A housing-launched crisis needs a property tax shift
|January 30, 2009||Posted by Jeffery J. Smith under Progress Report, The Progress Report|
A housing-launched crisis needs a property tax shift
While politicians borrow to stimulate, one state might try what works
The data show the land price cycle in full swing in the US, and the geonomic analysis to be correct. Based on that, whats our way out? We trim, blend, and append 10 2009 articles from: (1) AP, Jan 21, on builders sentiment; (2) BBC, Jan 22, on housing starts; (3) MarketWatch, Jan 22, on prices by Rex Nutting; (4) Reuters, Jan 26, on sales; (5) Reuters, Jan 27, on prices by Julie Haviv; (6) AP, Jan 27, on consumer confidence by Tim Paradis; (7) MarketWatch, Jan 23, on the UK by William L. Watts; (8) BBC, Jan 29, on France; (9) DownsizeDC, Jan 22, on the stimulus by Jim Babka; and (10) UrbanTools on what works.
by AP, by BBC, by Nutting, by Reuters, by Haviv, by Paradis, by Watts, and by UrbanTools
- Homebuilder sentiment index hits new record
Homebuilders’ confidence sank to a new low in January to 8. The index was at 9 the previous two months. The index has drifted below 50 (the midway point) since 2006 May.
- Home building at all-time low
The rate of construction of new homes fell by 15.5% in December to an all-time low, the lowest since World War II when recordkeeping began. From December 2007, the rate of new construction was down 45%. New building permits fell 10.7% from November.
- Home prices fall set record
Home prices dropped 1.8% in November, the fastest pace on record; in 1991 the US government began tracking such data. In the past year, home prices are down a record 8.7%, compared with a 7.5% drop through October. Since the peak in early 2007, national home prices are down 10.5%.
- Existing home sales rise but prices see record drop
According to Realtors, the pace of sales of existing homes rose 6.5% in December, but the median home price dropped to $175,400, a record 15.3% drop compared to the same period the year earlier. Its the largest decline since Realtors started keeping records and probably the largest since the Great Depression.
- Home prices plunge record 18.2% in November
In the Case-Shiller index, home prices plunged a record 18.2% in November from a year earlier. Since August 2006, the 10-city and 20-city composites have declined every month — a total of 28 consecutive months. As of November, average home prices are where they were 2004 Q1. From their peak in mid-2006, the 10-city index is down 26.6% and the 20-city Composite is down 25.1%.
- Consumer confidence weakest ever
Consumer Confidence Index in January slipped to its lowest level since the reading’s inception in 1967.
- Its official: British economy falls fast into recession
The British economy contracted during the final three months of 2008 at its fastest quarterly pace in nearly 29 years. Gross domestic product shrank by 1.5% in the period, following a 0.6% contraction in the July-to-September quarter. That was the steepest quarterly drop since 1980 and also met the official definition of a recession — two consecutive quarters of declining GDP — for the first time since 1991.
GDP shrank 1.8% compared to the final quarter of 2007. Meanwhile, the British pound tumbled to its lowest level versus the dollar since 1985. Also, December retail sales rose 1.6% due to a reduction in the value-added tax and other unique factors.
JJS: Two points. GBs last recession was 18 years ago. And taxes on efforts, like on adding value, do make a difference. How should you react?
- Huge city crowds join French strikes
The head of France’s biggest union said a million workers had rallied in protest over the handling of the economic crisis and to demand action to protect jobs and wages.
A third of flights from Orly airport were cancelled. Forty per cent of regional services were running and 60% of high-speed TGV services. Three-quarters of metro trains were running in Paris. Over a third of teachers and a quarter of postal and power company workers were on strike. Some 23% of public sector workers joined the action.
According to a January 25 poll, 69% of the French public backs the strike. Socialist leader Martine Aubry said people work and yet cannot make ends meet, retired people can’t make it, they fear redundancies, and the government don’t want to change policy.
People have the feeling theyre paying for a crisis they were not responsible for. Many are furious that President Sarkozy said there was no money left to raise consumer buying power but found billions of euros to bail out banks.
JJS: Yet Americans like their bailout. Hah!
- The stimulus too late to serve its purpose
If past recessions are any guide, recovery could begin, naturally, by the end of this year. Thats years before most of the federal stimulus package will be spent.
The Congressional Budget Office figures only 7% will be spent by the end of the current budget year. Consider some big-ticket projects. While Congress wants to spend $30 billion on road repair and construction, less than $4 billion would enter the economy before 2010 and less than $15 billion would be spent before 2013. Only one out of every seven dollars intended for energy projects will be spent in the next year and a half. Only a quarter of the proposed clean water projects can be completed by October of next year. Projects to provide broadband Internet to rural areas can’t begin for years.
Whether more debt stimulates, it is too late. President Bush exploited the 9-11 attack to invade Iraq. Now the Democrats exploit recession to fund pork. As Obama’s Chief of Staff, Rahm Emmanuel, said: “You never want a serious crisis to go to waste.”
JJS: So, what does work? Remove the obstacles to useful development.
- Connecticut Senators Lead the way for Levying Land
Two bills, one introduced by Senate Majority leader Martin Looney, the other by Senators Andrea Stillman and Andrew Maynard, would permit Connecticut cities to employ land value taxation. Similar bills in the past have been supported by Connecticuts Homebuilders, the Conference of Municipalities, the Sierra Cub, and others. Jurisdictions that do tax land, not buildings, have actually flattened the business cycle and prospered during previous recessions.
Jeffery J. Smith runs the Forum on Geonomics.
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