You and those darn economics textbooks.
Economics Thread
- Thread starter sturg33
- Start date
How is subsidizing housing through tax breaks via 401k withdrawals going to address this issue of having more demand than supply? It’s also going to further strain the system down the road when people who would have had retirement money cash it in to buy a house. This is like the perfect awful marriage of leftist economics and right-wing populism.
An endless path of outpacing demand? Thats 'normal'?
Because housing costs are coming down across the country and as deportations continue to happen those prices will continue to fall. You absolutely do not want free falling prices so you supplement the market with incentives by giving buyers access to cash reserves without penalty.
The results? More native Americans at younger ages owning homes. Perfection.....
So we prop up an overly inflated housing market by opening up lines of credit to people who cannot otherwise afford a home? What could possibly go wrong?!
At least Adam McKay will have some job security when he gets to make a sequel to The Big Short.
nsacpi
Expects Yuge Games
in this discussion of housing, it is worth noting the old truism that there is no such thing as a free lunch
there are always opportunity costs
whatever resources we redirect to housing (whether through subsidizing demand or supply) comes out of somewhere
housing is already one of the most advantaged sectors in the economy
the housing lobby is the gold standard in Washington....it works both sides of the aisle very effectively
and will undoubtedly continue to do so
as a country we are overhoused...not underhoused...this is an opinion of course, not an empirical fact
but if i were king and got to decide where to redirect resources to benefit society, it wouldn't be to housing
there are always opportunity costs
whatever resources we redirect to housing (whether through subsidizing demand or supply) comes out of somewhere
housing is already one of the most advantaged sectors in the economy
the housing lobby is the gold standard in Washington....it works both sides of the aisle very effectively
and will undoubtedly continue to do so
as a country we are overhoused...not underhoused...this is an opinion of course, not an empirical fact
but if i were king and got to decide where to redirect resources to benefit society, it wouldn't be to housing
nsacpi
Expects Yuge Games
we subsidize housing enormously
take the 30-year fixed mortgage
it is an American anomaly...a rarity in other countries
and it exists here at scale because the federal government implicitly (and to an increasing extent explicitly) guarantees those mortgages
without that guarantee the product would become prohibitively expensive and/or disappear
that implicit (and increasingly explicit) guarantee doesn't come free
in 2008 the implicit became explicit...the U.S. Treasury placed Fannie Mae and Freddie Mac into conservatorship...it injected large amounts of capital into them...and guaranteed their Mortgage Backed Securities (MBS)
this resolved any remaining ambiguity about what would happen when the shit hit the fan...Uncle Sam (the U.S. taxpayer) would come to the rescue...and it will do so again
because of this guarantee: 1) MBS trade at near-Treasury rates (as they should because they are for all practical purposes guaranteed) 2) foreign central banks, insurers and pension funds feel secure in buying them in massive quantities and 3) as a result mortgage rates are at least 1% lower than they would be otherwise
without this guarantee lenders would demand 1) higher rates, 2) shorter maturities, 3) higher pre-payment penalties
take the 30-year fixed mortgage
it is an American anomaly...a rarity in other countries
and it exists here at scale because the federal government implicitly (and to an increasing extent explicitly) guarantees those mortgages
without that guarantee the product would become prohibitively expensive and/or disappear
that implicit (and increasingly explicit) guarantee doesn't come free
in 2008 the implicit became explicit...the U.S. Treasury placed Fannie Mae and Freddie Mac into conservatorship...it injected large amounts of capital into them...and guaranteed their Mortgage Backed Securities (MBS)
this resolved any remaining ambiguity about what would happen when the shit hit the fan...Uncle Sam (the U.S. taxpayer) would come to the rescue...and it will do so again
because of this guarantee: 1) MBS trade at near-Treasury rates (as they should because they are for all practical purposes guaranteed) 2) foreign central banks, insurers and pension funds feel secure in buying them in massive quantities and 3) as a result mortgage rates are at least 1% lower than they would be otherwise
without this guarantee lenders would demand 1) higher rates, 2) shorter maturities, 3) higher pre-payment penalties
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nsacpi
Expects Yuge Games
the subsidy flows mostly to middle class homeowners and higher-income borrowers with good credit
it is invisible: it takes the form of lower interest rates and doesn't show up as a budget outlay (except for those episodes when the taxpayer must make good on the guarantee)
it is politically untouchable because: it stabilizes interest payments, reduces foreclosure cascades and contagion risks in the financial system, supports the middle of the wealth distribution
it is invisible: it takes the form of lower interest rates and doesn't show up as a budget outlay (except for those episodes when the taxpayer must make good on the guarantee)
it is politically untouchable because: it stabilizes interest payments, reduces foreclosure cascades and contagion risks in the financial system, supports the middle of the wealth distribution