Dear Guy

Dear MSN Guy,


Can you please explain why you claim Robert Shiller is the foremost expert on the U. S. housing market?  I thought he was an economist who gathers and interprets housing sales data. 


I believe his so called "national index" excludes any data from 33 of our 50 states.  I live in New Mexico. It is a state too and I believe we are just as much of a state in this country as California is.  I'll bet people who live in states like Montana, Missouri, Idaho, Indiana, and South Carolina might feel the same way.  Furthermore, he omits data from many of the outer lying, suburban areas surrounding the 20 urban centers that comprise this index. 


So how did he become the foremost expert?  It would seem that for one to be an expert on any market one should have actually participated in it, not just graph sales data reported from it.  There are far better sources of information regarding the condition of the nation's housing market.  For example, those who have the data on the entire nation like the National Association of Realtors, the National Homebuilders Association, even, FNMA has statistics representing a much greater cross section of national home sales compared to the Case Shiller index.


Why do people who live in places like Albuquerque, Oklahoma City, or Nashville have to be subjected to unending, "the sky is falling" reports based on things that happen in Detroit and Cleveland?  Detroit is nothing like Albuquerque.  If you don't believe me, go there then come here.  Or compare things like job growth, unemployment rates, population growth, and the economic base of each city.  Why don't you offer at least an opposing counter point to articles like this one?  Does our nation's foremost housing expert take this extra data into account?  No, we just have to sit here and be told how our real estate market is falling apart.  Enough!


I wonder if Mr. Shiller has ever shorted stocks or funds containing assets such as mortgage backed securities.  I honestly don't know the answer to that question but I would like to.


Since I am sounding off on the topic of housing, I will also sound off on the stimulus package signed into law on Tuesday of this week and how it relates to housing.  Housing accounts for 15% of this country's GDP. 


Congress had an opportunity to pass a bill which would have invested 40 billion in the form of a $15,000 tax credit to anyone purchasing a home this year and they failed to do it. Instead, a watered-down version of about half that was passed and it is only available to first-time buyers making limited income.  It is estimated that this will amount to about 3.9 billion investment.  They threw a water balloon at an army tank.  That's the expression my friend Jack used to describe it.  I like it!  Do our president and congressional leadership fail to realize there will be no recovery if housing does not recover? 


I will wonder what would have happed if they had actually passed the larger of the two tax credits.  Think a moment about the United States residential real estate market.  Then take a gander at how many people are in some way tied to it.  I'll attempt to list a few who come to mind.


The developer, the site engineer, planning engineer, the surveyor, the mechanical engineer, the electrical engineer, the traffic engineer, the architect, the municipal planning director, the banker who finances the developer, the contractor who builds the infrastructure, the sewer and storm drain maker, the water pipe maker, the guy at concrete plant who mines and manufactures the material for the curbs and gutter, the cable guy, the phone company guy who lays the phone lines, the guy that drives the grader, the guy at Caterpillar who built the grader, the guy who transported the grader when it was new, the asphalt man, and then the guy from the city or county that shows up to make sure all of this is going according to plan who is an official inspector.  Now we have a subdivision that is ready for houses.  I'll go on.


Now we have the developer's title insurer, the title examiner, the lawyer who prepares the deed(s), the escrow officer who closed the transaction between the developer and finally the builder or general contractor aka the Home Builder, his banker, the banker's appraiser, another survey guy, his insurance agent, his construction manager, his superintendent, the city's zoning person again, the city inspector, the banker's inspector, the plumber, the foundation contractor, the electrician, the framer, the guy who cut the tree down so there could be a frame, the trucker who hauled the logs, the guy who turned the log into a bunch of 2x4s, the window guy, the sheet metal fabricator, the insulation man, the guy who put up the drywall, the painter, the cabinet maker, the roofer, the appliance installer, the trim carpenter, the carpet layer, the tile layer, the door maker, the locksmith, the landscaper, and now we have an empty house. 


Enter a person who was going to have to pay $15,000 in federal taxes for 2009.  However she decides she will put that $15,000 in her own pocket by taking advantage of the tax credit and becomes a homebuyer.


Of course there are a few more folks still needed in order for the homebuyer to reach a point of closing and moving into the house.  There is the builder's sales representative, his title insurer, title examiner, his escrow officer, the homebuyer's broker, her loan officer, loan processor, loan underwriter, appraiser, insurance agent, yet another surveyor, and another lawyer who prepares another deed from the builder to homebuyer.  Now the homebuyer can close and move into her new home.  She'll need to rent a truck from a guy or hire a mover now too.  By the way, it's possible she might go shopping for things to put in her new home from the local furniture store.  For that matter, it's also possible that if enough people became homebuyers the contractor and tradesmen might have to buy another truck or two.


How many people would have benefited from the larger tax credit?  The reality of our short-sighted congress is that this homebuyer will have to waste her $15,000 by having to throw it in the big, black hole also known as the U. S. Treasury to shore up someone else's  bad debt.  Congress must not realize that all the people I've listed above pay taxes on the income they receive that is associated with this one home purchase.  They never pay tax on a home they don't build or sell.  Is there any chance Harry, Nancy, and Barney might want give this another "look- see"?


Do you really think Robert Shiller is the foremost expert on our housing market-especially the one I live in?  Does this doomsday character really serve us and our economy well?  Do his forecasts inspire confidence or do they serve as horrible self-fulfilling prophecies?  Let's say I was somehow able to convince you there existed in just one human being, the world's foremost expert on the value of gold bullion.  Now let's say this foremost expert told the entire world, "Tomorrow the value of gold was going to be much less than it is today".  How much gold would you buy today?  I am very grateful for those who do not see Mr. Shiller as you do.


Do you think inspiring confidence in times like these is important?  Imagine Eli Manning being behind a few points in the second quarter of a game and going into his huddle and saying, "Boy, things really suck out there and you guys all suck too. And by the way, it's only going to get worse and you're going to get more hurt as the game goes on".  If you're one of the guys in the huddle, how do you think you'd react?  But wait, there's a huddle nearly every play so you get to hear this more than once.  You think you might feel a little crappy after awhile?  Well, bingo Mr. MSN!  That's how Americans feel when our experts keep telling us how much we suck!  We get to hear it every month on the last Tuesday at 9:00 AM Eastern.


I don't think I am any sort of expert on the economy-I just know things work out best when I spend less than I make.  These days that is tough to do.  So Mr. MSN Guy, if you made it to this last paragraph, thanks for reading.  We will endure, we will survive, and we will be better for having been through this.  One last question though.  Do you think you and your pals might in some way also be tied to the United States of America's housing market?


Please pardon the typos.




Joe E. Gilmore




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