Posted by James Hamilton

The Office of Federal Housing Enterprise Oversight (OFHEO) released its house price indexes for 2006:Q2, which continue to show house prices climbing in all but five states, though with a significantly slower rate of increase than previously.

One-quarter logarithmic percent change in average house price between 2006:Q1 and 2006:Q2. Data source: OFHEO


During the second quarter, statewide average prices started to fall in five states in the Midwest and New England. Even so, half the states saw better than a 1.6% (logarithmic) increase in prices during the second quarter, and a dozen states experienced second-quarter price appreciation that would exceed 10% if maintained for a year. Looking at the year-to-year price change, as of 2006:Q2 prices were still up in every state, up 9% on average and up over 20% in still-hot Arizona.

One-year logarithmic percent change in average house price between 2005:Q2 and 2006:Q2. Data source: OFHEO

Prices are usually a lagging indicator of housing market conditions, coming down only after home sales decline and inventories rise. With the latter two trends already clearly established, I might have expected to see more outright price declines by this point rather than simply a moderation of the rate of increase.

I continue to watch this with concern, because the magnitude of the previous run-up in real estate prices suggests that the size of ultimate price declines could be quite dramatic as well. If one takes a market fundamentals view of the last five years, the earlier price appreciation would be attributed to falling interest rates, growing population and income, and restricted housing supply. The first factor is presumably the most important, and, if population and income were constant, would suggest that now that interest rates have come back up, the previous increases in house prices would be expected to be reversed. The reality is not quite so stark, since continuing growth in population and income can also provide for some of the adjustment. Even so, I would not discount the possibility of significant downward price movements.

And what then would become of the billions in interest-only, no-down-payment loans currently outstanding, and the home equity loans that have financed much ongoing consumption spending? Ah, that’s the question of the hour, isn’t it?

Econbrowser

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Marc Mohan in The Oregonian

The nonfiction works of Swiss-born author Alain de Botton occupy a curious place between stringent academic philosophy and gauzy self-help manuals. Using references from great thinkers and authors of the past, books such as "How Proust Can Change Your Life" and "The Consolations of Philosophy" aim to make their ideas accessible and useful to lay readers in a way that has made them frequent best sellers. His latest effort, "Status Anxiety," uses the same techniques to address the sources of, and solutions to, that ubiquitous impulse known in the vernacular as "keeping up with the Joneses." In his continuing quest to assist readers in leading happier, more fulfilling lives, de Botton rightly addresses one of the major sources of modern discontent as "a worry . . . that we are in danger of failing to conform to the ideals of success laid down by our society and that we may as a result be stripped of dignity and respect."

This concern, he posits, has emerged over the past couple of centuries in Western industrial societies as the possibility of social advancement has expanded to larger sections of the populace, and as the levels of material acquisition attainable have increased exponentially. "A sharp decline in actual deprivation may thus, paradoxically, have been accompanied by an ongoing or even escalating sense, or fear, of deprivation."

We desire riches or power not as ends in and of themselves, according to de Botton, but as a way of seeking the "love" of those around us. Another factor has been secularization: "(W)hen a belief in an afterlife is dismissed as a childish . . . opiate, however, the pressure to succeed and find fulfillment will inevitably be intensified by the awareness that one has only a single and frighteningly fleeting opportunity to do so." The emergence of capitalism as the planet’s dominant mind-set has also contributed to the use of material or monetary benchmarks of status, and to the sense that those who fail to meet expectations are somehow faulty.

What methods, then, does de Botton prescribe to counter the relentless urge, seemingly bred into us, to judge ourselves by what others think of us? He divides his solutions into five categories — Philosophy, Art, Politics, Religion, and Bohemia — but the simple answer is: Learn to realize that other’s opinions are ultimately insignificant. Easier said than done, to be sure, but worthy advice nonetheless.

Philosophically, de Botton suggests a touch of the "intelligent misanthropy" put forth by Schopenhauer: "The views of the majority of the population on the majority of subjects are perforated with extraordinary amounts of confusion and error." The "intelligent" side of the equation should be emphasized; total disregard for society’s opinions is, de Botton holds, an equally serious, if less common, problem. Art, from the novels of Jane Austen to the paintings of Thomas Jones, can "challenge society’s normal understanding of who or what ‘matters.’ " "Oedipus Rex" demonstrates that anyone can be a failure, while The New Yorker cartoons frequently show the opposite.

Understanding politics can reveal the contingency of a society’s status markers within a historical context; here de Botton essentially expands on Marx’s thesis that "the ruling ideas of every age are always the ideas of the ruling class," and reminds us that any oppressed group can see itself as the victim of forces that can be challenged. This does lead to the debatable proposition that "in modern Europe and North America, entrepreneurs and scientists will be the objects of admiration."

De Botton credits Western civilization’s Christian heritage, and the art it has inspired, with providing an awareness of death and a sense of the eternal, as well as fostering the notion that success can be graded outside of the material world. The most radical antidote to status anxiety, though is Bohemia, defined by de Botton to include all of the iconoclastic, anti-rational schools of thought of the past 200 years — Romantics, Surrealists, Dadaists and more. From Thoreau to Baudelaire, they offer up vivid examples of perhaps the simplest method of avoiding shame in the eyes of the bourgeoisie: Thumb your nose, behave "inappropriately" and welcome their disapproval. Here we’re back to "intelligent misanthropy," and de Botton’s solutions sometimes do seem like different religions with the same god — varying means toward an identical end.

That end, though, is laudable. One phenomenon that would have been an interesting addition to this tract is the recent, mutant offshoot of status: celebrity. When people are venerated not for any discernible accomplishment, but simply for veneration’s sake, we seem to be headed for a potentially radical redefinition of success.

In the meantime, it’s not a bad idea to keep in mind de Botton’s parting advice: "A mature solution to status anxiety may be said to begin with the recognition that status is available from, and awarded by, a variety of different audiences . . . and that our choice among them may be free and willed."

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A for-sale-by-owner Web site that is registered to a loan officer in Ohio also contained a cache of information about a suspected al-Qaeda operative captured in Pakistan last year and an Islamic militant movement.

Pages embedded within The For Sale By Owner Association Inc. Web site, at www.fsboa.com, contained Arabic writings attributed to Abu Musab al-Suri (al-Suri translates as "The Syrian"), who is also known as Mustafa Setmarian Nasar. Nasar was reportedly arrested in Quetta, Pakistan, in November 2005 and is rumored to be in U.S. custody, though his location remains a secret.

Alan Isham, the creator of the Web site who is a loan officer for 1st Metropolitan Mortgage in Pepper Pike, Ohio, said he hadn’t added anything to the Web site for two years and had nothing to do with the Arabic-language materials at the site. "Somebody hacked into the site," he said. The www.fsboa.com Web site was registered in Isham’s name in 1998.

"I just had no idea it was even there. I haven’t uploaded anything into the site for over 24 months. It’s kind of a dead site."

The entry page to the For Sale By Owner Association Inc. site included links to property search, mortgage information, membership information and chat pages, and invited sellers to "post ads instantly" and to "advertise your property for free," though many of the links at the site were not functioning. There were no links from the site’s home page that connected directly to the Arabic content at the site.

Isham said he was told by government officials earlier this year not to take down the Web site.

"I was actually contacted by government officials and asked about (the site). I was asked to leave it be because they were monitoring it," Isham said Thursday. But the attention about the site is endangering his reputation, Isham said, adding that he has asked to shut the site down. As of this morning, the www.fsboa.com site was not active.

The site had contained links to dozens of pages of text and images of a sword and a quill pen. The Islamic militant materials within the Ohio-based FSBO Web site were publicized earlier this year in a March 28 article by the Jamestown Foundation, a public policy group that researches events and trends in societies considered "strategically or tactically important to the United States."

The foundation cited a statement by Nasar at the www.fsboa.com/vw Web site and reported that Nasar is "one of al-Qaeda’s top ideologues" and "has proved to be the movement’s most significant strategic brain."

In late August, conservative FrontPage Magazine and author and counter-terrorism consultant Laura Mansfield published information about the possible terrorist connections to the Ohio FSBO site on their Web sites.

U.S. officials have said that Nasar was a trainer at Osama bin Laden’s camps in Afghanistan. A Spanish citizen, Nasar was named in a Spanish indictment in 2003 for alleged terrorist activities connected to al-Qaeda. He also had spent time in London in the mid-1990s before traveling to Afghanistan, according to reports. A message last month attributed to Nasar called upon militant groups across Europe to "awaken" and "move fast" to carry out more terror attacks against Britain, according to news reports.

A Google Language Tools Arabic-to-English translation of materials that were posted at the www.fsboa.com/vw site appears to be a statement by Nasar refuting media reports and allegations by the U.S. government about the extent of his involvement in terrorist activities.

Read more …

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