Month in Review: March 2007
[Previous months in review available here: Feb 07, Jan 07; Dec 06,]
On
Halfway through windy blustery March, I explored the question of the minimum family accommodation, what my insightful Mexican friend Alberto Mulas calls “the embryo house,” of 10 square meters, in Home configurations: let’s get SMALL, Part 1, and Part 2:
Yesterday we saw there’s a micro-trend to create micro-homes, as small as a single room, which is the most fundamental unit of housing. Small housing is cheap, and the same Law of Economic Gravity that drives rural self-builds to be single rooms also drives economically rational slums down to the most minimal structure:
A house made from barrels hammered flat
In the end, universal constants reflect universal principles; things persist only if they work. Physicists call this the anthropic principle:
The weak anthropic principle simply states that it is only because these fundamental physical constants acquired their respective values that there was sufficient order and richness in elemental diversity for life to have formed, which subsequently evolved the necessary intelligence toward observing that these constants have taken on the values they have.
One such universal constant is the embryo house: 120 square feet or more.
In fact, embryo houses and minimal accommodation consumed much of my thinking, with numerous posts on mobile homes, starting with a revisit of Paradise Park (
Even as people value only what they pay for, so too do governments notice only what they fund. Mobile homes are a tremendous form of affordable housing that for decades has gone unnoticed — and only intermittently attended. Having been quiescent for so long, the mobile home owners must now rapidly raise their voices, so they are the anti-incumbents.
“Every man a king,” eh Huey?
Directly related to small homes are issues of financing them, and in March the subprime issue exploded into public consciousness with the sudden collapse of the nation’s largest lender, New Century, which I analyzed in Subprime lending: a domino falls two ways and Part 2:
In a string of falling dominos, there is always a next domino, but also always a previous domino, and in the interconnected financial ecosystem that supports origination of new loans and their resale in the secondary market, it’s easy to become confused which is which. […]
Bankruptcy seems only a matter of a short time. Meanwhile, what tipped New Century into the soup was this cheery announcement only a week before:
Federal prosecutors and securities regulators are investigating stock sales and accounting errors at the New Century Financial Corporation, the biggest mortgage company that specializes in lending to people with weak, or subprime, credit, the company disclosed in a corporate filing yesterday.
“Stock sales and accounting errors” are the phrases one might use if the captain and crew were dashing for the lifeboats even as the ship was sinking.
We’re still making journal entries
Compared with other asset types, homes are resistant to price drops. So we see the housing-price crumple zone absorbing the weakness across multiple sectors — home builders, unsold land, subprime lenders, the securities market. The distributed and interconnected shakeout reduces the pressure on any one segment — a mark of a robust ecosystem.
Tarring the whole industry as shady?
Because it trolls at the bottom fringes of the credit conundrum, the subprime industry has always lurked in housing’s shadows, always seeking respectability and always sniffed at by the larger, more solid lenders.
One bottle of water, one subprime loan
In light of this sudden surprise, one might expect capital markets would applaud any innovation in ratings assessment of risk profiles, but as we saw in Bank creditworthiness: we don’ wanna know, when Moody’s introduced a new listing, it got catcalls:
There’s a pragmatic objection to the ratings: they produce nonsense results and after the ratings came out, as noted by Bloomberg, several major institutions blew loud raspberries at Moody’s for its ratings of three apparently rickety Icelandic banks:
Here’s what I think of the Icelandic bank ratings
We toured the world with posts on:
This sort of thing happens to me everywhere I go
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· Haiti’s: slums as houses of crime, and how slums effectively secede from the body politic around them.
Who uses a fake name to buy an utterly immobile house? People who need a secure place they own not in their own names. People who plan on using it for illegal home-based activities, such as growing marijuana, or manufacturing or storing illegal drugs:
“This was a very elaborate, sophisticated, identity theft ring that reaches well beyond
Melody found out the people who had “ruined her life” had been arrested in a phone call from Blair Tuesday night, who said: “Judy, we got them.”
On a happier note of crime going straight (?), Sherlock Holmes explored The value of urban land: Moriarty & Milverton:
“As Mycroft himself has repeatedly told me,” Holmes continued imperturbably, “friendship means choosing whom to trust, and business is the science of forming profitable relationships with those whom one does not necessarily trust. And property is a civilizing asset, for though the criminal may flee, his property may not, and in that very immobility is society’s guarantee of performance. Moreover, without the legal and financial superstructure of society, urban land has no value. No, Watson, you may take it as proven — when a criminal begins buying property, it is the first and most critical step to that criminal’s legitimization.”
He sighed. “I suppose I shall have to read their offering prospectus.”
Meanwhile, Wal-Mart withdrew its proposal to become a bank, for reasons I speculatively deduced in Banking: why be when you can team?
On the policy front,
Shoring up housing policy is a thankless job, but somebody’s gotta do it
I looked at the current state of affairs by listing Affordable housing’s great unsolved problems, speculating that the solutions may bubble up because of The housing policy innovation inversion, and reminded government that to innovate is to risk and to risk is to lose, in How much can you afford to waste?
The insight of hindsight — my goodness, in retrospect, it’s so obvious! — can be viewed in one of two ways:
· Critical. “You should have figured that out beforehand.”
· Experimental. “Hey, we discovered something.”
Both views are valid — most things are inferable beforehand — but there’s a vast difference between deducing something works and demonstrating it works.
In other words, “how much can you afford to waste?” is another way of asking, “what is the price of knowledge?“
How much money can we afford to waste? An answer might be any of the following:
I have here a partial list of your waste, fraud, and abuse
I also was glad to help out fellow blogger
Having opened the month by finishing my two-part post on The Battle of New New Orleans: Part 2, the war, as a bonus, on the first day of the following month, I posted shocking news from Fannie Mae.
He’s blogging so furiously he’s on fire!
