A Shot in the Arm
by Richard
More on our Bi-Polar markets…with an emphasis on real estate this time.
There has never been a time to be more pessimistic…and more optimistic…about residential real estate.
Pessimistic because this elevator is still going down…past the sub basement level. Inventories nationally hover at just about eleven months, when six months is usually an indication of a market balanced between buyers and sellers
And now comes the aftershock of foreclosures that had been put on hold while policy legislation was being negotiated. I saw a forecast last week that prices could drop a further 27% through 2010.
So what’s to like?
How about this….mortgages are plentiful at rates below 5% for conforming loans. And these are the retro, “Leave it to Beaver“ fixed rate, fully amortizing thirty-year mortgages….the gold standard before the lenders collectively lost their minds.
We may even see mortgage burning parties come back in fashion.
If you buy now, you may not get in at the exact bottom, but you have the wind at your back, with three solid years of price declines already in the bank.
You should also check out the March 17, 2009 op ed in the Wall Street Journal (p.A15) by LeFrak and Shilling “Immigrants can Help Fix the Housing Bubble“.
Their proposal is so simple and logical that I’m astonished no one had suggested it earlier.
Which is simply to give those foreigners who purchase homes a chance to move to the head of the line for permanent residency and ultimate citizenship.
Canada and Australia have learned how to dangle this carrot to help populate their massive, sparsely-settled countries. Preference is given to those who will invest in start up businesses, on the basic theory that a prosperous immigrant will contribute to the host country’s capital base, as opposed to impoverished immigrants who immediately deplete resources.
It may not be politically correct as the major welfare democracies engage in a race to the bottom with their leveling taxation and regulatory regimes.
It simply may have never occurred to our redistributionist government that a society could be leveled upwards by improving the financial and entrepreneurial gene pool, just as easily as it could be leveled downwards by confiscating wealth and “spreading it around” into consumption and other anti-investment sinkholes.
There could even be an overachievers category, whereby immigrants would both purchase vacant houses and invest in start up businesses to help absorb our tremendously underutilized and unemployed labor pool.
We’ve seen the fabulous results in Silicon Valley…
…where immigrants have helped create some of our most fabled enterprises. You could Google the results. One of which, of course, would be Google itself.
Besides the obvious benefits, this action would help to deflate the nativist and protectionist sentiment that has been running rampant in Congress and our neo-Luddite unions.
If we’re going to get through this tough slog, we need to pursue the most effective and efficient policy measures available to us.
Instead of constantly bailing ourselves out…..let’s let others shoulder some of the burden.
May 6th, 2009 at 12:28 pm
The INS (which is now part of DHS) has been informally applying an uneven treatment of immigrants ever since my first experiences with it (back in 1989 when I came to the US for college). Not all immigrants are treated equally. There are different visas, and the US embassies abroad treat a college student (F-1 visa) far better (streamlined procedures, shorter wait times, fewer visits), than the elderly parents whom a citizen sponsors to join him/her in the US. INS officers have a wide breath of discretion, and there is a clear bias in favor of individuals who are likely to be beneficial to the US, rather than those who will be a burden. So, practically, and despite the lack of a formal policy to that effect, immigrants who engage in certain activities beneficial to the economy do have a leg-up on others who do not.
Further, I believe the implication in the article that Congress and the unions would somehow oppose this approach runs opposite to reality.
Democratic governments have been far less protectionist than Republican ones when it came to immigration. H-1 visa caps (the visa that leads to a Green Card through employment, and the key mechanism that Stanford grads become Silicon Valley entrepreneurs) have been higher during Democratic years than during Republican years (e.g. a temporary increase passed by the Democratic Congress in 1999 was allowed to expired by the Republican Congress in 2004).
When it comes to immigration, Republican governments have been consistently short-sighted and protectionist, in direct contrast to free market principles.
And unions? Unions do not generally oppose immigration. If they oppose it, factories will move where the workers are (overseas). And immigration will happen anyway, legal or illegal. It is best that it is legal so that the workers can be unionized, and not afraid of the bosses having access to low-wage (illegal) labor in fear of deportation and unwilling to form unions.
So, if the immigrants are part of the solution of the present economic woes, a Democratic administration is much more likely to tap into that resource than Republican administrations.
Which reminds me… it is odd how in the span of a few decades, the party that spurned Condi Rice and turned her into a life-long Republican has elected the first Black president. And how Democrats are more favorable to immigrants than Republicans who tout free market but somehow exclude the labor market and free transport of people through borders. Or how the deficit soared during a Republican administration though Republicans are supposed to be the fiscal conservatives.
The lesson to take here is that just as an astute businessman should regularly observe the business climate and adapt his/her tactics to achieve his/her ultimate business goals, so should a member of a democracy continuously re-examine the practices of the politicians and parties. Becoming attached to labels like “I am a Republican/Democrat/Green” is akin to falling in love with a stock. It’s falling for a brand name, and ignoring the dynamic substance of parties and politicians (even though everyone knows politicians’ attachment to “core values” is even more volatile than the stock market).