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Post a Comment On: Steve Sailer: iSteve

"Village Voice endorses my reading of the mortgage meltdown"

15 Comments -

1 – 15 of 15
Anonymous Anonymous said...

It's really disgraceful how the MSM demonize you and then regularly use the stories you broke aeons ago. Is there nowhere other vdare.com that would have you?

8/18/08, 12:13 PM

Blogger RobertHume said...

I wouldn't overestimate greed or underestimate PC.

I was at meetings where liberal employees of the Federal government said that there was no legal reason that illegal immigrants could not have a bank account.

They strongly implied that if you disagreed that you were bigoted. This is the Bush administration.

The illegals were of the "unbanked" community. Only if they had a bank account could they buy a house.

8/18/08, 12:32 PM

Anonymous Anonymous said...

The big guys in private lending wanted them to stay away from million dollar mortgages to anesthesiologists ...

But really, how much sense do these even make? To make the payments and maintain the value of the collateral, your anesthesiologist better be netting $15K in cashflow per month over 30 years, and the collateral has to appreciate every year upwards from $1M. Does he really think his McMansion with its 2x4 framing and plywood substrate is going to be worth more than the teardown in 30 years?

This illustrates the absurdity of modern American culture. Why not just pay in full for a modest house with cash? Or take out a smaller mortgage on a cheaper house (one with, say, four bedrooms as opposed to seven)?

Government externalities warp people's perspectives on what would otherwise be self-evident: houses are costly, depreciating assets that do not justify 90% leverage, and probably not even 80% leverage. We are in for some hard lessons.

--Senor Doug

8/18/08, 1:08 PM

Anonymous Anonymous said...

A loan officer I know said that one problem with getting unworthy borrowers is that they were not REQUIRED to prove income, they merely had to state it on some forms. Someone could lie about their income on certain kinds of loans because it wasn't necessary for them to prove how much they made.

8/18/08, 7:23 PM

Anonymous Lucius Vorenus said...

Senor Doug: Does he really think his McMansion with its 2x4 framing and plywood substrate is going to be worth more than the teardown in 30 years?

A little off-topic, but this reminds me of a quote from one of those recent Atlantic articles:

The Next Slum?
by Christopher B. Leinberger
March 2008 Atlantic Monthly
theatlantic.com

...Hollow doors and wallboard are less durable than solid-oak doors and lath-and-plaster walls. The plywood floors that lurk under wood veneers or carpeting tend to break up and warp as the glue that holds the wood together dries out; asphalt-shingle roofs typically need replacing after 10 years. Many recently built houses take what structural integrity they have from drywall - their thin wooden frames are too flimsy to hold the houses up...

I'm not exactly sure what Leinberger meant by houses taking "structural integrity... from drywall". And I agree that 2X4 walls aren't worth diddly-squat [compared to 2X6 walls or 2X8 walls, etc etc etc - although if you start getting up around 2X10 walls, then you're gonna need a crane to lift the thing into place].

But I want to talk about plywood in particular - and actual classical plywood, not this gosh-awful oriented strand board - which, I agree, is little better than cardboard [or even paper].

Anyway, as regards plywood - and good plywood at that [3/4" exterior grade sanded white plywood, or 3/4" pressure-treated (green) plywood] - does anyone know of any actual evidence that there are problems with high-quality plywood naturally disintegrating in a dry environment?

Obviously anything [white - less so pressure treated] will rot and/or disintegrate pretty quickly in a wet environment [a leak in the plumbing, a leak in the roof, a massive flood, etc], but I've never heard of any problems with high quality plywood just randomly disintegrating in a dry environment.

If that's true - that the random disintegration of high-quality plywood is a known phenomenon - then could you point me in the direction of some studies which document the phenomenon on a large scale?

Or maybe someone at iSteve works on the actuarial side of the home insurance market, and has access to some proprietary data which indicates that high quality plywood is randomly disintegrating after a certain time interval?

8/18/08, 7:55 PM

Anonymous Martin said...

"Anonymous said...

Government externalities warp people's perspectives on what would otherwise be self-evident: houses are costly, depreciating assets that do not justify 90% leverage, and probably not even 80% leverage. We are in for some hard lessons.

--Senor Doug"

I believe you are quite right, Senor. There is nothing about a house which makes it a particularly good investment (although that might not be true about the land the house sits on).

In addition to the public externalities you mentioned, there is the vast real-estate business (I refuse to call it an "industry") which has promulgated this false notion. They aren't much different than those hucksters on TV who prey upon the none-too-bright, implying that collectible dolls or Franklin-Mint coins are a good investment.

My house is over 40 years old, and it's just an albatross. At least it does keep the rain off my head though.

8/18/08, 8:50 PM

Anonymous Lucius Vorenus said...

Senor Doug: But really, how much sense do these even make? To make the payments and maintain the value of the collateral, your anesthesiologist better be netting $15K in cashflow per month over 30 years, and the collateral has to appreciate every year upwards from $1M.

Not to sound like a pompous jerk, but a category of "like assets" increases in value when the demand for that category of assets exceeds the supply of that category of assets.

The reason that the price of American real estate [and especially the price of EXISTING American real estate] shot off into the stratosphere in the period 1970-2000 was very simple: It was the era when a huge bulge of Caucasian Baby Boomers was coming of age [the first Boomers graduated from college circa 1968] and was demanding housing of its own.

For several decades, there were more up & coming American Caucasian Baby Boomers than there were homes to house them, and, during that period, the price increases in real estate were just insane.

But, sadly, the American Caucasian Baby Boomers FAILED TO REPRODUCE AT REPLACEMENT LEVELS; indeed, the current American Caucasian population distribution peaked [as of 2006] at about 16 million in the 45-49 age group [where the largest number of Boomers found themselves in 2006], and then plummeted all the way down to a mere 11 million in both the 0-4 and 5-9 age groups:

JPEG: USA Caucasian population distribution

There's a similiar bulge in the Asian American population distribution, although its peak is about 10 or 15 years younger:

JPEG: USA Asian population distribution

On the other hand, there is no such thing as an American "Black Baby Boom" or an American [aboriginal/mestizo] "Hispanic Baby Boom", because those folks never stopped making babies:

JPEG: USA Black population distribution

JPEG: USA Hispanic population distribution

So in about 15 or 20 years [circa 2020-2025], when the bulk of the Caucasian Baby Boomers seek to cash out of their McMansions, and purchase themselves condos in the retirement communities of Palm Springs/Flagstaff/Santa Fe/Miami/whereever, they will come to find that for every 16 [Caucasian] sellers among them, there will be only 11 Caucasian buyers wishing to take them up on the offer.

So 11 of the 16 will be able to get a moderate return on their investments, but the other 5 will have to sell to blacks or aboriginal/mestizo hispanics, who, with IQs a standard deviation lower than their Caucasian peers, will not be able to finance anything like the mortgages that smarter people could have sustained [as has been made so abundantly clear in the current high risk mortgage debacle].

Moral of the story being that demography-dependent fixed assets such as real estate are just an atrocious place to be dumping your money right now - run, don't walk, away from real estate investments for the next several decades, until some point in the future when the American Caucasian population has [hopefully] not only stabilized but has [hopefully] also started to grow once again.

8/18/08, 8:51 PM

Anonymous headache said...

I guess the MSM read your blog using anonymizers in a locked bunker with electromagnetically sealed walls, lest someone find out they're perusing your site.

I regularly read Wirtschaftswoche, a popular German finance mag, whilst pedalling on my gym bike here in Germany. It’s the usual run-of-the-mill liberal finance mag you can find in any modern western country. They have lots of articles on the mortgage crisis, the financial meltdown and the implications for the US, German and global economies. What struck me was that it would have been cheaper to simply build those houses for all the minorities using tax money and give it to them for free. The mortgage crisis means many houses will become derelict and be razed, and it has weakened many other financial systems which produced additional costs. On top a number of hustlers have raked in and that money is now also gone. I would like to know what the ratio between the real cost of the mortgage crisis and the cost of handing out the houses for free is.

8/19/08, 1:22 AM

Anonymous Anonymous said...

"Moral of the story being that demography-dependent fixed assets such as real estate are just an atrocious place to be dumping your money right now - run, don't walk, away from real estate investments for the next several decades, until some point in the future when the American Caucasian population has [hopefully] not only stabilized but has [hopefully] also started to grow once again."

Thanks so much for doing the math for us; I'm sure most of the readers here intuited that demography is going to play a big part in future home prices. A couple years ago, my mother and I were talking about this and she said that my generation was going to enjoy some cheap housing. I also can't believe the prices of antiques and vintage. Absolutely they are subject to the same realities and pressures. A couple days ago, an antique shop owner literally gave my sister an entire set of vintage Noritake and an ornate, hand painted Limoges plate. She was having a hard time selling and, anyways, sells more as a hobby as she is rich. I predict many shops will close, especially when you add the fact that most anything decorative declined in quality in the post WWI era and precipitously so post WWII.

8/19/08, 3:05 PM

Blogger Ronduck said...

Headache

If you look at this page the author claims that one house was used to create ten or more mortgages that each were placed in different pools:

tinyurl.com/5knpyc

You have to scroll down 8 paragraphs from the section I sent you to see the part about ten mortgages.

At least when Germany pisses away money on windmills it is using money from its' own pocket and not borrowing it.

8/20/08, 11:24 AM

Anonymous headache said...

Ronduck sed:
"At least when Germany pisses away money on windmills it is using money from its' own pocket and not borrowing it."

Yea, but pissing it away they are. Plus they never asked us taxpayers whether we would like to pay more for our electricity bills. They just did it. Eventually all that metal will just end up in ship hulls. Another hugely expensive handling of raw materials.

8/21/08, 2:11 PM

Anonymous Anonymous said...

Your theory sounds plausible to me, Steve, but there's one problem with it that I see: the mortgage and real estate busts weren't limited to the U.S.: Spain, Ireland, and Britain all had a similar bubble and burst. Do those countries all have similar policies about minority homeownership, or is the common element something else?

- Fred

8/21/08, 8:40 PM

Anonymous Anonymous said...

Fred,

The common element is the central bank-enabled expansion of artificially cheap credit. This is true "bubble" activity: an economic expansion fueled solely by the injection of credit created out of thin air rather than from the pool of real savings. Eventually, as it always does, economic reality asserts itself. Lenders finally realize there is no way to justify such a large inventory of housing at prices that nobody except the top 1% of income earners could ever pay in a lifetime, other than to bank on an infinite succession of greater fools to buy these white elephants. At that point, credit contracts, the bubble deflates, capital flows back to economically justifiable activities, and the recovery begins.

The absolute worst thing the government and its central bank can do at this point is to keep this failed business model afloat. So naturally, that's what they proceed to do.

--Senor Doug

8/22/08, 6:16 AM

Anonymous Lucius Vorenus said...

Senor Doug: This is true "bubble" activity: an economic expansion fueled solely by the injection of credit created out of thin air rather than from the pool of real savings.

Finish your line of thought all the way through to its logical conclusion: What creates real savings? Real ______.

So they created credit out of thin air so as to mimic real savings as saved by real ______.


But there were no real ______, because you can't create real ______ out of thin air.

HINT:

A Portrait of Europe's Aging Population
businessweek.com

...However, the decrease in numbers has been greatest in Spain, where the young population has diminished by 44% in the 1990 to 2005 period....

8/24/08, 3:21 PM

Anonymous Jun said...

Investor's Business Daily also channels Steve Sailer (they blame mainly/only the Democrats, though):

"But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street's most revered institutions.

"Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making."

9/16/08, 4:08 PM

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