April 1, 2008

WSJ's Jenkins: Knock down surplus new homes

The Wall Street Journal's Holman Jenkins argues that:

"Knocking down surplus homes would be the most efficient and equitable way to spend taxpayer dollars. It can proceed experimentally. It can be turned off quickly when the need evaporates. It would not be a lesson to Americans that housing debt is not real debt and need not be repaid. It wouldn't benefit the most irresponsible lenders and borrowers at the expense of responsible ones. The housing market would still have to hit bottom, but the bottom would be higher (and sooner).

"Have no illusions about the alternative being fashioned in Congress. Behind the fig leaves that will be frantically waving, a lending bailout would be effective in stemming foreclosures and propping up home prices only if taxpayer money were used to put speculators' housing bets back "in the money.""

He may be right. But, after the government pays to knock down all those surplus homes built with illegal immigrant labor, shouldn't the Wall Street Journal be ordered to publicly burn all its old editorials about how crucial illegal immigrant labor was to the economy?

My published articles are archived at iSteve.com -- Steve Sailer

36 comments:

headache said...

OK, so the idea is to knock down those surplus houses using illegal labour. Like they say here in Germany "rein in die Kartoffel, raus aus den Kartoffeln" (into the potato fields, out of the potato fields).

Kind of sounds like the higher math logic of the financial elites, of which the WSJ are just the cheerleaders. Didn't the financial elite get it right with the sub-prime schemes, the hedge funds and the banking system? Oh, I digress ...

TGGP said...

Sometimes I think Bastiat is haunting us from the grave out of anger that so few bothered to read what he had to say about broken windows.

Anonymous said...

The real danger is if the WSJ starts printing editorials calling for amnesty so all the empty houses can be filled.

Anonymous said...

As it will be in the future, it was at the birth of Man --
There are only four things certain since Social Progress began --
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool's bandaged finger goes wabbling back to the Fire

Anonymous said...

I remember in my schooldays (back in the 1970s) my Economics teacher used to berate the 'stupid' economic establishment of the 1930s for perpetuating mass unemployment , whilst the 'scientific' solution of John Maynard Keynes was so obvious.
Keynes actually claimed that one way to abolish unemployment was to employ men to stuff bottles full of pound notes, bury thm deep in the earth and then employ other men to dig out the bottles and keep the cash.
Well I suppose it's really no more perverse than the current uS economic situation.

dharma bum said...

Hey, count your blessings, America. Up here in Canada the government deliberately restricts land and housing (while simultaneously having the world's highest immigration rate) as a racket to artificially inflate the cost of homes or, from the POV of the voters they chase, the value of their homes.

It's a bit of a head scratcher to me that the one country everyone wants to move to (America) would be knocking down homes, though the fed bailout seems an even worse idea. Can't the free market handle this one?

Where did we get this idea that buying a house was the way to get rich, instead of transacting business or getting a job? Low housing cost should be seen as an unambiguously good thing.

neil craig said...

Lets go round & trash people's PCs too. That, plus preventing imports, will push up their prices too.

Anonymous said...

Steve,

The city of chicago (which you rhapsodize upon now and then) has a similar policy.

The west side and the near south side are much more desperately poor than the deep south side which actually contains a significant black middle class.

These neighborhoods suffer especially from abandoned buildings that the city eventually takes over. The city immediately tears the house down and leaves an empty lot. The landscape looks very bizarre and pitted as you whiz past it on the "L". Not the organized identical lots Chicagoans are used to.

In Bronzeville, Chicago's historically black neighborhood, gentrification is creeping in at a breakneck pace. 40 years of empty lots are being purchased and having luxury homes and condos built upon them. In fact, Bronzeville just elected its first white Alderman.

One day, someone is going to figure out how to divide these McMansions up, legally, into apartments and we'll see the same dynamics of poverty in the suburbs.

Argent Paladin said...

I love how now that housing prices are lower we now have "surplus homes" but when prices are higher, we have a "homeless problem".
It reminds me of how the MSM spins this purely as a bad thing, interviewing those who have lost money by investing in real estate. Never mind that many can now afford a first home. Never mind that they have been crying foul over the "housing bubble" for the past 6-7 years (since Bush got into office).

rightsaidfred said...

We don't even have to knock them down. Just let them sit vacant, and let the lending institutions eat the loss.

Anonymous said...

Jenkins's point (which he has made a few times before) is that if you don't knock down the poorly-built, vacant McMansions, they will get occupied by squatters who will lower the real estate values of the currently occupied, poorly-built McMansions.

- Fred

Ross said...

This looks like a straight transfer of wealth from those who don't own homes to those that do. The poor subsidising the well off.

bbartlog said...

The winners and losers in Jenkins' proposal are unsurprising given the source:

Winners:
- those who currently own the foreclosed homes (banks, investors in REITs and so on)
- homeowners (property values are preserved)
Losers:
- taxpayers who finance these buyouts and demolition
- people who might be wanting to buy or rent a home, especially those who want to buy or rent marginal housing

Basically he's talking about artificially destroying supply to maintain prices. If the banks want to do that then let them do it on their own dime. It's no better than government price supports for milk or anything else; it screws over consumers.

gcochran said...

Reminds me of "The Door Into Summer": our hero, new to the situation, gets a job crushing new cars without a mile on the odometer. He's puzzled, and the boss explains that those cars had been accepted as security against price-support loans but were now two years old and 'unsaleable'. Later he notices that many of those cars were missing air conditioners or even engines, and the boss explains that you can't expect people to put their best workmanship into cars destined for the crusher.

Of course destroying an asset is never going to make economic sense. That's why we should dissect Holman Jenkins for spare parts, or possibly bag him as fertilizer, rather than just shoot him.

Chief Seattle said...

Maybe if the Fed (aka government planners) hadn't loaned freshly printed dollars at 1% in 2003, then we wouldn't have quite as few unneeded houses. But of course no one in the media is allowed to question the Fed. It's the most important tool of the banking elite. When times are good, the bankers yell "free market" and claim the profits. When the bets go bad, they yell "systemic risk" and the Fed prints fresh money for a bailout, creating inflation for everything else. Nice work if you can fool the American people into giving it to you.

William said...

The housing market would still have to hit bottom, but the bottom would be higher (and sooner).

Why would a higher "bottom" be better than a lower bottom?

Everytime prices for a commodity or stock rise the good folks at the Wall Street Journal argue that it's just rewards: investors deserve to benefit from the law of "supply and demand." But if those prices fall, or if the law of supply and demand justifies higher prices for worker salaries, suddenly Adam Smith and Supply & Demand are kaput.

What the Journal seems to be arguing is that we use taxpayer money to make it harder for Americans to buy a home. Brilliant. We spend tens of billions at HUD to make it more affordable then we spend billions more to make it more expensive. Only in America...

BTW: have you noticed that the new OpinionJournal page no longer allows readers to leave comments? Guess they got tired of never getting a reader letter supporting their open borders tirades.

Jewish Atheist said...

But, after the government pays to knock down all those surplus homes built with illegal immigrant labor, shouldn't the Wall Street Journal be ordered to publicly burn all its old editorials about how crucial illegal immigrant labor was to the economy?

I was wondering how you were going to shoehorn race into this subject!

StephenT said...

Yes, and since they were built by illegal Mexicans -- I'm sorry, "old world craftsmen"-- doing the jobs and doing them so much better than the "lazy Anglos," why it might not even be *possible* to knock them down. With their superior skills, I have no doubt that these buildings would prove just as resilient as the sturdy construction so evident in their own native country.

Anonymous said...

In a way,its happening already. Unfinished homes are being stripped of copper and other hi priced scrap metals. Prob lots of stuff to be taken. the 'workers"?? Guess who!!

American Goy said...

Via Asia Times, and on my blog now:

Bear Stearns in a nutshell:

"If you are like me, you gulped in horror at the revelation that this one bunch of people had made that kind of a huge, humongous, staggering load of unimaginable, unpayable commitments! More than the total income of everybody in the country!"


""$13,400 billion was what was leveraged on a measly $80 billion? Leveraged 167 times? Bear Stearns had less than 1% in the pot? Hahahaha!""

Read that last paragraph again.

Half Sigma said...

Demolishing perfectly good homes is the most moronic idea I ever heard of.

Anonymous said...

wait! i thought we were just trying to help Americans afford homes..now we have to destroy them? America sounds more and more like a Soviet every day..

Anonymous said...

"Demolishing perfectly good homes is the most moronic idea I ever heard of.

Most of them aren't perfectly good though, they're shabbily built. As Christopher Leinberger wrote last month's Atlantic ("The Next Slum?"):

"Many of the inner-city neighborhoods that began their decline in the 1960s consisted of sturdily built, turn-of-the-century row houses, tough enough to withstand being broken up into apartments, and requiring relatively little upkeep. By comparison, modern suburban houses, even high-end McMansions, are cheaply built. Hollow doors and wallboard are less durable than solid-oak doors and lath-and-plaster walls. The plywood floors that lurk under wood veneers or carpeting tend to break up and warp as the glue that holds the wood together dries out; asphalt-shingle roofs typically need replacing after 10 years. Many recently built houses take what structural integrity they have from drywall—their thin wooden frames are too flimsy to hold the houses up."

- Fred

Jim Bowery said...

You guys STILL don't get it do you?

The whole point of the "demographic transition" bringing women into the workplace was to provide a higher fertile female to male ratio for management. This is a corporate perk fundamental to the New Economy.

If housing becomes as affordable as it was to families during the 1950s, not only would you have another baby-boom, thereby removing the excuse for importing all those nice subservient brown people, but you would have far more fertile women staying HOME and away from their liberation as corporate concubines -- at least until downsizing hits them at age 40.

The WSJ guys need to protect their women from the horrors of being left home in marriages made stable by their being barefoot and pregnant and otherwise oppressed!

Sheesh, what a bunch of losers!

Concerned said...

Jewish Atheist:

Plenty of illegals are Irish or Polish. This has nothing to do with race. This has to do with our country, our culture, and our laws.

Take it somewhere else, will you?

Anonymous said...

Hey "Concerned," speak for yourself.

This is definitely a racial issue. Bringing more Hispanics in this country is not in our interests.

Hispanics generally support wealth redistribution, affirmative action, stricter gun laws, "hate-speech" laws, and illegal immigration. They also wish to remove European American cultural icons from the public square and replace them with their own.

So don't tell me this "isn't about race." The whole reason organizations like La Raza (The Race) exist is to serve the interests of Hispanics. To them ITS ALL ABOUT RACE! So wake up!

If you're really "concerned" then its important that you realize this.

anony-mouse said...

Tearing down surplus homes sounds a bit like the old policy of paying farmers not to grow food.

Wouldn't this encourage a lot of people to construct badly built homes so the government could buy them up and knock them down?

(See Catch-22's Major Major Major who's family got rich not growing more alfalfa than any other farmer in America)

Darwin's Sh*tlist said...

This idea crossed my mind recently as I was gnashing my teeth at the thought of any bailouts.

The thing is, it's something that both liberals and conservatives could get behind. Liberals hate, and I mean hate, suburban living. (Well, right-kind-of-white-people-liberals do. Most blacks love huge houses in the 'burbs.) Their mantra has been to get people back into the city, into higher density and less auto-dependent living.

Conservatives, on the other hand, would rightly see starter-home slums as being more expensive to taxpayers than their higher-density counterparts. More subsidies for public transit through lower-density neighborhoods, more demands for energy subsidies for larger homes. And just think how crappy the lawns will look.

Talk it up. Better than a bailout.

Anonymous said...

The fact this guy wants to prop up home prices shows that he just doesnt get it. The root of the problem is that prices went way too high in the first place. The only true solution is to let prices fall to whatever level the market will support. Some people will get hurt (and some of them deserve it), but more government meddling will just make the problem worse. Let the market work.

Roger Chaillet said...

Jewish Atheist should check out Dallas for illegals.

There was a murder case recently in the affluent suburb of Plano. Seems passerby had detected a foul odor coming from a car in the parking lot of a warehouse club. Authorities investigated, and found the body of a Chinese female here illegally. She had been murdered here by another Chinese national, presumably an illegal as well.

Her occupation: massage therapist.

As for knocking down surplus homes, it's already happening in California. Squatters have moved in to abandoned homes, and are trashing them. The homes will soon collapse. Other houses have been stripped of copper, aluminum, bathtubs and anything else that can be pawned, sold or bartered. Once this occurs the only thing to do is bulldoze them.

Or burn them. Cedar Hill, Texas has had almost a complete neighborhood torched. Apparently i t was done for insurance reasons.

As for where Jenkins got his idea, think of Cisco Systems. Cisco was stuck with huge numbers of routers and other hardware after the dot-com meltdown. It attempted to sell these goods, but ended up competing against sellers on Ebay and elsewhere. These other sellers had bought Cisco routers for pennies on the dollar from failed dot-com firms. The systems were new or nearly new. Cisco allegedly bought up these online goods at a discount, and then had them scrapped. The intent was to work off the surplus, itself a result of the Greenspan tech bubble, and get back to selling new hardware.

Anonymous said...

Keynes never recommended hole-digging as a policy measure. In fact, he once wrote an open letter to Roosevelt insisting that public works should be focused on higher- productivity projects than they actually were at the time.
(I won´t explain the context of the hole-digging analogy here. Since everybody already knows that they are so much more intelligent than Keynes was, surely there is no need to suggest that those who don´t know the context go look it up.)

And there is nothing to add to the comments by Cochran and TGGP.

Martin said...

""Jewish Atheist said...

I was wondering how you were going to shoehorn race into this subject!"

Illegal immigration has a lot to do with this subject. A lot of those new McMansions were built for buyers fleeing places like California that have been enriched by diversity (enriched to the point of bankruptcy). Or who were just fleeing old neighborhoods that have been colonized by mexicans or section 8 recipients from the projects.

You might consider paying some attention to the influx of people from Mexico into our country. Mexicans are not exactly known for being especially philosemitic, so it might end up being your ox that gets gored."

Martin said...

Given that the large national papers are concerned about the viability of their business in the new internet age, perhaps we should all start destroying Wall Street Journals at the newsstand - you know, in order to prop up their value.

Spungen said...

Most of them aren't perfectly good though, they're shabbily built. As Christopher Leinberger wrote last month's Atlantic ("The Next Slum?"):

That article attempts to provide academic validity to the wishful thinking indulged in by privileged urban snobs, hippies, and Ahwanee-principles Nazis (considerable overlap between the last two).

Anonymous said...

This whole discussion is bizarre. If nobody is paying the property taxes on a house, then its ownership passes to the city or town. They can auction it off. Somebody is likely to pay something for it and begin paying the property taxes, even if they just want it as a second home or vacation home or to rent it out. If nobody wants it even at auction, then the city or town can demolish it. In any case, this is clearly a job for local government. Jenkins should chill out.

CJ

Anonymous said...

The government should pay Holman Jenkins to not write columns. It would improve the quality of journalism.