Bomasada Development (NOT) Going Forward

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Ironically, it's not any more than any other good. It works more like the economists saying, "oh, this 32 ounce bottle of ketchup costs twice what this 16 ounce bottle costs, so the market is rational." People compare the price of houses to each other, but usually fail to look at how they are valued relative to other goods. If that were not the case, the housing bubble would have been impossible.

I think the bailing out that should happen is whatever it takes to keep the foreclosures coming in at a slow enough rate to avoid financial armageddon for the entire country. If someone makes bad decisions and ends up not being able to keep their house, that's fine, but I don't like cutting off my nose to spite my face. We don't live in a vacuum; the overall economy and lending environment affects us greatly. If our employers can't get loans, they will cease operating, leaving us with no job and eventually no home. (Whether it goes to the bank or the tax man, the result is the same)

Where I was trying to go with S & D on housing was that the demand may not be related to the roof over your head value.  Brookside reminds me of that.  Per this thread, young folks want to live in Brookside and will pay a rental rate for a house that they wouldn't pay for an equivalent house elsewhere.  There is a value involved in terms of the lifestyle etc but it has nothing to do with the structure of the house.  Twice the square ft in a house costing more makes sense.  I was not trying to imply housing was the only place S & D works.  Brand A ketchup may taste better and be worth more than brand B.  Brand A ketchup may cost more in Food Pyramid than WalMart and still sell because some shoppers don't want to be seen in WalMart.  I don't think the difference in price between Food Pyramid and WalMart is a similar percent difference to that seen in the housing market.

Bailout: I realize we cannot have a "let them eat cake" mentality.  Bad decisions though should have some cost.  Banks (bad loan decision) should maybe renegotiate the mortgage to a lower rate or perhaps even the price in order to have some payments coming in and avoid having to go through the foreclosure process. I would think the bank/mortgage holder does not generally get rich in a bad market by foreclosing on a home.  Borrowers maybe need to pay more years (as a refinance deal) to keep the house.  I don't want to throw people out on the street.  Many, but not all, have fallen on unfortunate circumstances beyond their control. If I have to pay for a nice house, I'd rather it be one that I live in.  If the bank  where I have (any?) savings cannot pay a good interest rate because they made bad decisons, I can move my money to a another bank and have done so.  I will admit to putting a portion of my money in FDIC/FCUIC institutions.  I accept that I get a lower interest than some other investments in turn for some security on the principle.

[nathanm]

Where I was trying to go with S & D on housing was that the demand may not be related to the roof over your head value. 

I completely agree. Just don't try to convince some Chicago-school economist of that. They have more faith in the rationality of the market (any market, stock, housing, super) than my preacher had in God. Their dimwittery was a large reason why nobody was willing to see the housing bubble and the oil bubble. (Sorry, I'm ranting tonight..I'm pissed about the Baucus pile of smile, so I'm focused squarely on the negative this evening)

[cannon_fodder]

Nathan:

The economists, particularly the Chicago school, saw and clamored about the respective bubbles going back into the 1990's.  The economists saw it.  The bankers, shareholders, oilmen and builders who were making money off the bubbles saw it to - but made a cash grab while the getting was good.

The market IS rational given "perfect" information.  In the aforementioned bubbles those with dominant control of the market manipulated it such that the information was far from perfect.  The rating agencies, buying institutions and others involved enabled the imperfect information to be rubber stamped and passed on as truth - and the other parties were willing to accept it as truth so long as it served our purposes (cheap mortgages, easy access to capital, large bonuses, etc.).  Thus, the market was acting rationally with the information they were given (that mortgages were properly secured, that there was a shortage of oil).  It was a classic market failure.

Imperfect information destroys markets.  THAT is where government regulation should come in.  If people want to take high-risks and invest in under secured mortgages - they should be able to.  But enabling the market (you and me) to really understand the risks without hampering our ability to operate freely is the hard part.

Unfortunately, our government seems capable of only acting with a sledge hammer or sitting on the sidelines.

[nathanm]

Nathan:

The economists, particularly the Chicago school, saw and clamored about the respective bubbles going back into the 1990's.  The economists saw it.  The bankers, shareholders, oilmen and builders who were making money off the bubbles saw it to - but made a cash grab while the getting was good.

The market IS rational given "perfect" information.  In the aforementioned bubbles those with dominant control of the market manipulated it such that the information was far from perfect.  The rating agencies, buying institutions and others involved enabled the imperfect information to be rubber stamped and passed on as truth - and the other parties were willing to accept it as truth so long as it served our purposes (cheap mortgages, easy access to capital, large bonuses, etc.).  Thus, the market was acting rationally with the information they were given (that mortgages were properly secured, that there was a shortage of oil).  It was a classic market failure.

If I could figure it out, "the markets" could. I said mortgages were unsustainably high (a bit early, apparently, based on the stabilization of prices of late), they were. It was obvious. I said oil prices were unsustainably high for no particular reason. Turned out to be true once again. It's not as if these things are unknowable. You just have not believe in magic. Either that or a stopped clock is right twice a day. Not sure which yet. We'll see.

I'd love to see some cites regarding economists who actually got it right (there were few).

Note that I'm not saying they're (the Friedmanites who went farther than even he was willing) completely wrong. Their predictions and understanding work reasonably well in the good times. However, they discount the fact that "the market" is made up of a bunch of people. People whose expectations, hopes, and fears color their every move. That sends the school of thought on the skids any time times aren't good. And perhaps when times are too good, also. Yes, between the irrational exuberance crowd (which is most of the stock market) and the likes of Mansack distorting the market as much as is humanly possible, any theory which relies on perfect information and rational market participants is doomed to failure. It's like Bush's theory that we would be greeted with roses in Baghdad. Great on paper, but the reality is starkly different.

Now I'm no economist. I'm like the wife sitting on the couch saying "that's not right..maybe a little to the left," so don't ask me who is right. Beyond the general thought that Keynesian theory on stimulating the economy works and whatever obvious things I glean from events, I have no school of thought.

You should read this guy in general. And Krugman will obviously have a particular point of view, but I think recent events have proven he's probably correct on this one.

[Townsend]

Sorry to bring this old biddy up but I've not been by the area in a while.

Has anything come of the empty lot/lots this was supposed to be built on?

[TheArtist]

nope

[Townsend]

Damn

[YoungTulsan]

Same thing happened on the other side of 41st.  A bunch of homes were razed on 41st Place and 42nd Street around Quincy to build high-end condos.  They only completed the first block of condos a year or so ago and still haven't sold all of them.  There is an empty field there now where there used to be several homes.  I'd like to blame it on banks not lending due to the credit crisis, but it looks more like the few they built haven't even sold.  I am still of the belief that something like Bomasada's proposed apartments are in high demand and would sell quickly on Brookside, but apparently $400k condos are not the hot thing.

[Hoss]

Same thing happened on the other side of 41st.  A bunch of homes were razed on 41st Place and 42nd Street around Quincy to build high-end condos.  They only completed the first block of condos a year or so ago and still haven't sold all of them.  There is an empty field there now where there used to be several homes.  I'd like to blame it on banks not lending due to the credit crisis, but it looks more like the few they built haven't even sold.  I am still of the belief that something like Bomasada's proposed apartments are in high demand and would sell quickly on Brookside, but apparently $400k condos are not the hot thing.

I have a cousin of mine who lives right there with his wife that I used to visit on a semi-regular basis.  They'd been working on that since at least 1998, maybe earlier.

[Gaspar]

From what I've heard the project is dead, but there's another developer looking at the property.
Don't know what killed it.