High-End Housing Continues to Struggle

I haven’t read any statistics on the high end housing market in quite some time, but it doesn’t seem as though things have changed a whole lot over the last year or two, the same houses priced in the $500K to $1M+ range seeming to sit on the market forever.

There are still a handful of homes for sale in the Northern California neighborhood we moved into more than three years ago – they’ve dropped the price from a million to $700K, but the houses just sit there. Who are these sellers and just how long are they willing to wait for prices to rebound? Five years? Ten years?

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The Old Road to Serfdom

Justin Lahart over at the Wall Street Journal Economics blog details the renewed interest in Frederich Hayek’s classic The Road to Serfdom, the recent sales surge spurred by Fox News personality Glenn Beck’s discussion of the book last week.

On Tuesday last week, customers at Deb’s Books in Cullman, Ala. started coming in and calling with an odd request: They wanted copies of “The Road to Serfdom,” a book economist Friedrich Hayek wrote 65 years ago.

Customers at Schuler Books, in Grand Rapids, Mich. were also looking for Hayek’s book. Same with the Book Shop in Green Valley, Ariz. On Amazon, it shot to number one where it remained for a week. The reason: Fox News host Glenn Beck, whose recommendations have lately had an Oprah Winfrey-like effect on book sales, had just devoted a section of his show to the Road to Serfdom.

But Mr. Hayek’s book is no beach read. Rather, it’s dense polemic against socialism that argues centralized planning by the government will inevitably lead to an oppressive state.

A member of the so-called Austrian school of economics, Mr. Hayek believed that the economy was simply too complex for the government to attempt to manage its ups and downs. He argued that economist John Maynard Keynes’s recommendation that government spend money to allay an economic downturn could actually make the downturn worse, as well as lead to an inflation problem later. With many people angry over the financial crisis, the recession and the government’s large-scale response to both of those things, Mr. Hayek’s ideas are striking a chord.

Until about a week ago, you’d be more likely to hear the phrase “The New Road to Serfdom” as it has been used quite liberally to characterize the aftermath of the housing bubble, first appearing in a Harper’s article a few years ago. As for the original road to serfdom, I’d be shocked to hear that more than one-out-of-ten recent buyers of the book make it through the first chapter. I don’t think I ever did…

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Dr. Marc Faber, the original Dr. Doom (well, at least before Nouriel Roubini), was on CNBC earlier today talking about stocks, bonds, gold, and the waning fiscal and monetary stimulus noting that “governments have become like a cancer”.

In the second part of the discussion (located here), Faber says it would be a good thing if the world had some deflation and then he notes, “At this level I’m not particularly interested in buying anything. I buy gold in the absence of knowing what else to buy”.

Joe Mysak at Bloomberg files this report on how one California city might extricate itself from pension and benefit obligations that it has no realistic chance of ever meeting.

The city of San Diego should consider Chapter 9 municipal bankruptcy to help it reduce fringe benefits, pension and health obligations.

That’s one of the suggestions made by the San Diego County Grand Jury, which does the normal duties of recommending indictments as well as reporting on local governments and special districts.

San Diego is the fifth major city in the U.S. this year, and the second in California, where people are talking about bankruptcy as a means to “restructure and reorganize their assets and debts while providing relief from current and future obligations,” in the words of the grand jury’s 22-page report, published on June 8.

San Diego has unfunded liabilities of $2.2 billion in its pension plan and $1.3 billion for health care, which the report calls “unsustainable.”

More than two years of cutting budgets and the mounting public pension crisis have made the unthinkable an option, maybe even an attractive one.

Having lived in Southern California for many years, there were many stories to be heard about how you could get rich working for the City of San Diego and, apparently, a lot of people did. Double-dipping was common. Not the recession double-dip you hear so much about today, but the widely practiced “retire and then get rehired” career move where individuals collected both a retirement check and a regular paycheck while still in their 50s.

It’s not hard to understand why they now have such a mess on their hands.

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The Labor Department reported that consumer prices in the U.S. fell last month at their fastest pace since December of 2008, down 0.2 percent in May after a decline of 0.1 percent in April, driven lower by tumbling energy prices.

On a year-over-year basis, the overall consumer price index is now up just 2.0 percent and looks ready to go lower in the months ahead since the big annual energy price increases that have kept the price index elevated during the first half of the year are now all but over.

(more…)

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