld?   Continue reading “Don’t Ask a Journalist to Explain Real Estate Economics to You, Part I”

22 Days To Go: How Christmas Caused the Financial Crisis

A little over a week ago, I asked, “What…is the lesson from the financial crisis for Christmas? What is the connection between this economic shortfall and our moral heritage?” The best answer came from someone who wasn’t actually trying to answer the question. Yesterday, Wharton professor Joel Waldfogel, of Scroogenomics fame, spoke at LSE. His lecture added another dimension to the deadweight loss of Christmas. The following charts are not included in his book; this is a Trading 8s exclusive…   Continue reading “22 Days To Go: How Christmas Caused the Financial Crisis”