The “reader”
In a perfect world, you are Michael Barr (US Assistant Treasury Secretary), Timothy Geithner (current US Treasury Secretary), Hank Paulson (former US Treasury Secretary), or a decision-maker in the realm of policy. Most likely, you are like me, someone who knows a little about policy, economics, and finance of the US housing market. Because the US housing market is the largest non-governmental debt capital market in the world, you might also be in the financial services industry. Or you might be a homeowner, realtor, non-profit housing counselor, or policy-wonk in the realm of US housing policy (HUD, FHFA, GSE, US Treasury).
The global housing market
The global housing market
The majority of my content will be about the US housing market; however, I believe the scope of my blog will encompass the global housing market. The US housing market is in some ways the testing ground, upon which the BRIC (Brazil, Russia, India, China) countries will develop their housing markets. In the past 80 years, our financial system has withstood many macro-economic shocks to the US housing market (Home Owners Loan Corporation, RTC, subprime mortgage-fueled housing bubble). The founders of the US banking system leaned on the lessons of England and France, because the banking systems were centuries old, and had withstood previous shocks; and so I expect that the BRIC countries will look to covered bonds (and other structured finance products) as a source of capital to create robust lending markets during the next 10 years. Hopefully, they will design their structured finance products with more subordination and better (note, NOT more) regulatory oversight. So, the scope of my blog will encompass international themes; but, the content will be limited to the US housing market.
Housing hierarchy & Policy
A house, more than any other financial instrument, fulfills the needs articulated in Maslow’s hierarchy. In this way, individual homeowners make decisions that are both rational (such as strategically defaulting) and irrational (paying credit card debt before a mortgage payment). But few of us live in a vacuum. Decisions we make individually impose externalities on everyone. Think of a house like a business, and it’s easy to comprehend the difference between a shareholder and a stakeholder. Jeffrey Hollender (CEO/Founder of 7th Generation) and other social entrepreneurs like Jonathan Greenblatt (Founder of Ethos Water) have helped to articulate the “stake” that governments, consumers, and the public at-large have in the actions of businesses.
More than 50% of Americans now reside in urban areas. In China, there is a flight to the urban areas that is likely to continue. Land use, urban planning, transportation, and smart-grid energy efficiency are examples of factors that shape our behavior as house consumers. One could make an argument that the most significant problems America faces are because of inadequate land use and urban planning since WWII, commonly known as urban sprawl. Some detrimental externalities include:
1) increased need for cars, which exposes the US to foreign energy dependence
2) increased maintenance costs of the aging highway system (rural states spend 2-3 times per capita as much as heavily populated states on highways)
3) over-reliance on a single mode of transportation (cars) causing ubiquitous traffic congestion
4) under-reliance on diversified transportation modes that are more healthy and energy efficient (walking, biking, transit, carpooling, etc)
5) excessive consumption of durable goods based on cheap space
6) increasing social isolation especially in the elderly populations
7) increasing commute times as high-paying jobs move to population centers while people move out to suburbs
8) hollowing out of formerly-economically vibrant central business districts
9) far-reaching environmental impacts beyond population centers
2) increased maintenance costs of the aging highway system (rural states spend 2-3 times per capita as much as heavily populated states on highways)
3) over-reliance on a single mode of transportation (cars) causing ubiquitous traffic congestion
4) under-reliance on diversified transportation modes that are more healthy and energy efficient (walking, biking, transit, carpooling, etc)
5) excessive consumption of durable goods based on cheap space
6) increasing social isolation especially in the elderly populations
7) increasing commute times as high-paying jobs move to population centers while people move out to suburbs
8) hollowing out of formerly-economically vibrant central business districts
9) far-reaching environmental impacts beyond population centers
The above externalities are realities that cannot be shouldered by homeowners alone. This “shared experience” influences healthcare premiums and affects the quality of life. Urban planning is now a department of most municipalities, and the discipline has advanced as an academic discipline. So while we are working to resolve the problems associated with post-WWII urban sprawl, we are undoubtedly spawning problems that future generations will be forced to resolve.
The house fulfills the needs in Maslow’s hierarchy for the individual, but as we see, the aggregation of the 130 million housing units in America poses difficult policy questions as well. At some point, I would like to enhance this discussion, and consider the policy surrounding the asset and wealth creation cycle of the home, both for the individual, and for the fabric of American society. But my purpose for today was to touch on the greater policy ramifications, as they relate to the individual motivations surrounding homeownership, which surpasses the wealth cycle.
Thanks for reading. I welcome critical feedback, robust thoughts, and vigorous challenges. Later this week, I plan to post my analysis on the Second Lien Modification Program, also known as “2MP”.
The house fulfills the needs in Maslow’s hierarchy for the individual, but as we see, the aggregation of the 130 million housing units in America poses difficult policy questions as well. At some point, I would like to enhance this discussion, and consider the policy surrounding the asset and wealth creation cycle of the home, both for the individual, and for the fabric of American society. But my purpose for today was to touch on the greater policy ramifications, as they relate to the individual motivations surrounding homeownership, which surpasses the wealth cycle.
Thanks for reading. I welcome critical feedback, robust thoughts, and vigorous challenges. Later this week, I plan to post my analysis on the Second Lien Modification Program, also known as “2MP”.
We recognize a tendency to recognize that the 2 most important resources of business travelers are data and time. Our mission is to produce you with fast access to the very best quality info on the market.
ReplyDeletephoenix corporate housing