Happy 8th Anniversary Sweetheart!

Today is the 8th anniversary of me somehow fooling the most wonderful, worthy, capable woman in the world into marrying me. I certainly have no regrets. I married far above my station. Everything I've achieved since then has been because of Becky's influence. I was going to do a list of all the eventful things we've done together , but that would be REALLY nerdy and unromantic, and since I'm nerdy and unromantic the other 364 days of the year, I though I'd try something new.

Since Becky blogged me a sonnet, I'm going to return the favor:

So oft have I invoked thee for my Muse
And found such fair assistance in my verse
As every alien pen hath got my use
And under thee their poesy disperse.
Thine eyes that taught the dumb on high to sing
And heavy ignorance aloft to fly
Have added feathers to the learned's wing
And given grace a double majesty.
Yet be most proud of that which I compile,
Whose influence is thine and born of thee:
In others' works thou dost but mend the style,
And arts with thy sweet graces graced be;
But thou art all my art and dost advance
As high as learning my rude ignorance.

So, Happy Anniversary to you, my muse, my friend, my inspiration, my wife. Thank you for giving my life "double majesty" I look forward to many, many more years of fun.

Love, Chris

When Are You Moving?

WARNING: this is a LONG, dry, economics rant post. Beware!

"When are you moving?"

I get asked this question every time I mention that we live in Ogden, but I work in Provo. The people asking the question have a point. A 156 mile round-trip commute isn't the most pleasant part of my day, and on snow days I often can't get either down or back.

The short answer is . . . who knows!

Here follows the long answer:

I do know why we haven't moved yet. Besides the wonderful generosity of family, for which we are very grateful, housing prices are not . . . shall we say . . . stable. MSNBC has an article today about the housing market. Apparently none of the measures being taken by the Federal Reserve have done anything to stem the tide of foreclosures or to increase the number of homeowners or the median price of a house. They have a spiffy graphic showing what housing prices have done since 1999:

Now, this raises two questions in my mind.

1. Why are homes worth more in the middle of every year and less at the beginning and end?
2. How does this track with median income changes over the same period?

I have no comment on the first question, and I only asked the second because I already knew the answer. That's why I'm writing this post.

So, as to question 2 - the amount a family can afford to pay for a house is related to their income. "Well. . . duh!" you say. Bear with me. It's more obvious when you think about housing prices in terms of years of income. In the UK, for example, the size of a mortgage you can qualify for equals 3 times your annual income (ignoring all other factors). Thus if you earn $50,000, then you can get a $150,000 mortgage. The ratio in the US is a bit more generous, but, same idea. With that in mind, let's look at another chart (thank you Wikipedia):

If you'll notice, median income peaked in 1999. Since then it has declined.

Everyone assumes the housing market was healthy in 1999. So, we'll start there. In 1999 median income was about $46,000, and the average home cost about $138,000 (just eyeballing the chart for the end of the year). That works out to . . . let's see . . . carry the 2 . . . oh, yeah, 3 times the median income. Those mortgage people were on to something. I'll call this 3:1 ratio a "healthy ratio."

Now let's look at 2005. Housing prices that year were $230,000 for most of the year, while median income had declined to $45,326. That comes out to over 5 times the median income. Not a healthy ratio.

When I look at the numbers that way, it's perfectly obvious why houses aren't selling. The latest income figures available are for 2007. They show that median income has risen slightly since 2005. It was about $50,000 in 2007. the housing slump was in full swing in 2007, so for that year the ratio declined from 4.6 times median income to 4 times median income.

What really gives me pause is this:

Looking at the income chart, median income starts to slide before every recession, and continues to decline till well after the recovery is underway. As every news outlet in the country recent told us, we are in a recession. Chances are good, therefore, that median income is falling, and has been for a while. (we don't get income figures till after the fact).

If this is one of the sharpest recessions ever, as we are reminded daily, chances are median income will fall steeply, and housing prices will continue to follow until well after the recovery is underway.

With that in mind, I'm going to make some predictions. Since they will be memorialized on the internet, we'll all see what my predictions are worth in a few years. (it's really win-win: if, as is most likely, I'm wrong, you'll all know to stop wasting your time reading my blog, and I'll know to keep my mouth shut on topics of which I am ignorant). These are also the reasons, in my mind, we aren't moving yet:

• I think housing prices will return to something much closer to the "healthy" 3:1 ratio they were at in 1999.
• Prices won't even begin to recover until unemployment starts to fall, and median income starts to increase at the earliest. (probably more like 6 months later).
• All the fancy things lenders did to make up for the increasing gap between income and housing prices are gone for good.
• I think the national median home price will easily fall below $150,000

I think the low prices will stay around a while because 1) All the speculators fueling shows like "Flip this House" lost their shirts (and good riddance), and 2) Lenders will be gun shy for a while, given the number of banks that went under from bad mortgages.

We'll see what happens, but I'm not optimistic for the next few years.


PS - Sorry for the abrupt ending, I tried to think of a good closing with a smooth transition and a hard-hitting conclusion, but I couldn't. The thoughts have stopped, hence so does the post.

...

Who Knew Detroit Was This Bad? - Part II

As a former Michigan resident, I'll always have a soft spot in my heart for the state . . . well most of the state. I never did learn to like Detroit. I did learn to pity it, however. I have written previously about the problems facing Detroit. Here are some updated factoids, courtesy of MSNBC:

• The jobless rate has climbed past 21 percent
• There are 15 candidates for the Feb. 24 special mayoral election necessitated by the conviction of [mayor] Kwame Kilpatrick for trying to cover up an affair with a former top aide.
• The city's deficit is approaching $300 million, and he ordered all departments to cut their budgets by 10 percent.
• Several dozen schools have been closed in the past three years
• The FBI's latest statistics, for 2007, show Detroit with the highest violent crime rate of any major city. . . some offenders, notably those without homes of their own, were now expressing reluctance to leave jail when their sentences were done. (But, on the bright side, "property crime in some Detroit neighborhoods [has] stabilized or declined because targets of opportunity [are] fewer now that most remaining residents are poor and many of the homes have been abandoned and cannibalized.")
  
• About 44,000 of the 67,000 homes that have gone into foreclosure since 2005 remain empty, and it costs about $10,000 to demolish each vacant house. (do the math, and that means 440 million dollars just to tear down vacant housing created within the last three years).
• The residential real estate market is catastrophic, with the Detroit Board of Realtors now pegging the average price of a home in the city at $18,513. (According to the National Automobile Dealers Association, the average price of a new car sold in the United States is $28,400).

Keep in mind these stats were likely taken before the recent near-collapse of the American auto industry. If the "Big 3" go under, it may just be time to admit that the city has failed, move everyone out and just plow everything under. Over half the population has left in the last 50 years. I've never heard of a city being depopulated like that, not since the black plague in the Middle Ages.

One observer does manage to diagnose the root of the problem, however:

"Up until the '70s, you could come to the city without education, without speaking English, and get a job in the auto industry and instantly be in the middle class, economically speaking," said Mike Stewart, director of Wayne State's Walter P. Reuther Library and an expert on the auto industry. "A lot of folks in the city depended on these jobs for generations — they don't exist anymore," he said. "A lot of Detroiters are unprepared, educationally and technologically, to cope."

If a mind is a terrible thing to waste, then three generations of minds are . . .?

"Unprepared educationally" is a nice PC euphemism. What he meant was "illiterate." As I cited in my previous post on this subject Detroit has a 47% adult illiteracy rate.

The article points out that the surrounding areas aren't doing too bad. I can confirm that from personal experience. Prospects for improvement aren't good when all the need is concentrated in the area least able to deal with it.

Maybe we should declare a hurricane and disperse Detroit's population throughout the country, like we did with New Orleans. Many wouldn't return, but would that really be a bad thing? America can help that many people, Michigan alone can't, nor can the city of Detroit.

I wonder how much we'd need to pay Canada to take Detroit off our hands?