Articles

Economists Stymied as Reality Bears Little Resemblance to Theories, DP

"The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. . . . Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." - English economist John Maynard Keynes (1883-1946)

WASHINGTON — Almost everyone wants the world's governments to do more to revive ailing economies. No one wants a "double dip" recession. But what more can governments do? It's unclear.We may be reaching the limits of economics. As Keynes noted, political leaders are hostage to the ideas of economists, and economists increasingly disagree about what to do. Granted, the initial response to the crisis probably averted a depression. But the crisis has also battered the logic of all major economic theories: Keynesianism, monetarism and "rational expectations." The resulting intellectual chaos provides context for today's policy disputes at home and abroad.
By Robert J. Samuelson, June 27, 2010  The Washington Post

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Mortgage Rates Set New Record at 4.69%, So Why Is Demand Weak? WSJ

Low rates typically spur waves of refinancing, but low rates aren’t enough to spur home purchases independent of other factors, such as a healthy economy that fuels job growth and household formation.  That can lead to some of the dissonant headlines of the present, where home sales plunge even as mortgage rates reach generational lows.

Average rates on 30-year fixed-rate mortgages reached their lowest levels in more than 50 years this week. On Thursday, rates tracked by HSH.com hit 4.69%, down from 4.75% on Wednesday and an average 4.85% last week.Freddie Mac also said on Thursday that rates this week had fallen to an average 4.69%, which is the lowest level recorded since it began its survey in 1971. Brokers were quoting rates as low as 4.25% on 30-year loans on Thursday for well-qualified borrowers.HSH.com says you’d have to go back to at least the 1950s to find comparable rates—and those may not be perfect comparisons given how different the mortgage market was back then.Rates have fallen over the past month, first as the European debt crisis sparked a flight to safety that helped drive down rates for American borrowers. Over the past week, renewed concerns about the health of the U.S. economy have also put pressure on rates. Rates on 30-year fixed-rate jumbos are down to 5.65%, a seven-year low, while banks offered “hybrid” jumbo adjustable-rate loans with a five-year fixed rate of 4.49%, according to HSH.But if rates are so low, why isn’t demand for new loans picking up?
By Nick Timiraos, June 25, 2010 WSJ

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Good Schools, Bad Real Estate, WSJ

Despite the housing slump, house hunting in good school districts frustrates parents who often have to settle for less house...It's supposed to be a buyer's market. Yet, for parents determined to buy in areas associated with top schools, those bargains may be harder to come by. When housing markets go south, "areas with exceptional schools tend to hold their value better than the market overall," says Michael Sklarz, president of Collateral Analytics, a Honolulu-based firm that specializes in real estate data analysis....In ...parts the country, home prices have dropped in areas with good schools, but the declines are typically nowhere near the levels in their surrounding metro areas. In Irvine, Calif., a city that regularly gets national attention for its quality schools, average price per square foot has fallen 18% since its 2006 peak, but prices in the greater metro area surrounding Irvine fell 33%. The same goes for Edina, Minn., where prices per square foot are down about 14% since their peak, versus 27% for the greater Minneapolis area. And in the brainy town of Andover, Mass., prices are down just 4%, versus more than 16% for the Boston metro division.
By Sarah Max, June 25, 2010 WSJ

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Record-low Rates Boon for Higher End Housing, DP

The high-end market, which had been largely unaffected by the expiration of the tax credit, is seeing a surge in sales as a result of the lower interest rates... A year ago, the rate for a jumbo loan (more than $417,000) ranged from 6.25 to 6.75 percent. Today, it's about 5.75 percent for a 30-year fixed-rate."That's what we need to have happen to fuel that upper-end market. The availability of quality jumbo product is for the upper-end market what the tax credit was for the under $300,000 market."

A home for sale is posted at a reduced price in Palo Alto, Calif., Thursday, June 24, 2010. Mortgage rates fell this week to the lowest level on record, giving consumers added incentive to lock in low payments for home purchases and refinanced loans. The lowest mortgage rates since 1971 are propping up the metro-area housing market, giving consumers an incentive to lock in low rates on home purchases.It's the best news the market has seen since the expiration of federal tax credits aimed at spurring homebuying activity, some real-estate agents say.The average rate for 30-year fixed- rate loans dropped to 4.69 percent, from 4.75 percent last week, mortgage company Freddie Mac said Thursday.That's the lowest point since April 1971, when Freddie Mac began tracking rates. The previous record of 4.71 percent was set in December. Rates for 15-year and five-year mortgages also hit lows.
By Margaret Jackson. June 25, 2010 Denver Post

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