Posts Tagged ‘law of unintended consequences’

Perverse foreclosure laws wreck Las Vegas housing market

July 10, 2013

It is a well-known historical fact that most governments – democratic or autocratic – introduce perverse laws. Ignoring the law of unintended consequences, thoughtless, ill-educated politicians produce laws that achieve the exact opposite of their explicit objective.

Few lawmakers, however, can bathe in the infamy of Nevada, a gamblers’ state whose residents gambled excessively on the housing market bubble that burst in 2007. Las Vegas confronted one of the most serious house foreclosure consequences of this gamble. Well, as a signature gambling state, the Nevada legislature gambled one again, recording another spectacular loss in the arena of the American housing dream.

Between 2002 and 2006, house prices doubled in Las Vegas with many buyers making zero or minimal deposits, and confronting the sketchiest of income and asset evaluations. From 2007 through 2012, average house prices collapsed 62 per cent, driving many households into foreclosure and short sale. What is required in such circumstances is a swift and efficient foreclosure system, removing those who cannot pay their mortgages out of home ownership and into the rental market, allowing house prices to fall quickly to their bottom, and thus encouraging a new inflow of more affluent home owners.

The State of Nevada rejected outright this solution. New legislation – in the form of A.B. 284 – threatens criminal penalties for bank officials who do not follow new rules to certify that foreclosures are processed properly. Further, it makes it a felony for any one who makes a false representation concerning real estate title. Worse still, the wording of the new law, rushed through the legislature, is highly ambiguous. Severe penalties apply to vaguely defined crimes.

The Nevada law simply stopped foreclosures cold. In October 2011, the first month after the law took effect, lenders filed just 600 notices of default, an 88 per cent drop from the previous month. By May 2013, foreclosed homes, which accounted for half of all homes sold in Las Vegas since 2007, accounted for only 11 per cent of home sales. Many mortgage holders have gone 60 or more months without making any mortgage payment and still remain in their homes, without any notification of foreclosure proceedings.

As a perverse consequence of the foreclosure seizure, Las Vegas now has only 4.300 previously owned homes listed for sale, down 70 per cent from two years ago. New home sales, in contrast, are up 87 per cent so far this year. The number of new building permits issued this year is up 52 per cent from last year.

Because mortgages for these new homes are extremely difficult to come by – the consequence of A.B. 284 – most of the new homes purchases are by cash buyers, many of whom are aiming to flip their purchases in order to re-sell at higher prices driven by the foreclosure seize-up of the existing housing stock.

So the New Nevada law has effectively destroyed the market in existing houses and driven a rising bubble in new house construction. When this second bubble bursts – as burst it surely will if ever the existing stock of houses comes onto the market – Las Vegas will be right back in 2007, with an even larger stock in houses that should, but will not be, foreclosed.

Well, it is the gamblers’ city. The game is in play and the tables load up until the dealer calls out : ‘Rien ne vas plus“!

Once he was a Beatle, now he may be just a roach: Where is the Orkin Man?

November 22, 2012

Thanksgiving is a special day in the United States, when often far-flung families come together for good company and good food. Turkey is the dish that best symbolizes that this happy day has come again.  So beloved is that tasty dish, that one might be forgiven for thinking that Puritans first fled England, not to escape the fiery stake of  the Catholic Inquisition, but to set their teeth into the flesh of an otherwise ungainly bird.

It takes the wisdom of a Liverpudlian  pop-singer to shatter our faith in the Thanksgiving gift.  Bestriding the Atlantic Ocean like a great vegetarian Colossus, Paul McCartney beetles out the message like it truly is:

Any American who eats turkey on Turkey Day is a turkey.  President Obama, you are a turkey, for observing the tradition of issuing  presidential pardons for two such birds. Your false beneficence makes light of the  annual mass slaughter of some 46 million gentle, intelligent birds.

We all live in a meatless submarine. We should all eat meatless submarines. Stuff those submarines with yellow corn, and we are right back where we need to be: Oh! for Woodstock and the sheer joy of sex, drugs,  rock and roll, wine, women and song, and in bed before breakfast!

The drive for a meatless Thanksgiving is in full swing, and Paul McCartney is leading  PETA in its ruthless animal rights campaign. Paul McCartney, however, might care to contemplate the law of unintended consequences. For what he is rock and rolling across the Atlantic is a message of extinction for the American turkey.  Without the sacred place that they hold on all those  Thanksgiving tables,  turkeys would not be reared, lovingly as they are, would not be well- fed and cared for, would not receive the blessings of protective custody from the cradle to the dinner table.  Rather, they would be extinct.

Sad though it may be Sir Paul, the turkey is not beloved for its looks, nor for its desirability as a household pet. It is desired for its tasty flesh. As you well know, the lowly beetle was never beloved by the world’s population until it provided a product that delighted those who had no taste for classical music.

The selfish turkey gene does well to encourage those who feed on turkey at the Thanksgiving table. For all those hungry  bites sustain that selfish gene. Otherwise, turkeys might have to rely on your personal beneficence  for their survival. And the mists that roll in from the sea  may not be all that life-enhancing for  such ungainly birds, isolated on that windy Mull of Kintyre.

Happy Thanksgiving, all my readers! As you sink your teeth into delicious Thanksgiving turkey, always remember that you are helping to  save the species. Continue to do well, while doing good!

Hat Tip: ‘The war on Thanksgiving: Jibes fron the thankless shouldn’t spoil the feast’ The Washington Times, November 22, 2012