As tear-downs sell for millions, for the hoi polloi it's record lows
Henry George's land tax idea is on the lips of many
We trim, blend, and append five 2009 stories from: (1) the Los Angeles Times, Jan 3, on hot properties; (2) Reuters, Feb 24, on record drops by Johnson; (3) Cara, co-founder/CEO of Qtrade Investor (Canada’s leading online broker) and of Canaccord Capital’s Eastern Canada Operations (Canada’s largest full-service independently-owned broker-dealer), who has testified before the Canadian Securities Administrators and the Senate of Canada Banking Committee Task Force, has also been a member of the Government of Ontario Task Force that reviewed the operations of the Canadian unlisted securities market; (4) The Guardian, Feb 24, on land tax by Toynbee; and (5) Harrison on cycles at www.
by Los Angeles Times, Steven Johnson, Bill Cara, Polly Toynbee, and Fred Harrison
$6-million-plus for a tear-down? Sites obscured by buildings
Jeff Franklin, who produced such TV hits as "Full House," "Hangin' With Mr. Cooper" and "Malcolm & Eddie," hopes to score a hit on the sale of his Sunset Strip-area house, now listed at $6,495,000. The walled and gated private site is being sold for land value. The house is a tear-down with three bedrooms and three bathrooms in 3,027 square feet. The property is at the end of a cul-de-sac and has city views.
JJS: Sites are more valuable than buildings, especially in pricey areas. Elsewhere, most people live in an imploding economy.
Consumers fret as US home prices fall
US home prices plunged at a record pace in December and consumer confidence hit a new low in February.
The Conference Board, an industry group, said its consumer confidence index fell to 25.0 in February, the lowest since the index began in 1967, from 34.7 in January.
Prices of US single-family homes fell 18.5% in December from a year earlier, with the pace of decline speeding up, according to the S&P/Case Shiller home price index. That was the biggest drop since the data series began 21 years ago.
From the previous month, the S&P/Case Shiller composite index of home prices in 20 metropolitan areas fell 2.5% after dipping 2.3% in November.
The S&P/Case Shiller data showed that prices have plummeted 26.7% from the housing market peak in the second quarter of 2006.
A different index from the Federal Housing Finance Agency said single-family home prices fell a record 4.5% in the last three months of 2008 compared with a year earlier, though the pace of decline slowed.
JJS: What does one successful investor make of the mess?
Prominent Canadian businessman follows George
I am not a socialist; never been one. I am a fiscally prudent individual who rose among my peers in the financial services industry to sit in the corner office of the penthouse of the stock exchange tower in a G-7 country, offices that I designed, built, recruited, and managed. Yet I never once kowtowed to my peers in the industry.
I had my principles -- mostly along the lines of Henry George -- where society must take care of itself, individually and within communities.
Otherwise organized gangs -- including bankers, politicians, and land barons -- would take unfair advantage… Most of the problems we face today are based squarely on bank credit and land. Just like land barons they serve, who own the best locations in every urban and suburban market, the bankers demanded control so they could set their price. More people need to revisit the work of Henry George to see the reason why, and what he advocated to control this situation. click here
JJS: What did George suggest? The Guardian offers some variants.
Owners must be weaned off the house-price drug
Please, can we have our bubble back, clamors just about everyone. Everyone knows this fairy money caused the crisis. Since about 2003, real incomes have hardly risen, except among the top 10% of earners. Now is the time to tell people that house prices will not be allowed to go mad again. Now is the time to be honest about what is needed to avoid another wild boom: taxes geared to discourage inflation
Announce a tax to be imposed on future gains (not retrospectively). There are plenty of ways to do it. Some administrations impose an annual tax, including many US states. Some urge a land value tax system. It would be easy to impose capital gains tax on all future rises: that 18% on any inflation in value, only to be paid on selling it, could stop another bubble. The money raised could be earmarked for building social and private rented homes, or helping others to buy.
JJS: On the spending side, using the revenue for housing could appeal to many. But on the taxing side, while targeting future gains may be safer politically, it is far less potent economically -- it would not drive efficient land use, nor generate enough revenue to make feasible repealing counterproductive taxes. At least it’d be a step in the right direction.
If we don’t adopt geonomic reform, if we just keep floundering, then we might finally run out of chances to get it right. Our next recession could be our last and everlasting. Eighteen years from now, after so much profligate government spending, the amount of debt could bury us in a hole too deep to dig out of. If China or Russia or Brazil is stable by then and less indebted, the rest of the century could be theirs. For more on the 18-year land-price cycle, visit specialist Fred Harrison. click here
Jeffery J. Smith runs the Forum on Geonomics.
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