Taghousing

Responding to authoritarianism with segregation

With the rising popularity of Donald Trump; at least within the GOP, I made the following observations on Twitter:

Responding to the tweet, Supremus sent me this link documenting the rise of American authoritarianism. Rooted in political science research, the article makes an effort to understand this recent fondness for Trump. It’s the perfect storm of having just the right bigoted/racist individual running at the time when racial diversity is on the rise.

In an influential 2005 book called The Authoritarian Dynamic, Stenner argued that many authoritarians might be latent — that they might not necessarily support authoritarian leaders or policies until their authoritarianism had been “activated.” This activation could come from feeling threatened by social changes such as evolving social norms or increasing diversity, or any other change that they believe will profoundly alter the social order they want to protect. In response, previously more moderate individuals would come to support leaders and policies we might now call Trump-esque.

Other researchers, like Hetherington, take a slightly different view. They believe that authoritarians aren’t “activated” — they’ve always held their authoritarian preferences — but that they only come to express those preferences once they feel threatened by social change or some kind of threat from outsiders.

But both schools of thought agree on the basic causality of authoritarianism. People do not support extreme policies and strongman leaders just out of an affirmative desire for authoritarianism, but rather as a response to experiencing certain kinds of threats.

I found this interesting because not only does it confirm our fears of what is happening right now in the Presidential race but it also confirms a theory in housing and neighborhood change; something that’s up my alley.

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How We Almost Lost The House We Live In Now

Ever since the banking industry caused the massive downturn in the world’s economy five years ago, the regulations have been made slightly stricter. I say, slightly because the major causes remain unaddressed but there is a hint of accountability among banking professionals. But incompetence cannot be cured by regulation. There is a reason MacDonald’s has detailed step-by-step checklists for even the most illiterate employee so much so that if you say, without fries, they look at you funny. Only when you say, no fries do they understand you. Perhaps it is time for such checklists in the banking industry. If there was one, we would’ve had fewer sleepless nights. Let me explain.

The way our house sale and house buying went down was that we had to juggle the two and the latter obviously had to follow the former. In fact, the house buying was contingent on our house sale so much so that it was written into the contract when we made the offer. Given how much of a seller’s market it was, the sellers could’ve easily dismissed our offer had they received any competing offers. The sellers were being a little indecisive after we made the first offer but then later appeared to be amicable. However, they wanted to close on a specific date since they too were buying a new home few days later. It was no problem for us since it was just a matter of time and waiting out on our house sale in College Station. We had received an approximate number for our seller’s proceeds and were making a very small amount on our sale. But then, as always, not everything happens smoothly in our life.

It all started out with our buyer in College Station missing an important IRS form that was needed for the closing. The IRS couldn’t locate them in the records and ultimately, they had to drive up to Houston to get a copy. This delay nearly pushed back the closing date which was a Friday and which would’ve effectively pushed back our closing in Austin too. We were finally given the go-ahead for closing in College Station on Friday morning, the day of the closing and we would’ve to drive up there at 4pm. The shocker however was that we had to take money to the closing. It was a mere $800-odd but we were expecting to drive back with a check and not drive with a check! Our selling realtor failed to mention that our escrow balance and home insurance premium that we had paid in full last month would be reimbursed later. To add to that, she had never listed the Title Insurance policy which was around $1600 on our Seller’s Proceeds. This gave us an inflated estimate of our net gains. We were pissed but had no option and luckily we had spare cash lying around in another account since we had long consolidated everything else for our buying our house [1].

But we thought, the worst was behind us and although badly-judged sales proceeds and the last-minute trepidation on the house sale, we finally sold our house and that was a big relief! At least the contingency aspect of our house buying in Austin was fulfilled. We sent over the HUD-1 statement to our Austin lender and got the go-ahead from the title company to close on our house in Austin on Monday. EVerything went smoothly and even the closing costs were couple of thousand lower than we expected. We congratulated each other and even went out to celebrate that evening. There was some glitch about the loan not being funded but our lender said, it must be something technical at their end.

The following morning, we got a shocking email from our lender. Apparently, she and two other people at their bank including the underwriter had misread our HUD-1 Statement from our house sale and thought we MADE that $800-odd instead of paying it. How, in the frikkin hell could three people working at a financial institution responsible for doling out millions of dollars make such a basic error? The error was so grave that when our realtor called our lender to inform her, the lender broke down crying. There was a real possibility that our loan would not be funded due to lender error and we would lose the home we just closed on. The situation was more dire for our sellers since they were closing on their new home that day and needed the money. The lender tried to deflect some blame onto us by claiming we had used some money from a gift that we couldn’t but I had my paper trail straight and corrected her immediately. We didn’t hear back from the lender for another 3-4 hours and were freaking out but guess things were more frenetic at their end as she finally got back to us after moving some money around and got some papers signed for a piddly $200 credit we had received from our realtor. The loan was finally funded and money was disbursed to our sellers. We heaved the biggest sigh of relief of our lives.

Given how everything went down, I didn’t want to assume anything until we had the movers over and finally move into the house. Luckily, nothing else went wrong and we could finally move in without any more problems. Thanks, lenders and realtors for giving us sleepless nights in a process that is supposed to be seamless given your “years of experience” in the field.

Footnotes:
  1. After all the refunds and reimbursements, we did end up making a very negligible amount of money on our house sale. This is not counting the mortgage interest deductions we enjoyed for the past three years when we filed our taxes []

Austin’s Hot Property Market

As soon as we accepted the offer on our house in College Station, we began hunting for a house in Austin. Little did we know that it wouldn’t be as easy as our last time house buying, no thanks to the Austin’s suddenly resurgent property market. After a tepid last four years in the real estate market, things started picking up. Our quick house sale should’ve been an indicator but apparently, Austin is on a whole different level.

Burned by the realtor’s ineptness during our last home purchase, we did some shopping around this time and met with at least 3 realtors. One didn’t actually operate in the part of Austin we wanted to buy in, the other came across as too busy and forceful, so we finally settled on a local realty firm with an established presence both offline and online. The realtor quickly set us up with an online search of the MLS with our criteria as filters so that we would get an email as soon as a house that fit our criteria hit the market. The ‘as soon as’ part is important because the market was heating up and as we later found out, homes were being snapped up within days. In some neighborhoods that eventually turned out to be out of reach, not because of the price but simply because the sellers were inundated with offers often with a cash component. We couldn’t possible compete with a part-cash offer since we were going to finance our entire loan (we don’t have 20% or at least $40-60K lying around).

Couple of homes we saw, liked, and considered making an offer already had offers pending. The seller’s realtor was in fact, collecting offers that the owners would then sift through. This is not typical since buyers are often lucky to get an offer within days of listing and then have to negotiate quickly to avoid scaring off the buyers. But this was a whole different ball game, according to our realtor and very unusual. It was a seller’s market which proved beneficial to us while selling but was now biting us when we were on the other side. It can be extremely difficult to get attached to a house enough to make an offer and then get turned down. You have to begin your search all over again and may have potentially lost out on other homes in the meantime.

So we made a decision and expanded our search to other neighborhoods which were equally good but were often ignored by the madding crowd of buyers. Luckily, after a short search, we found an excellent home that had been on the market for 7 days and hadn’t received an offer yet. Ironically, that made us a little uneasy but the realtor expressed confidence and assured us that we’ll have enough opportunities by the way of home inspection and appraisal to get a fair assessment. So we decided to make an offer…$900 more than the list price.

How it all turned out is a post by itself and gave us numerous sleepless nights mostly due to ineptness of other people involved in the process. We did end up buying the house and are currently living in it so there is no unfortunate twist in the end. More on the process later.

Final Farewell to College Station

We moved to Austin on a Friday. Our realtor took care of hiring the make-ready cleaners and carpet steam cleaners and put the house on the market on the following Tuesday. We waited patiently for an offer and turned out that we didn’t have to wait that long. We received a low-ball offer on Friday but we stuck to our list price. Finally we relented a little to drop the price by about a thousand dollars and the buyer agreed at 5pm Friday. Boom! Just like that within 3 days, our house was sold.

Talk about a recovering housing market! Anecdotal evidence but still that was too quick. If we had known, we could’ve done some things differently with our move or even with the listing price. But that’s all in hindsight. Probably us moving out and having a fresh coat of paint made all the difference! The sellers (and the seller’s agent) aren’t privy to the buyer’s lender appraisal unless it appraises for less so we’ll never know if our realtor priced it right.

Of course, it isn’t that easy. The buyers would hire a home inspector, request repairs, wait for the lender to order an appraisal, and then finally close on the house. The inspection turned up zilch. After all, the house is just over 3 years old. They asked us to replace the backdoor that had a doggie door. We refused. That didn’t change things. The painters had messed up few electric outlets so we had to call in the electrician to fix them. But that was it. The buyer was financing only half the sales price and fronting the other half with cash. That’s always a good thing since in that case, no appraisal or financing issues will surprise us later. We got a hefty earnest money deposit so we were assured that they buyer was serious and not just shopping around. Earlier, we were slated to close on June 21st but we’ve requested for an earlier closing date to aid our house hunting efforts in Austin.

More on that later because that wasn’t or rather isn’t so convenient.

Popular Myths on Homeownership

2. The homebuyer tax credit makes buying a house more affordable.

Not necessarily. Just because you got an $8,000 tax credit toward the purchase of a home doesn’t mean that you actually saved $8,000. In areas where there is strong demand for housing and the supply of new housing is limited — including the Washington metro region — tax credits may result in the bidding up of home prices.

[Source: 5 Myths about Homeownership]. This short and interesting article on popular myths on homeownership puts things in perspective for potential home buyers; especially pertinent to us since we just made the plunge to get our first home. Firstly, the point that I quote about is true of College Station. It has a strong demand for housing and the supply of new housing is limited. This report on the housing market [PDF] as of May 1, 2007 although dated is still relevant. As you see, the total demand far outstrips the sales units under construction (for rentals, supply meets demand). The in-migration of high-skilled workers (professors and research staff) to the town is strong due to the presence of Texas A&M University. The investment crowd also has a significant presence as parents buy homes/condos during their kids’ tenure at the university (they sell or lease out units after they graduate). The majority of the homes sold fall under $200,000; the price somewhat tempered by the presence of the city of Bryan.

Surprisingly, the older homes in town tend to be more expensive than newer ones simply because of the now-cliched adage, location location location. Homes located near the university or within the older boundaries of the City are expensive and if you must find a home suited for your budget, you must be willing to drive five more minutes down south on Hwy.6. But don’t drive out too far to the Indian Lakes and Coves at Nantucket subdivisions where the homes are palatial and prices can touch a million. If you drive west, you still may get what you want at the price you want but then be prepared to drive down couple of miles even for a loaf of bread. Public transportation in this town is non-existent so if you want to live close to the amenities, you have to rent. Our previous apartment was fantastically located [within walking distance] near shopping, a public park, coffee shops, bars, restaurants, mall, and close yet not too close to the highway. Unfortunately, homes are older and more expensive in that neighborhood.

Coming back to the question of the tax credit saving money myth quoted above, it is valid if you are purchasing your home ONLY to avail yourself of the savings. Before the tax credit was extended couple of weeks back, we avoided rushing in to making our decision. The extension merely sweetened the deal for us. Are home builders gaining at the expense of home buyers in College Station? I think not. Why? I’ll keep that for a later time.

Homebuyer Tax Credit Extended

The $8,000 tax credit for first-time homebuyers would be extended and some people who already own residences could claim a benefit under a proposal by Senate Democrats.

An agreement reached yesterday by the Democrats would let homeowners who buy a new home qualify for a $6,500 credit if they have lived in their prior residence for five years, according to Regan Lachapelle, an aide to Senate Majority Leader Harry Reid.

The plan would extend the homebuyers credit, due to expire Nov. 30, to home purchases under contract by April 30, 2010, with borrowers allowed another 60 days to close the sale, according to a person familiar with the details of the agreement [source].

Since we are now in the market for our first home in this country, this comes as welcome news. It vindicates our decision to wait a while before we bought a home. In fact, the extension opens up the program to homeowners who may not be buying their first home but have lived in their existing home for at least five years (approx. the average period a household lives in one home in the U.S.) The tax credit is 10 percent lower but it is at least better than nothing.

On the other hand, I know of people including my in-laws who purchased their first-home this year just to take advantage of this tax credit. But considering the still-dire economic conditions and the sad state of the housing market, I had expected at least a one-time extension of this program similar to the ‘cash for clunkers’ program. There are arguments to be made on either side whether this program works or not but in our town which has been largely unaffected by the housing crisis, realtors and mortgage lenders have admitted that business was up by at least 20%.

This tax credit provides an impetus to potential homebuyers to take the plunge toward their first home and in turn stimulate the real estate market to get the ball rolling. However, this can also encourage behavior that landed us in this spot in the first place. I know of some people who rushed into buying their home this year just to take advantage of this tax credit. Buying a 200-300K home for 8K sounds ridiculous especially when you have a mountain of student loans. I know my in-laws who recently moved into their new home factored this in their decision but at least they put 20% down. For yuppies who wait and save up for their downpayment, this extension comes as a godFSMsend. More on the housing hunting later.

The Demand for McMansions

Balloon Juice blames HGTV for the housing crisis:

How many episodes of House Hunters or Property Virgins or whatever the show du jour was at the time did they have with twenty-somethings, just out of college, touring houses and turning them down because they only had two bathrooms or there was only one sink in the guest bathroom or because there was not enough light in the dining room or because the cabinets were not nice enough in the 400 square foot kitchen or, well, you get the point.

Although the post is made in a lighter vein, I can’t say I completely disagree. If anything can be blamed for this housing crisis, it is this relentless push not only for homeownership but also for large-sized homes that belied any rationality in terms of use. HGTV merely fed into the fad of more is less. Housing size has ballooned in the past decade and 2000+ square-foot homes on even larger-sized lots were now considered passe. Even when you had only a kid or two. People justify larger homes for kids needing space but anyway they carry half their belongings for their two-year-old in the family mini-van when they travel. In any good, more is always better but then so is declining marginal benefit. There exists a platuea beyond which additional square footage is simply not required for optimal living and merely counts as luxury. Of course,billionaires like Ambani cannot be chastised on their 55-story home but if overconsumption becomes the norm, you invoke tragedy of the commons which leaves everyone worse off.

In a climate of oversized homes, builders naturally obliged to satisfy this demand of McMansions especially when adding a bedroom or two didn’t add much to their construction cost but allowed them to hike up their price just high enough not to deter buyers. Do we need a fifth bedroom, but it’s only $10,000 more…hmmm, let me have it and then we can think what we put in there. Even when Mr. and Mrs. John Doe did not need that extra bedroom, all of their friends (peer-pressure) had a five-bedroom house so why not them especially when it isn’t going to cost all that more. Also, you must remember the housing boom was fueled by easy access to loans without proportionate collateral so piling on debt wasn’t an issue especially when your home prices are expected to rise exponentially just as they had in the past few years. Why wouldn’t any ‘rational’ homebuyer get that oversized house especially when you had access to loans to buy it for slightly more? Want trumped need and most weren’t so tough when the going got tough.

No wonder the suburbs are suffering far more disproportionately than central cities. People especially those fresh out of college may finally discover that they indeed can live comfortably in 1200 sq.ft homes. Or probably less, ask your average Mumbaikar.

Update: It took a housing crisis but the markets are adjusting. Average home size for a single-family detached home is declining from 2,626 to 2,343 square feet. The average home size was 1,710 in 1982 but the average family size has in fact decreased over the years thus providing no rational reason for increased home size.

Google enters Real Estate Search Market

The real estate market isn’t usually the target of most web companies. Sure, we have had online services like Zillow that let you look up property valuations laid out on maps and Criagslist has a healthy listing of property listings. Effectively, these services try and cut out the middle man who usually makes a lot of commission based on the information asymmetry in the real estate market. Consumers in this market are the least likely to make the best decision while buying or even renting a house even though this might be the biggest [monetary] decision they might make in their life.

Google had launched its own version of classifieds called Google Base but we haven’t heard much about it in recent times. Housing was just one of the sections in Google Base. But earlier this week, they integrated Google Base in their most popular product ever – Google Search. Not many people might be searching or listing their items on Google Base but Google Search is the first destination for most when they are looking for stuff even housing.

If you enter a city name followed by “real estate” in the Google Search box, you will see a option just above the first search result just like in the adjoined image. The Google Blog announced this on Thursday and while the listings aren’t available for all U.S. cities yet, they are rapidly adding cities. Almost all the major cities I looked for were available. It lets you specify a location and the listing type – rent, sale, foreclosure before you hit Go. Once you do, you are taken directly to the Google Base Housing section where you can fine tune your search according to a variety of factors that you use during house-hunting.

Don’t be thrown off by the first $15 million+ offering, you can sort it from low to high as well [you get something for $100 when you do]. You can sort your results by listing type, price, property type, bedrooms, bathroom, and of course, location. The search results are also plotted on an adjacent map. Brokers, Agents, MLSs, and IDX vendors can also add their property listings on Google Base so that they pop up on the search. Now, this is nothing new. There exists an independent mashup – Housing Maps – that uses listings on Craigslist and maps them on Google Maps. But of course, you can imagine who is going to get more traffic – this mashup or results in the Google Search Results page.

Google may thus be moving into Craigslist territory and leveraging its powerful search monopoly to direct traffic to its still-struggling applications like Google Base. Other listing sites may feel shortchanged and resent Google’s thrusting their product in their otherwise potential customers. This would be valid if there were any sponsored advertisements on the search results page but strangely, I don’t see any. Probably Google doesn’t sell ads for those search terms which is strange since it also would be a lucrative market. Does Google hope to earn much more through its Base listings than it would through contextual ads? Maybe time will tell.

Another Move

This blog has been silent for the longest ever since it was started more than three years ago. Admittedly, it is partly attributed to declining interest and passion for blogging but other personal reasons are largely to blame. The last month has been that of drastic changes in our personal lives and it has certainly been for the better; at least in the long run. That change led me to abandon my rickety and typical student-apartment housing near the university and seek a decent apartment complex elsewhere in town – away from the creaky floorboards and no-dishwasher kitchen.

Following some hiccups trying to find a replacement and dealing with an obdurate non-desi roommate, Ash and I had a nice time trying to find an alternate apartment in this small town. Due to the presence of a large student body and associated staff and faculty, the housing market in College Station is virtually a sellers’ market. There are literally thousands of housing choices with a wide price range but the deal and bargains that you would get in a typical large city are few and far between. But since the demand is quite high, we had to make a quick decision and sign the lease within few hours. It also reminded me of my professor who confessed seeing 14 houses in a day and closing on the same day. At least we had to sign just a seven-month lease that would give us leeway later. But as we found out post-move, moving is not something that you want to do frequently even if it saves a few bucks.

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FEMA City

Alex Tabbarok over at Marginal Revolutions comments on why another ‘FEMA City’ in New Orleans is a bad idea. The Bush administration and FEMA are planning to house Hurricane Katrina evacuees in some 300,000 trailers and “mobile” homes. In a similar situation, 1,500 evacuees from Hurricane Charley are still living in temporary homes and the situation has worsened over the years. I agree with Alex that this might just be another public housing failure and instead housing vouchers might be a better idea, especially Section 8 vouchers that let low-income people rent homes wherever they see fit (as long as the landlords accept vouchers, of course) in New Orleans or better still, anywhere in the United States. Fencing in displaced people in substandard conditions never works especially for low-income people who need to travel to work or rather, find jobs that they have lost during the existing calamity.

Also, it is highly unlikely that people who have fled the city might not return at all because they might have already found a better place or are in the process of doing so. There have been talks of low-income people moving to Las Vegas because of the abundant low-income jobs available there. You will not find people ditching their new-found jobs that pay the same or even more and returning to New Orleans purely for sentimental reasons. Rich people in fact, are happy that they aren’t moving back and actually are looking toward keeping them out. But little do they realize that every city needs its share of poor people
otherwise who would do the ‘menial’ tasks of bagging groceries, sweeping the streets, blowing away leaves, or waiting on tables.

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