Relationship between mortgage securitization and suburban sprawl?

[quigleydoor]

Interesting thesis by one Alan Farago in a CounterPunch piece: http://www.counterpunch.org/farago08022007.html

The structured debt debacle in housing markets is the reverse side of the costs of suburban sprawl.

Is there a correlation between the growth of the MBS system of housing finance (including late innovations like CDOs)—and the growth rate of suburban sprawl, and declining quality of life for residents? Did the invention of MBSs cause sprawl to accelerate? Did CDOs?

The government-sponsored entities (Fannie and Freddie) began as programs to help people own homes, by supporting special financing programs. How did these institutions evolve into lakes of MBS junk protected by a moral hazard?

Did the absorption of junk MBSs by Fannie and Freddie contribute to suburban sprawl?

The relationship I am thinking of is market-distorting subsidies, and screwed up power relationships between finance corporations, land use planners and developers.

[DemonD]

Re: Relationship between mortgage securitization and suburban sprawl?

The relationship I am thinking of is market-distorting subsidies, and screwed up power relationships between finance corporations, land use planners and developers.

Yes, yes, yes, yes, and yes.

While I do believe that there should be subsidies and encouragement for smart growth, I firmly believe that homeownership should not be one of those things. No one really "owns" their home anyway so helping people who are either poor or are terrible with their money doesn't help them stay in a home, and as we've seen all it does is drive up the prices through overspeculation and systemic fraud.

One of the most nauseating things about real estate is how easy it is for people in politics to pass along info and get bribes and kickbacks from real estate "investors" using knowledge of planned public works. I can give one specific example:

In Philadelphia around the year 2000, the Phillies and Eagles (baseball and football teams) were looking at sites for new stadia. There was an advantageous deal worked out by the city, the teams, and the state of Pennsylvania which has worked well so far to my knowledge. In any case, in 2000 the planners were scouting sites for potentially building these large structures. There were about 4 spots, 3 of which the politicos knew would be completely politically impossible to get done. The last place was a place call the T-warehouse, an old warehouse that was in south Philly near where the former Veterans' Stadium was. So what happens?

Well, a local real estate "investor" buys the T-warehouse (this was an abandoned place that hadn't been used for years). Six months later the parties come together and agree that this warehouse site would be optimal for the new sports complex, and, oh gee, what happens? This "investor" gets a return of 10x of his original "investment." This really wasn't an investment at all as the investor had close ties to 2 of the people on the search committee who basically knew that that location would be the site.

This is an egregious example, but anyone who has spent time around Philadelphia knows that if you pay to play you can win big on these types of arrangements, and although I've not kept up with local LA municipal arrangements, I would assume that friends of city councilmembers get a "most favored" status.

Anyway more directly on topic, until median home price comes in line with median household salaries, this MBS/overextended credit boondoggle will continue to show it's moldy, fraudulent, overspeculatory self, and I would not be surprised if we have new ghost towns especially in the Central Valley of California.

[Spartacus]

Re: taking this off topic a little

one of the things that amazes me is that people willingly commute 1 to 2 hours per day, when a walking-distance apartment would cost 1/3 the price of the house.

There's been lots of research on this issue - you see a big house and you're impressed. 2 months after you move in, you're used to the size - it neither adds nor subtracts to your regular, ongoing happiness, but you never get used to the commute - it makes you unhappy every day.

On the flip side, you see an apartment and think it's tiny. You move in and 2 months later you're used to it - it doesn't affect your regular, ongoing happiness one way or the other - but you now walk 10 minutes to work, and the walk doesn't make you unhappy every single day.

I just find it curious that people pay such a premium to add to their unhappiness.

[Jim Nickerson]

Re: taking this off topic a little

one of the things that amazes me is that people willingly commute 1 to 2 hours per day, when a walking-distance apartment would cost 1/3 the price of the house.

There's been lots of research on this issue - you see a big house and you're impressed. 2 months after you move in, you're used to the size - it neither adds nor subtracts to your regular, ongoing happiness, but you never get used to the commute - it makes you unhappy every day.

On the flip side, you see an apartment and think it's tiny. You move in and 2 months later you're used to it - it doesn't affect your regular, ongoing happiness one way or the other - but you now walk 10 minutes to work, and the walk doesn't make you unhappy every single day.

I just find it curious that people pay such a premium to add to their unhappiness.

If there is truth in what you write, it suggests to me that people don't know what constitutes happiness. I believe many think of happiness as something based on what others have and who say (whether truthfully or not) "having this is happiness." All this is part of what leads me to conclude that many Americans are fools.

[c1ue]

Re: Relationship between mortgage securitization and suburban sprawl?

Spartacus, JN,

There is a lot of research going on right now on the origins of happiness.

There is probably a lot of work still to go, but everything I have been seeing thus far is that happiness is not a function of what each person has or receives, rather, it is a function of what each person has as a ratio to what the perception is of what other people have.

The interesting analysis resulting from this statement is that American culture is good in that everyone - mostly no matter what wealth status - is unhappy and thus is constantly striving for more.

The equally bad result is that hardly anything is ever enough.

One of the examples: There have been a number of experiments based on the concept of fairness.

A number of these experiments involve giving money to people, with the provision that they may give all or part of said money to someone else.

The measure of the experiment is how 'fair' the giftee (i.e. person other than the one given the free money) felt about whatever they were given.

From a strictly rational perspective, the money in question would be 'fair' no matter what since it was 'blue sky' money - i.e. money which the person should have had zero expectation of, therefore which should be considered a net gain or at least never a net loss.

However, in reality it turns out that the 'giftee' almost never feels the exchange is fair unless there is a 2 to 1 or less ratio of money received by the 'giver'.

An interesting twist on the American dream... it ain't what you get or are going to get, it is what you get or going to get vs. the Joneses.

[Jim Nickerson]

Re: Relationship between mortgage securitization and suburban sprawl?

Spartacus, JN,

There is a lot of research going on right now on the origins of happiness.

There is probably a lot of work still to go, but everything I have been seeing thus far is that happiness is not a function of what each person has or receives, rather, it is a function of what each person has as a ratio to what the perception is of what other people have.

The interesting analysis resulting from this statement is that American culture is good in that everyone - mostly no matter what wealth status - is unhappy and thus is constantly striving for more.

The equally bad result is that hardly anything is ever enough.

One of the examples: There have been a number of experiments based on the concept of fairness.

A number of these experiments involve giving money to people, with the provision that they may give all or part of said money to someone else.

The measure of the experiment is how 'fair' the giftee (i.e. person other than the one given the free money) felt about whatever they were given.

From a strictly rational perspective, the money in question would be 'fair' no matter what since it was 'blue sky' money - i.e. money which the person should have had zero expectation of, therefore which should be considered a net gain or at least never a net loss.

However, in reality it turns out that the 'giftee' almost never feels the exchange is fair unless there is a 2 to 1 or less ratio of money received by the 'giver'.

An interesting twist on the American dream... it ain't what you get or are going to get, it is what you get or going to get vs. the Joneses.

Interesting, c1ue, but it is the notion of happiness being perceived based on comparison to what others possess (or appear to possess) that is the screwed up part, I believe.

Personally, I am almost always unhappy, none of which I attribute to what I and wife have or don't have compared to anyone. My unhappiness, as I can evaluate it, is based on how the world works and how I think it could better work, except for all the inestimable bullshit that stands in the way. My best defense is to avoid as much regarding politics and religion as I can. The less I know daily of those two areas, the better my humor.

[DemonD]

Re: Relationship between mortgage securitization and suburban sprawl?

I am generally happy, and I attribute that in large part to the fact that if i want some ice cream or milk or an apple or want to go to a world-famous comedy club, i need only walk a few hundred feet, as opposed to driving 15 minutes to get just to the nearest 7-11 (blech).

I grew up in the burbs, and I will never, ever live in a "suburban" community ever. A beach town maybe, an urban residential neighborhood maybe, but never a place where you have to drive 15 minutes to be anywhere.

This is why it boggles my mind when people spend gazillions of dollars to live in ranchos palos verdes. the drive just to and from your house would drive me insane.

[Spartacus]

Re: taking this off topic a little

A good current popular review of (some of) the research is in Daniel Gilbert's
"Stumbling on Happiness" - it's a psychology book, not a "how to be happy" self-help book.

As c1ue notes, comparison with others is one way in which people make themselves more or less happy, but it's much more complex than just comparing oneself to others.

there are lots of instances where you have self-defense mechanisms which get you to compare yourself to those less well off

If there is truth in what you write, it suggests to me that people don't know what constitutes happiness.

Exactly. A very large part of Gilbert's book is exactly about this - what you think will make you happy actually does not.