WSJ: "Immigrants Can Help Fix the Housing Bubble". What do you think?

[chimpymustgo]

This is a reported story - not from the editorial page. Interesting notion.


By RICHARD S. LEFRAK and A. GARY SHILLING

The Obama administration should seriously consider granting resident status to foreigners who buy surplus houses in this country. This makes more sense than the president's $275 billion housing bailout plan, which Americans greeted with a Bronx cheer.

The federal bailout forces taxpayers to subsidize overextended homeowners who bet on ever-rising house prices and used their abodes as ATMs, and it doesn't get to the basic problem -- the huge inventory of excess houses. We estimate that 2.4 million houses over and above normal working inventories are left over from the 1996-2005 housing bubble. That's a lot, considering the long-term average annual construction of 1.5 million single- and multi-family units.

Excess inventory is the mortal enemy of house prices, which have already fallen 27% since the peak in early 2006. We predict another 14% drop through the end of 2010 if nothing is done to eliminate the surplus.

Doing nothing to eliminate the excess inventory might well push the recession through 2010 and into a depression. Declining home values, for example, are eliminating the home equity that has funded oversized consumer spending for years.

As consumers retrench, production is cut, payrolls are slashed, and consumer confidence, incomes and spending are savaged in a self-feeding downward economic spiral. But if the government buys surplus houses and sells them at low market-clearing prices, other house prices will drop, destroying more home equity and driving many more mortgages under water. Bulldozing excess houses would be an inefficient end for perfectly habitable structures.

A better idea is to offer permanent residence status to the many foreigners who are clamoring to get into the U.S. -- if they buy houses of minimal values (not shacks). They wouldn't need to live in those houses, but in order to remove the unit from the total housing market, they couldn't rent them. Their temporary resident status granted upon purchase would become permanent after, perhaps, five years, if they still owned the houses and maintained clean records. The mere announcement of this program might well stop the ongoing collapse in house prices, especially in cities such as Las Vegas, Miami, Phoenix and San Francisco, where prices are down 40% -- but where many foreigners like to live.

-snip-

Granting permanent resident status to foreigners who buy houses in this country will curtail a primary driver of the deepening recession and financial crises -- excess house inventories and the resulting collapse of prices. Since the people who will buy these houses will tend to have money, education, skills and entrepreneurial talents, they will be substantial assets to America in both the short and long runs.

Mr. LeFrak is chairman and CEO of LeFrak Organization, a real estate builder and developer. Mr. Shilling, an economic consultant and investment adviser, is president of A. Gary Shilling & Co.


http://online.wsj.com/article/SB123725421857750565.html?mod=googlenews_wsj

[kiva]

1. I don't agree. So people losing their houses, and renters

being forced out because their landlords defaulted on mortgages can watch someone move in who can afford to buy US citizenship? Smacks of all of the outsourcing that caused a multitude of Americans to lose their jobs over the last decade or so. The WSJ may think that having the government buy up houses and sell them at 'low market-clearing house prices' is a bad thing, but if it helps people who need housing then it would serve its purpose far better than this bizarre plan.

[Trajan]

2. Yes .... IMPORT people with money that can afford houses ...

It's not like there are citizens who need good jobs so THEY can afford to buy a house or anything like that .....

Just what we need: foreign landlords jacking up rents ....

Maybe, instead, the market should be allowed to float - downward - to eventually intersect with the reality of low worker wages ....

You can be sure there are tens of millions of low wage workers who hope that prices drop even further .... Prices ramped UP due to a defective credit environment - It is time the environment readjusted to reflect the REAL abilities of Americans to afford homes ....

[No.23]

6. Ah, a practitioner of common sense.

"the market should be allowed to float - downward - to eventually intersect with the reality of low worker wages...."

How refreshing. To breathe in common sense, that is.

Too easy credit inflates the price of things.

When there's easy money to go around, the price of stuff skyrockets.

A credit crunch invariably results in significantly reduced prices.

Granted, we'll have to learn how to save, now, for the things that we need.

But, at least, the prices will intersect more closely with our means to pay.

With our own money, of course, and not someone else's (AKA credit).

[rucky]

3. Sounds good to me.

We need money coming in from outside sources - why not open up our housing market?

[Trajan]

8. Maybe we can sell our asses to those who have money ....

We can stand on the eastern US shore, and offer our butts to those across the ocean ...

Hell ... We need the money ... right ?

:sarcasm:

What we need is stable employment at decent wages - not wealthy carpetbaggers from across the ocean swooping down for some carrion .... A down population is easy pickings ....

[rucky]

10. Where are these higher wages supposed to come from...

if, as a country, we don't sell more than we buy?

[Trajan]

13. Higher wages ?

From dedicated work on behalf of an honest employer ...

It used to be the basis for 'The American Dream' ..... Good pay for hard work ....

[rucky]

17. How would opening the housing market to feriners get in the way of that?

[RaleighNCDUer]

15. The idea behind that is we sell PRODUCTS, not ASSETS.

Selling off assets is what turns a country into a third-world nation.

There is no way that selling real property to rich foreigners make housing more affordable to Americans. It does the opposite, by propping up the already inflated prices.

[rucky]

20. Further drops in housing prices helps Americans?

Horse: People are fighting to stay in their homes. A declining market hampers that.

Cart: There needs to be opportunities for new homebuyers - once the market stabilizes.

So helping new homeowners now will hurt current homeowners.

And speaking as both a homeowner and a landlord - I'd rather be renting right now. Homeownership isn't what it's cracked up to be, and I don't think we should rush getting new people into the market, the way it is now.

[RaleighNCDUer]

24. And propping up over-valued real estate for current homeowners

doesn't help ANYONE. It leaves the current homeowners paying more on their mortgages than they are worth. It leaves the current homeowners unable to sell for what they paid. And it keeps new homeowners out of the market because the properties are FUCKING OVERPRICED.

It is a classic ponzi scheme - you have to keep bringing in new suckers to keep it going. When the bubble bursts, that is when there are no more suckers.

You want to maintain the bubble, find new suckers.

That is not a solution.

[rucky]

25. not sure about your market, but the bubble has burst here

[lumberjack_jeff]

32. What prevents foreigners from buying US property?

Nothing.

But wait... that means that the WSJ's bullshit article must be pushing a different agenda. I wonder what that might be? Hmm.

[rucky]

34. We have to approve loans with FICO, tax records and VOE's and whatnot.

I'm not saying it can't be done, but under the current conditions, I don't see anything but a cash settlement that would make that happen.

[sandnsea]

4. lol, oh right

People making LESS than minimum wage are going to buy a house in the most expensive cities in the country.

These kind of brilliant million dollar minds are why we're in this mess.

Anybody wealthy enough to own one of these homes can already buy one if they want to.

[pampango]

7. "Anybody wealthy enough to own one of these homes can already buy one if they want to. "

I think the idea is that such a person would be more likely to actually buy a house, if they had permission (permanent residency) to live in the house after they bought it.

[sandnsea]

12. They can already get that permission

This is a crock of shit excuse to import more cheap labor, that's all. Anybody who can make enough to afford one of these homes can already get permanent residency. It's how our system works.

[anonymous171]

5. Just what we need, an influx of wealthy foreign parasites. nt

[pampango]

14. Why are wealthy foreigners investing in the US considered to be "parasites"?

Are you worried that one might buy a $300,000 house and then try to get on food stamps?

[ddeclue]

9. NO - how about letting the "free" market work and have those banks sell those surplus homes for

surplus prices?

Let the price of housing adjust downward where it NEEDS to go so that ordinary people can once again afford housing without exotic screw-you-over loan vehicles?

A decent house should cost no more than 3 years salary for an average worker or on average about $140,000. Once the price of homes becomes reasonable, people will start buying them again.

[pampango]

19. President Obama seems to be trying to stem the tide of declining housing prices rather than

letting the "free market" work its magic. He apparently believes that as long as the housing market tanks, it will be impossible to turn the economy around and unless he can turn the economy around, he won't have much credibility to do anything else.

In terms of pure free market economics, you may be right that we should let the housing market settle to whatever level starts to attract home buyers, but President Obama seems to want to be proactive and shorten this painful cycle as much as he can.

[ddeclue]

23. Obama shouldn't be trying to re-inflate the housing bubble.

He should be creating gov't infrastructure jobs to put people to work and raise general demand in the economy so people can have some confidence in it.

Doug D.

[RaleighNCDUer]

11. Only problem with this is

IT MAKES NO FUCKING SENSE AT ALL.

The housing bubble was not created by excess inventory - it was created by over-valuation of the houses that both were being built and already existed. This over-valuation, created by the paper economy which guaranteed that any house purchased would be worth more in five years than the equity paid into it, priced housing out of the reach of people whose income had been stagnant for years. Suddenly, there was nobody else available to buy the over-priced homes, and so, by the influence of the invisible hand of the market, prices dropped, leaving people with upside-down mortgages.

Bringing in wealthy foreigners to buy up real property does NOTHING to make housing more affordable to Americans. It does, in fact, the opposite, by propping up the inflated prices that created this bubble to begin with.

IT MAKES NO FUCKING SENSE AT ALL.

[ddeclue]

16. The WSJ only cares about their perverse little world of investors on Wall Street

not the real world of real people on Main Street so in their little reality bubble it makes perfect sense because they don't care about you or me.

[anigbrowl]

18. Excess inventory is what you get after a bubble bursts

Obviously, you can't have a bubble caused by excess inventory. That's like saying you have a glut due to a lack of supply.

Personally, I have no problem with foreign investment in real estate. back in the 80s everyone was paranoid that the Japanese were going to buy the USA but that worked out just fine. It doesn't have to be particularly wealthy foreigners either. There are lots of middle-class people in other countries who'd jump at the chance to buy a newly affordable house in the USA. For that matter, if am amnesty program were set up to address the situation of the millions who are already here illegally, it's quite likely that you'd see some of them entering the market too.

[strategery blunder]

21. Where's the inventory of surplus JOBS to offer these foreigners?

Oh, yeah, that's right...there are none.

WSJ can STFU.

[ddeclue]

22. Speak the truth to WSJ on their forum:

http://forums.wsj.com/viewtopic.php?p=238393#238393


What I wrote to them:

http://online.wsj.com/article/SB123725421857750565.html?mod=googlenews_wsj

NO.

The bubble is over. Stop trying to re-inflate the broken bubble for the benefit of a relatively few greedy speculators.

Instead, think about the vast majority of Americans who have been punished by this bubble for a change - people who either bought inflated homes they couldn't afford or people who were put in the position of not being able to buy a home because the price had been inflated beyond their reach.

Not only is your "solution" not a sustainable one but it is not a fair one, or a reasonable one. It focuses only on helping out a bunch of greedy speculators while perpetuating the pain this bubble has caused to the vast majority of Americans.

Instead of the exotic "solution" of importing new customers from overseas, how about the simpler and fairer solution of allowing the existing free market to work? - The result will be that these banks and real estate brokers will be forced to sell these surplus homes they created for surplus prices.

We need to let the price of housing adjust downward where it NEEDS to go and would naturally go so that ordinary people can once again afford housing without exotic loan vehicles that ultimately screw the average buyer.

A decent house should cost no more than 3 years salary for an average worker or on average about $140,000 at this point.

Once the price of homes becomes reasonable, the American people will start buying them again.

[EFerrari]

26. Whenever WSJ introduces the word "immigrants", you know it's flamebait. n/t

[that went well]

27. I heard that foreigners (not necessarily immigrants, though) are buying houses on the cheap

in Detroit, for example, where the houses are going for crazy-cheap prices. Even that didn't sit too well with me because I cannot help but feel that if this all keeps up, we are going to be the biotches of the world in our own collective backyard.

[lumberjack_jeff]

31. Welcome to DU. n/t

[ColbertWatcher]

28. Dupe. n/t

[ColbertWatcher]

29. "foreigners who buy surplus houses in this country" Gee, I wonder which countries ...

... would be given preferred status?

Cuba?

[lumberjack_jeff]

30. Wall street journal wants an excuse to import more cheap labor?

Color me surprised.

[Virginian]

33. How do they qualify for mortgages?

He is talking about the lower value homes. MY guess is that he is talking about the people who are here without work visas.

The people who are here with H1b work visas are already buying homes.

[KamaAina]

35. Compare the number of units vacant to the number of people homeless

and see if maybe we can't work something out there.

Then maybe Mr. LeFrak and I can talk.