Thursday, February 26, 2009

Why house prices are going to get even more hammered

Friend sent link to this post about house prices and price/ income ratios in the UK. I've a mildly professional interest in this issue.

I agree with the main thrust, that price to income ratios are out of whack and must revert to a lower number before house prices will stabilize.

But we get a little deeper understanding when we ask the question: How did this ratio get so far from norms in the first place?

The answer, as we all know now, is that lax lending practices did it. I'll speak in oversimplification, to make the point. Going to ignore taxes, speak of drastic shifts as examples, for illustrative purposes.

If the lender thinks home values will grow indefinitely, the lender will be more likely to lend at high loan to value ratios, where the owner has no equity interest in the home, save its future appreciation. So suddenly, because the lending criteria relax, consumers can afford as much house as they can afford a payment stream. This allows home buyers to enter the market not when they have saved enough for a down payment, but when they have an income stream that can afford the mortgage payment. So demand surges, as this lets more buyers in. One no longer has to wait and save, one can buy today! No money down! No credit? No problem!

And now the lenders have tightened. They want to see down payments as a hedge against their own risk of the property's value declining. The bank wants to own the 80% of value yet to be paid for, not the first 20% of value the consumer owns. Adding the downpayment requirements pushes the devaluation risk to the consumer, not the bank. Value declines, it's the owner's stake, not the bank's that gets hit.

So now someone who has the income to afford the payments, but no down payment can't get the loan. And they're forced to sit on the sidelines of the market until they've set aside enough cash to re-enter the market. So no matter how low the mortgage interest rates go, buyers still can't enter the market without saving up money.

I ran some numbers, to get a feel for this. I kept it simple, and rounded here and there.

Assuming a household income of 100K (high, no matter what the currency or location, save Zimbabwe) and a safe payment burden of 35% of monthly pre-tax income, a mortgage interest rate of 5%, term of 30 years, fixed rate, we can afford about 550K of loan.

In a 0 down payment world, we can buy 550K of house. (Value to income = 5.5)

In a 20% down world, to get the 550K of loan, we must put down 137K, but then we can buy 688K of house. (Value to income = 6.8!)

Trouble is, if we have no down payment, we can buy the 550K in the first scenario, but can't buy anything in the second. And if savings interest is 2% and we save half the mortgage payment by renting, it'll take 7 years to come up with the down payment for scenario 2. So the change in lending practice took today's buyer out of the market until 7 years from now. Way to kill demand, lending institutions!

And even if we set our sights on a 300K property (value to income = 3.0, historical norm), where we can well afford the 1272 monthly payment, we still must come up with 60K down, in a 20% world, which would take us 3 years to save, with the previous assumptions. So even when values get back in line with incomes, people without down payments are still out of the market until they've saved enough to enter. So the time to rebound isn't just a function of house prices and loan rates, (payment affordability) but also a function of time and savings rates (down payment affordability).

Now this is an oversimplification, but it makes the point: Yes, people can't afford these house prices, but also, they can no longer buy, even as prices decline, because they must first save (or at least have to save more now than they did a year or so ago) to enter the market.

So if government really wants to support house prices (which I think is a terrible idea) they need to get buyers in the market by helping with the down payment/ value decline risk part of the problem. Match a down payment, take an equity stake in the property, and take on the risk of decline. Stipulate that consumer's equity gets wiped out first if sold for loss or repossessed, then government, then bank. Government gets return on its portion of equity, consumer on his, when property is sold. Government can claim its portion through taxes due at time of sale.

Again, I don't think government should get involved in price targeting, unless we want massive inflation, which seems to be the only solution to our current mess. But if they want to attack the problem, they should go after the part that's holding back demand: Suddenly tightened (reverting to reasonable) lending standards, and the challenge of meeting these standards with the up front payments.

Wednesday, February 25, 2009


From one of my co-workers in the UK. He and his mates made this, and it's superb.

Tuesday, February 24, 2009

Good things that happened in the 70's

Home brewing becomes legal in the USA. I can't imagine life if I couldn't make my own beer. Or without my favorite brewpubs. I would cry.

Monday, February 23, 2009

More strengthening marriage

Looks like I'm about number 15 on Google for "strengthening marriage".

We're working on it, dude, we're working on it.

Thursday, February 19, 2009

Islam: Religion of tolerance. Or not.

Again from the files of religion is evil: Beating up on the Baha'is.

On one hand it's a bit of "Angels have blue eyes!" "NO, they have green eyes" or "Superman would totally beat up Batman". On the other, it's further example of Islam's utter incompatibility with pluralistic secular integrated society.

Wednesday, February 18, 2009

Chicken Mole

I love chicken mole.

One of the things I like most about California is authentic Mexican food. And mole sauces are as good as it gets. Chocolatey savory spicy sweet warm earthy perfection. With slow cooked meat. Proof that Homer Simpson was on to something when he said, "If God didn't want us to eat animals, why did he make them so tasty?"

In Denver, there is the Savory Spice Shop, and they have the most amazing flavor creating substances on earth. They have a mole seasoning package, and for about $5 for 4oz, it's a steal.

So I picked up two 4 oz packages for gifts, one for friends across the bay, one for a co-worker in London who professed her love of Mexican food, and her ignorance of mole. I shall take it to her in April when I go over next. Oh, and a full pound for myself. I'm not screwing around.

For K I picked up some amazing eastern, middle eastern and Indian things.

I sampled their powdered cheeses. Unreal.

We only had a few minutes on the meter, so I had to be surgical in my shopping, but next time I want to take an hour to try every taster in the place, save, perhaps, the habanero powder. I don't need to test the pulverized pain in a jar, thanks.

Tuesday, February 17, 2009

On the Atheist bus campaign

My dad pointed out that one of the local pundits in Malta took issue with some aspects of the campaign. There were aspects of her criticism that need to be addressed.

Her points can be summarized, fairly, I think, as follows:
  1. "Probably" means atheists aren't sure
  2. People will have a hard time enjoying life if they don't believe in a god
  3. Religion is a harmless eccentricity of the lower classes
  4. Atheism is a religion, as it is organized and evangelizing

First off, she doesn't like the word "probably" in "There probably is no God."
"You would think that atheists, of all people, would be certain in their own minds about the non-existence of God, that they wouldn’t be blithering and blathering in the same way as those ‘believers’ who are not quite sure, who practise their religion just in case there is a God and they wake up after death to find this elusive being waiting for them with their name on the Naughty List."
She seems not very good at research, for googling "Atheist bus campaign", clicking on the first result for the official site, and looking at their FAQ page yields a clear explanation of why the word probably is there:

As with the famous Carlsberg ads (‘probably the best lager in the world’), ‘probably’ helps to ensure that our ads will not breach any advertising codes Committee of Advertising Practice advised the campaign that “the inclusion of the word ‘probably’ makes it less likely to cause offence, and therefore be in breach of the Advertising Code.”

Ariane Sherine has said, ‘There’s another reason I’m keen on the “probably”: it means the slogan is more accurate, as even though there’s no scientific evidence at all for God’s existence, it’s also impossible to prove that God doesn’t exist (or that anything doesn’t). As Richard Dawkins states in The God Delusion, saying “there’s no God” is taking a “faith” position. He writes: “Atheists do not have faith; and reason alone could not propel one to total conviction that anything definitely does not exist”. His choice of words in the book is “almost certainly”; but while this is closer to what most atheists believe, “probably” is shorter and catchier, which is helpful for advertising. I also think the word is more lighthearted, and somehow makes the message more positive.’

So her conjecture that we atheists are secretly scared of and believe in the imaginary sky daddy is a bit off. If we were scared he was real, we'd probably not have left an auditable paper trail of our heresy. If it weren't for the state protection of religious belief from unpleasant confrontations with truth ("Your facts might offend folks, please tone them down"), we could be more direct.

The second point is also important. We don't say "there is no" because we've a sufficiently sophisticated understanding of logic and reason to know you can't prove a negative, merely show it's highly, highly unlikely. Can't prove there are no WMD's in Iraq. So it's a great way to pick a war, if you threaten to invade unless the other side can do something that's not logically possible. One can persist in believing in the WMDs despite all the UN weapons inspections in the world, because they don't prove they're not in the country, just not in those specific locations at that time. I use this example to show how pernicious the belief in provable negatives is, and why it deserves eradication.

Her next criticism is interesting, but hardly a problem:

"...the atheists who came up with this less than brilliant marketing ploy for their cause don’t appear to realise that the prospect of no God is more disturbing to many people than the prospect of there being a God. It is the existence of a God in their moral universe which allows them to enjoy life in the reassurance that they will be rewarded for the good they do while others will be punished for the bad they do. Whip God out of the equation and they are left floundering in a sort of moral anarchy. How can they enjoy life when they know that the paedophile down the road, the heroin-trafficker round the corner and the wife-beater in the flat downstairs will not be toasted on Satan’s spit for all eternity?"

A few thoughts:
  1. Yes, it's much more scary to confront the truth that death means poofing out of existence and not teleporting to magic happy land. But then it's much easier to enjoy this life (Jews: have some bacon! Catholics: use the pill, save money on babies! Muslims: wear a skirt!) without the insane superstitious practices dictated by world religions. Sleep in on Sunday, no one cares.
  2. Who's the police force? We are. Ceding tasks to imaginary friends is a great way to be sure nothing is done. My guardian angel doesn't do the dishes, and God won't heal your cancer, stop global warming, protect the innocent or punish the wicked. It's all up to us.

    So yes, some people's moral compass must find a new magnetic north, in the absence of a Father Christmas on steroids. But they'll find one, as a code of conduct is requisite for successful living within social groups. God's got punishments, and, if we were truly believers, we'd have none of our own. But we actually do have our own code of punishments, both formal and informal, since we need them to keep society working, and waiting for God to take care of it all doesn't seem to have worked so far. The pedophile, heroin trafficker and the wife beater all get punished both through our system of laws, and our system of social stigma. They're all screwed, and they lose out in this life, the only one they have. Life in jail is 100% of your remaining existence in punishment, not an infinitely small fraction of an infinite existence, which is the case when we believe that we have phase 1: earth, phase 2: purgatory, phase 3: be happy with Jesus forever. The infinite part of phase 3 makes the unpleasantries of phases 1 and 2 insignificant (so belief in god yields less punishment, not more when we consider percentage of existence in punishment). And if we hold that phase 2 and 3 become "roast on a spit forever" for the ultra-baddies, it's still somewhat temporally equivalent to "the rest of your life" for duration, but perhaps not intensity, as most of the civilized world has outlawed torture. Save those places fueled by religion. So no god doesn't mean no punishment for baddies.
Then there's her next point, which is the most dangerous, and where I disagree the most:
"What I am saying is that the process of belief is much the same: children believe in Father Christmas because that is the received wisdom in their world, and because authorities higher than they are have assured them that he exists and they have no reason to question that authority. Children also need to believe in Father Christmas because it makes their world more interesting and gives them something to look forward to when they petition him with their hopes and desires.

How would I react to a bus advertising campaign by the Anti-Father-Christmas League, informing under-10s that Father Christmas probably doesn’t exist? This is how: why ruin things for children? Let them have their fun. And that’s exactly how I reacted to the photographs of buses driving past with that wet and wimpy ‘There is probably no God’ slogan. It’s not a public information campaign alerting passers-by to the dangers of smoking, say, or to the benefits of eating more greens. No, it’s what I call a spoilsport campaign, designed by the sort of person who gets a perverse pleasure out of shaking others from their comfort zone.

I agree that disabusing kids of their Easter Bunny, Santa Claus, Tooth Fairy and Cookie Monster beliefs is cruel and unnecessary. And I also agree that it's fine to tell people to stop smoking and eating only food fried in pure lard, even though all of these things jostle people from their comfort zones.

The reason it's okay to jostle folks about smoking and fried food (and religion) is that they all cause social harm. Your smoking harms me through second hand smoke and larger health care costs for us all, which I absorb through my insurance premiums of socialized risk. Your lard-ass lifestyle also costs me when you have a heart attack at age 45 and remain on diabetes and cholesterol drugs for the rest of your life, while I absorb those costs through socialized cost and risk redistribution. Drunk driving, speeding, not wearing seat belts, dumping household cleaners down the sewer all have costs to those who aren't the ones performing the action. Your rights end where my rights begin.

Religion causes harm. Look at the Taliban, Israel-Palestine, birth rates in the Catholic third world, Suni-Shia, Northern Ireland and the fundamentalist Christians in the US who want to sabotage science and thought W was a great guy. And these are harms caused to the larger society, not just those affected with the eccentricity of belief in faries, jewish zombies, or real estate deals with flamable shrubbery. I'm assering my right to live in a smoke free environment, both of the "tobacco-" and "-and mirrors" varieties.

Does religion do good in the world? Sure. Feeding the hungry, healing the sick, etc. But all of those humanitarian functions are also performed by secular organizations too, that do them not to curry favor with imaginary friends, but out of a genuine desire to help others. So on one hand we have religion, with war, violence, invasion and contempt and hatred for those "not in our tribe", but also some good works. And on the other, we have secular humanism, which tries to do good, and doesn't organize societies into bands ready to do violence to other bands. Given the choice, I prefer the one without all the evil.

So it does make a difference to me whether people believe in God or not. Believers keep fucking up my world, and I'm pretty tired of it.

Her parting shots:

"When atheism organises itself and seeks to convert others, what it has effectively become is a religion in itself, like the new religion of environmentalism. Atheists appear not to be content to get on with life in the absence of a god. Like obsessive believers in God, they seek to ram their belief down the throat of everyone else. They are as bad, and for the very same reasons, as those born-again Christians who pin you to the wall at parties and try to persuade you to come along to the next prayer group meeting despite your insistence that you have never been, are not, and never will be interested in religious involvement.

So by this reasoning, any time a group of people unite under a common idea and attempt to spread that idea, they are a religion. So we'd have the religion of the civil rights movement, the green movement, the gay rights movement, the Apple movement, and the Copernican revolutionaries. Given that Ms. Galiza's definition of religion tends to include things we'd not consider to be religions, I think it's a bad definition.

I'll borrow wikipedia's definition of religion: "A religion usually encompasses a set of stories, symbols, beliefs and practices, often with a supernatural quality, that give meaning to the practitioner's experiences of life through reference to an ultimate power or reality.

Atheism is a religion like bald is a hair color. Want to see our story about non-god?

Here it is:

Did you like it?

How about our list of non-beliefs?

Long, eh?

We have no ritual, no dogma, no hierarchy, no meeting places, and, most importantly, no supernaturalism, no magic ideas, no ultimate power, Higgs boson aside. We're trying to delete malicious programming from the minds of the masses, just as every enlightenment thinker that's come before us has tried to do.

So it was a well crafted and crafty essay, but the reasoning does fall short on several fronts.

Religion: Still evil

From our favorite monotheistic (all gods are fairy tales, except ours) religion, Islam.

Religion of peace. And beheadings and treating women like cattle.

Monday, February 16, 2009


I'm not a fan of most humans. There's a pretty narrow range of folks on this planet I get along with. I think this is because most folks just seem to stumble around without thinking, and it drives me nuts.

I am reminded of my general contempt for humanity whenever I fly. Humans at their irrational, self-interested worst.

Take the boarding process. People tend to forget that the plane isn't taking off until we're all on board. And while they rightly think that boarding the plane quickly might speed up the departure, they tend to ignore clear instructions on how to actually make the boarding process happen more quickly, and instead follow their own lizard-brain scarce resource competitive programming.

Example: My trip home from London

The counter staff announce to folks very clearly that they should only approach the gate when their section has been called, because failure to do so slows down the process. So what do the sheeple do when they ask the first group to board? They mob the gateway, so that everyone approaching the gate must slowly wade through a sea of bleating idiots, trying to determine whether the person they're about to step past is genuinely in the queue to board, or just mobbing the area because they can't think and follow directions. And so a stroll that should take 10 seconds takes 60.

So the sheeple, all trying to get in front of their tiny boarding group, and thus get on the plane more quickly, actually slow the process for everyone ahead of them in line.

Now on some levels, this actually makes sense: The only people they can beat on the plane are people in their own boarding group. Slowing the process for the groups ahead doesn't change the sequence of the boarding in their group, just the time that their boarding begins. So if people only care about being the first in their group, mobbing makes sense, if they're willing to screw folks boarding ahead of them and slow the entire process, just to have a better shot at the overhead space in row 42.

I actually approve of Southwest's cattle corral batching process, which does seem to speed entrance onto the plane. If humas are going to act like sheep, treat them that way.

Friday, February 06, 2009

Strengthening marriage

Let people who love each other get and stay married.

"Fidelity": Don't Divorce... from Courage Campaign on Vimeo.

Monday, February 02, 2009

Because kids are able to critically evaluate ideas so well