Friday, October 05, 2012

New Carpe Diem Site

For new posts please visit Carpe Diem's new home at The American Enterprise Institute.

Thursday, September 20, 2012

Major CD Announcement

Dear Carpe Diem Regulars

Over the next several days, there will be some major changes taking place for the Carpe Diem blog. After six years, almost 10,000 posts, and more than 8 million visits and almost 12 million page views using the Blogger platform, Carpe Diem will become a WordPress blog at a new website. 

Starting within the next few days, Carpe Diem will be exclusively hosted by The American Enterprise Institutes's new AEIdeas website, which also features Jimmy Pethokoukis's blog as well as other AEI blog "channels" by topic (Economics, Foreign and Defense Policy, Politics and Public Opinion and Society and Culture). Many of the AEI scholars and fellows now regularly blog in the topic areas of the AEIdeas blog including Charles Murray, Andrew Biggs, Marc Thiessen, Michael Auslin, Mackenzie Eaglen, Dani Pletka, Nick Schulz, Karlyn Bowman, Alex Pollock, Ken Green and Arthur Brooks, among others.  

Here’s how the relocation of Carpe Diem will affect you: 

1. If you have the current Carpe Diem website bookmarked, you’ll be automatically re-directed to the new website and you won’t need to do anything.  (Here's a direct link to the new Carpe Diem website.)

2. If you subscribe to the daily email updates of Carpe Diem posts, you should still receive those emails with a summary of posts over the last 24 hours from the new AEIdeas website. 

3. If you regularly (or occasionally) leave comments on Carpe Diem, you can still easily make comments at the new AEI website, by providing a name and email address (the email address won’t be published). The comments at the AEIdeas website are moderated before appearing on the AEI website, and I’ll do my best to help with the moderation process to be sure your comments appear as quickly as possible. 

4. All of the 9,000 posts in the Carpe Diem archives have been moved to the new AEIdeas website, so they will still be available and searchable by key word.   

5. If you follow Carpe Diem by RSS feed, here's the link to the new Carpe Diem RSS feed

Thanks for your loyal readership and I hope you continue to follow Carpe Diem at its new home!

National Home Sales Snapshot from DQ News

Click to enlarge.
Today's "National Home Sales Snapshot" from DQ News is displayed above, which has been updated with U.S. home sales during the last 30 days in 98 of the top 100 MSAs (excludes Louisville and Wichita), and covers about two-thirds of all U.S. home sales.  Compared to the same period last year, home sales over the last 30 days have increased by 9.8%, following previous increases in September of 11.3% (last week) and 10.3% (first week of the month).  

The median home sales price increased nationally by 7.8% above a year ago in the most recent 30-days sales period, which is the highest year-over-year increase during the last six weeks of data displayed above, and reflects a pattern of gradually increasing median home price increases (from 5.3% in mid-August), even though the median price has remained flat at about $200,000.  

Quotation of the Day: The Fallacy of Redistribution

From Thomas Sowell's column today (emphasis mine):
The history of the 20th century is full of examples of countries that set out to redistribute wealth and ended up redistributing poverty. The communist nations were a classic example, but by no means the only example.

In theory, confiscating the wealth of the more successful people ought to make the rest of the society more prosperous. But when the Soviet Union confiscated the wealth of successful farmers, food became scarce. As many people died of starvation under Stalin in the 1930s as died in Hitler's Holocaust in the 1940s.

How can that be? It is not complicated. You can only confiscate the wealth that exists at a given moment. You cannot confiscate future wealth -- and that future wealth is less likely to be produced when people see that it is going to be confiscated. Farmers in the Soviet Union cut back on how much time and effort they invested in growing their crops, when they realized that the government was going to take a big part of the harvest. They slaughtered and ate young farm animals that they would normally keep tending and feeding while raising them to maturity.

We have all heard the old saying that giving a man a fish feeds him only for a day, while teaching him to fish feeds him for a lifetime. Redistributionists give him a fish and leave him dependent on the government for more fish in the future.

If the redistributionists were serious, what they would want to distribute is the ability to fish, or to be productive in other ways. Knowledge is one of the few things that can be distributed to people without reducing the amount held by others.  That would better serve the interests of the poor, but it would not serve the interests of politicians who want to exercise power, and to get the votes of people who are dependent on them.

Wednesday, September 19, 2012

Wednesday Afternoon Links

1. Markets in everything: WiFi enabled, multi-color, energy efficient LED light bulb that you control with your iPhone.

2. "Patchwriting" is more common than plagiarism, and just as dishonest.  I guess that's what happened to me, see recent CD post

3. Almost half (46.3%) of Irish residents buy private health insurance, despite "free" national health insurance.

4. Thanks to the commodity boom, 2012 graduates from the South Dakota School of Mines make more on average than Harvard grads, $56.7k vs. $54.1k.

5. New website archives every TV news program since 2009, and it’s now online and searchable for free.

6. Russia has vast new diamond field containing "trillions of carats," enough to supply global markets for next 3,000 years.

7. Airlines add service in North Dakota's oil patch:  Delta to add two daily Minneapolis-Williston flights, United to add three flights from Denver to Williston.  

The Year of the "Plow Horse Housing Recovery"

Some key reports today on architecture billings, existing home sales, and new residential construction provide additional evidence that a U.S. housing recovery is underway:

1. Reuters --  "A leading indicator of U.S. construction activity rose last month to its best level in five months, indicating that demand for design services is expanding, an architects' trade group said on Wednesday. The Architecture Billings Index (ABI) rose 1.5 points to a reading of 50.2 in August, according to the American Institute of Architects. Any reading above 50 indicates an increase in demand for architects' services. The ABI is considered a predictor of U.S. construction activity nine to 12 months ahead.  A separate measure of inquiries for new projects rose 0.9 points to 57.2, the group said."

MP: Both the Billing Index (ABI) and the New Projects Inquiry Index have risen in each of the last three months, and the ABI was at the highest level last month since March, while the inquiry index in August was the highest in six months.

2. Existing U.S. home sales surged in August by 7.8% over July, marking the highest monthly increase in home sales in a year, according to today's National Realtors Association (NAR) report.  Compared to last August, home sales this year were 9.3% higher, and last month's increase was the 14th consecutive year-over-year increase in home sales.  The median home sales price in August was $187,400, a slight decrease from July's median price of $187,800, but above last August's median price of $171,200 by 9.5%.  According to the NAR, "The last time there were six back-to-back monthly price increases from a year earlier was from December 2005 to May 2006. The August increase was the strongest since January 2006 when the median price rose 10.2 percent from a year earlier."

Other positive signs from today's report include: a) a reduction in the share of distressed sales in August this year (22%) compared to last year (31%), b) a reduction in the median marketing time from 92 days in August 2011 to 70 days last month (almost one-third of homes sold in August were on the market for less than a month), and c) a drop to only a 6.1 month supply of homes in August at the current sales pace, which except for a 6.0 month supply in January is the lowest inventory level of existing homes for sale since April of 2006. 

3. Associated Press -- "U.S. builders started work on more homes in August, driven by the fastest pace of single-family home construction in more than two years. The increase points to steady progress in the housing recovery. 

The Commerce Department said Wednesday that construction of homes and apartments rose 2.3 percent to a seasonally adjusted annual rate of 750,000 last month. That's up from 733,000 in July, which was revised lower from last month's initial estimate. Single-family housing starts rose 5.5 percent to an annual rate of 535,000 homes, the best pace since April 2010."

MP: Single-family home starts last month were the highest for the month of August since 2008, and were 27% above last year, marking the largest year-over-year increase since April 2010.  Further, the number building permits issued in August was 24.5% above permits in the same month last year.  In both July and August, building permits were above 800,000 in each month, and it's been four years since there has been more than 1.6 million permits issued in a two-month period.    

Bottom Line: The evidence continues to accumulate pointing to a gradual, but steady housing recovery that is underway in the U.S.  As with any economic or housing recovery, it can be expected that the improvements in the U.S. housing market will be somewhat choppy at times.  But the fact that most of the main housing indicators (existing-home sales, new home sales, pending sales, housing prices, asking prices, home affordability, etc.) are showing gradual, but consistently positive signs of improvement would support the growing consensus that a sustainable housing recovery is underway.  

Brian Wesbury et al. at First Trust have described the slowly improving U.S. economy as the "plow horse economy," which keeps moving gradually forward despite the pessimistic media reports of "gloom and doom."  Perhaps it would also be appropriate to describe the ongoing recovery in the U.S. real estate market as the "plow horse housing recovery" - which keeps making gradual, but steady improvements month after month.     

Tuesday, September 18, 2012

Year of the Recovery: August Home Sales Boom

1.  Wisconsin home sales increased 20.3% in August, median sales price by 2.9%.

2. Kalamazoo MI housing market shows highest sales volume since 2007, August home sales were up 14%, average sales price by 7.5%.

3. Louisville area home sales up 26% in August over last year, median sales price by 3.7%.

4. Chicago-area home sales increased 26.5% in August above last year, and were the highest August sales total since 2007.  

Builder Confidence Index Rises in September to 6-Yr. High, With Largest 12-Month Gain in History

From today’s report from the National Association of Home Builders:
September 18, 2012 – Builder confidence in the market for newly built, single-family homes rose for a fifth consecutive month in September to a level of 40 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).  This latest three-point gain brings the index to its highest reading since June of 2006 (see chart above).

“This fifth consecutive month of improvement in builder confidence provides further assurance that the housing market is moving in a positive direction, but there’s still a long way to go on the road to recovery and several obstacles are slowing our progress,” said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. “In particular, unnecessarily tight credit conditions are preventing many builders from putting crews back to work – which would create needed jobs — and discouraging consumers from pursuing a new-home purchase.”

“Builders across the country are expressing a more positive outlook on current sales conditions, future sales prospects and the amount of consumer traffic they are seeing through model homes than they have in more than five years,” noted NAHB Chief Economist David Crowe. “However, against the improving demand for new homes, concerns are now rising about the lack of building lots in certain markets and the rising cost of building materials. Given the fragile nature of the housing and economic recovery, these are significant red flags.”
MP: The increase in the builder confidence index in September to a six-year high of 40 is a remarkable recovery from a reading of only 14 a year ago.  The 24-point improvement in builder confidence over the last year is the largest 12-month gain in the history of the HMI going back to 1985, and surpasses the previous record of a 24-point annual gain in early 1992.

Fire: Environmentalist's Way to Thin the Forests

From Terry Anderson's editorial in today's WSJ "Environmental Protection Up in Smoke": 
Environmental laws since the 1970s require public input into federal land-use decisions including logging on national forests. This has led to lawsuits challenging efforts by the U.S. Forest Service to prevent forest fires by thinning out trees (most of which are dead or diseased) and brush by machines and carefully controlled burns. This dead wood is the fuel that feeds catastrophic wildfires. 

Removing the fuel reduces the likelihood of fires, and if fires do break out, makes them easier to fight. Meanwhile, the suppression of fires costs the federal government nearly $2.5 billion annually. 

A fuels-management project to log and thin 4,800 acres in the Bozeman, Mont., watershed exemplifies the problem. This project has been held up since 2010 on grounds that the environmental-impact assessment did not adequately protect the habitat of the Canadian lynx and the grizzly bear, both listed as threatened species. 

Now a wildfire threatens the watershed, burning over 10,000 acres and costing more than $2 million to fight. As one firefighter put it, "fire is the environmentalist's way of thinning the forests."

Monday, September 17, 2012

Top 10 Most Expensive College Football Tix 2012

From CNBC, based on tickets being sold in the secondary market on StubHub, Ticket Network, eBay, etc. and aggregated by TiqIQ.

Housing Affordability is Historically Very High

A recent analysis by Trulia concluded that buying a home today is 45% cheaper on average compared to renting a comparable home, see CD post here. That post generated a lively discussion with about 100 comments, and some questioned some of Trulia's assumptions and analysis (or lack of some key assumptions), although I think the general conclusion is valid that buying a home is relatively affordable today compared to renting a similar home -whether it's 10%, 20%, 30% or 45% cheaper.

Another measure of housing affordability is to compare the median household income in the U.S. (or regions) to the qualifying income needed to purchase a median-priced home, and that analysis is reported monthly by the National Association of Realtors based on its Housing Affordability Index (HAI), see chart above.  

In July, the Housing Affordability Index increased to 182.0 from 179.7 in June, but is down from historical highs for the HAI above 200 in the first three months of 2012.  Looking back over the last thirty years, the July HAI of 182 is still very high by historical standards (see chart).

An HAI of 182.0 means that the typical American household earning the median annual family income of $61,080 in July would actually have 182% of the standard qualifying income level of $33,552 required to purchase a median-priced existing single-family house ($181,000) with a 20% down payment, financing the remaining 80% of the sales price with a 30-year fixed rate mortgage at the July average of 3.78% (monthly payment of $699 for principal and interest).  For the Midwest region of the country, the HAI in July of 219 means that the typical Midwest household income of $60,657 is more than twice the qualifying income ($27,696) necessary to purchase the median price home at $155,400.  
Bottom Line: Whether comparing buying to renting a home, or comparing the median household income to the qualifying income necessary to purchase a home, homeownerhip today is extremely affordable.  And that historically high affordability is one of the factors that will continue to support the housing recovery taking hold across the country right now.  

2012: The Year of the Housing Recovery, Update

DataQuick -- "An estimated 41,280 new and resale houses and condos sold in California last month, making it the strongest August since 2006. Last month's sales total was up 4.5% from 39,507 in July, and up 9.4% from 37,734 sales in August 2011."

"The median price paid for a home in California last month was $281,000, the same as the month before and up 12.9% from $249,000 in August 2011. The July and August median was the highest since September 2008, when it was $283,000. August marked the sixth consecutive month in which the state's median sale price rose year-over-year." 

"Of the existing homes sold in August, 20% were properties that had been foreclosed on during the past year. That was down from a revised 21.7% in July and down from 34.3% a year earlier. Last month's figure was the lowest for any month since foreclosure resales made up 18.3% of the resale market in November 2007."

MP: Isn't this exactly what a housing recovery looks like? 

California home sales were the highest in six years for the month of August and up almost 10% from a year ago, the median sales price was the highest in almost four years and up almost 13% from last year, median prices have increased year-over-year for the last six months, and the share of foreclosure sales in August was the lowest in almost five years.  

If this isn't a real housing recovery in California, how would a real recovery be different?    

Classic 1978 Milton Friedman Lecture on Trade

In the above 1978 lecture at Kansas State University, Milton Friedman discusses free trade, and explains why trade protection and interference in international trade are so widespread, despite the almost universal condemnation of such measures by the economics profession.

Professor Friedman also addresses the political obsessions with: a) increasing exports (e.g. President Obama’s goal to double exports by 2015) and b) achieving a “favorable balance of trade.” 

Here’s a quote from Friedman’s lecture, demonstrating the timeless nature of his economic wisdom, which is as relevant today as it was in 1978:
In the international trade area, the language is almost always about how we must export, and what’s really good is an industry that produces exports. And if we buy from abroad and import, that’s bad. But surely that’s upside-down. What we send abroad we can’t eat, we can’t wear, we can’t use for our houses. The goods and services we send abroad, are goods and services not available to us. On the other hand, the goods and services we import, they provide us with TV sets we can watch, automobiles we can drive, with all sorts of nice things for us to use. The gain from foreign trade is what we import. What we export is the cost of getting those imports. And the proper objective for a nation as Adam Smith put it, is to arrange things, so we get as large a volume of imports as possible, for as small a volume of exports as possible. 

This carries over to the terminology we use. When people talk about a favorable balance of trade, what is that term taken to mean? It’s taken to mean that we export more than we import. But from the point of view of our well-being, that’s an unfavorable balance. That means we’re sending out more goods and getting fewer in. Each of you in your private household would know better than that. You don’t regard it as a favorable balance when you have to send out more goods to get less coming in. It’s favorable when you can get more by sending out less.
MP: Here’s a formula summarizing Milton Friedman’s insights:

1. The stuff we import


2. The stuff we export =

3. Our standard of living

In other words, in economic terms, our standard of living is highest when we maximize imports and minimize exports, which is exactly the opposite of the political thinking and policies, which generally seek to maximize exports and minimize imports.

Occupational Licensing Gone Wild

From the Bloomberg article "Why Is It So Hard to Become a Cosmetologist in America?"

"The average cosmetologist in the U.S. trains for 372 days before earning a license. The average emergency medical technician spends 33 days in training. From this, one might conclude that Americans are obsessed with primping but tragically unprepared for emergencies."

"Actually, the disparity merely confirms what a muddle the process of occupational licensing is. In 1952, fewer than 5 percent of U.S. workers required a state license. By 2006, according to a survey that year by the Gallup Organization, 29 percent of workers said they needed a government-issued license to do their job."

"A study released in May by the libertarian Institute for Justice makes a compelling case that occupational licensing requirements in many states have run amok. Some licensees, including EMTs, have life-or-death responsibility. Others handle hazardous chemicals. Too many, however, are in occupations for which a natural inclination and a short apprenticeship should provide more than sufficient preparation. Why, for example, do florists, funeral attendants or shampooers need a license to work?"

Read more here

Quotation of the Day: A Duty Is a TAX on Imports

From Don Boudreaux's open letter to Mitt Romney:

Your wish to “label China a currency manipulator” means that you seek a pretext to impose (as your website says) “countervailing duties” on imports from China – which is to say, you seek a pretext for raising taxes on Americans who buy goods and services from China. Yet in other episodes of your campaign you promise (as you did here* last month) “I will not raise taxes on the American people. I will not raise taxes on middle-income Americans.” 

If you keep your promise to impose countervailing duties on imports from China you will thereby break your promise to not raise taxes on the American people. (Americans who buy imports from China are, after all, American people.) But if you keep your promise to not raise taxes on the American people, you must – as I hope you will – break your promise to punitively tax those many Americans who buy imports from China.  

MP: It's a simple, but often neglected point that a tariff or duty on imports is just another word for a sales-type tax on imported goods, and those tariffs/taxes/duties are not imposed on China or other U.S. trade partners, they are imposed on, and paid for by, Americans (consumers and businesses) who purchase foreign-produced goods.   

Sunday, September 16, 2012

Grisly Drug War Fact of the Day

"The American news media continues to report the body count in Mexico’s “War on Drugs” at more than 50,000 dead. But Molly Molloy, a researcher at New Mexico State University, tallies more than 100,000 Mexicans killed to wage a war financed and mandated by American authorities and led by Mexican president Felipe Calderón."

From the article "Mexicans Pay in Blood for America's War on Drugs."  

Note: That would be a casualty count that approaches the U.S. body count during WWI (116,500 deaths) and more than the combined American casualties during the Korean War (36,500 deaths) and the Vietnam War (58,000 deaths).