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A solution to housing market oversupply and social security outlays.

bugs_'s picture




 

More housing defaults will occur and the number of homes on the federal government's "asset list" will only increase.  The federal government and it's GSEs have citiloads of houses that they cannot get rid of.  Most are worthless.  What is more worthless than a run-down unmaintained home that is unloved?

The answer to this question is the expected value of your social security pension!  Everyone expects THE ponzi scheme to end, to be cut, or to be means tested.  Trick after trick has been used to extend its life but now the federal government is in the baby boomer phase where the lines get longer, the payouts grow, and the need for solutions much more immediate.

It seems that the federal government is faced with two crises that cannot be solved, however, might we be able to create a unique solution to both crises?

Lets say you are in the market for a home.  You are not in a favored class and you cannot obtain financing from the taxpayer supported TBTF GSE banks. You are an older American who has been paying into SSC for a long time.

Suppose you head down to your Trusty Resolution Coop.  The friendly clerk (former TSA) presses a button on his GOVphone and the net present value of your social security payout appears on the LCD desk surface.

You look down at the desk and think wow that much?  The former TSA agent hits another key on his GOVpad and a list of government held homes appear.  Their values all appear to be roughly similar to the net present value of your social security stipend.

While the value of these homes is quite inflated remember that because of ZIRP the net present value of your social security payout is also hugely inflated!

He hands you a USBless sphere and suggests you take your time selecting one. So many states, so many cities, so many neighborhoods.  You leave and decide to do some serious googling.  You can go anywhere.

You pick a house and take it in lieu of your social security stipend.  The federal government has one less house to get rid of and one less check to cut every month in your old age.

A worthless government owned house has just been exchanged for a worthless government supplied pension.  Is this not the perfect match?  You now have a fixer upper real asset instead of a broken down paper promise.

The icing on the cake is that we can give TSA agents something else to do with their hands!

Thanks ZeroHedge
Mark Hittinger
bugs_

 

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Sat, 09/24/2011 - 09:34 | 1704922 Setarcos
Setarcos's picture

Can I nominate this as "VERY SILLY IDEA OF THE YEAR"?

Aside from bubble times, when a house can be a kinda ATM machine to get more credit from, houses are more of a liabilty than an asset ... somewhat like cars in that they require a lot of maintenance, tax payments, insurance and so forth.

OK if you are young and/or remain fit enough to DIY (like I used to be), but an increasing burden later in life ... a drain on finances.

I once resented a wife who stripped me of a house I/we owned outright, but no more.  At 68 (and subsequent to three lots of cancer) I would no longer be able to afford to keep the place on a pension.

In "bugs" "MOST STUPID IDEA OF THE YEAR" - OK I have upped the ante - I would now have zero income to maintain a house, or even feed myself.

Long-term my ex did me a favour, because I now rent a secure one bedroom unit, only pay for utilities and I have no debt whatsoever (I preserved my share of the settlement in cash).

Last I heard: my ex is floundering and has lost the house anyway ... could not afford the upkeep.

Real world anyone?  At least 90% of people, even in ZH (sic), are not amongst the mega-rich who can afford the liability of "owning a house".

Think on it.

Sat, 09/24/2011 - 10:50 | 1705006 Setarcos
Setarcos's picture

BTW my pic is of a Velocette Venom Thruxton which I once owned during my foolish younger days (not that particular 'bike, but one of only about one hundred produced).

As a production (street legal) racing motorcycle it was good for nearly 120 mph ... not bad for a 500cc single, for which I paid about $600 and sold for about $300 back in the 1960s.

Had I been less foolish I would have kept it ... today I would get around $40,000.

Strange world we live in when a motorcycle performs better than gold as an investment ... or is it?

I am a fitter/turner/toolmaker by trade and so I know the skills which go into the actual production of anything tangible and I know how little skill goes into the production of gold ... a nearly useless metal.

The key words are "value added", or what Marx called "congealed labour" ... far more of which went into a Velocette than gold production.

 

Sat, 09/24/2011 - 11:28 | 1705098 snowball777
snowball777's picture

You have to look at what was sacrificed elsewhere to enable some poser to bid the 40k.

It's a beautiful cafe putt...at least you used it for what the makers had intended instead of putting it under glass like a dying rose.

 

Sat, 09/24/2011 - 08:32 | 1704826 Smithovsky
Smithovsky's picture

We have too many old people and not enough money to pay them.  We can't do anything about the latter.  Anyone see where I'm going with this?  

 

sorry, very bad joke, but I couldn't resist

Sat, 09/24/2011 - 07:49 | 1704757 papaswamp
papaswamp's picture

Bulldozer does wonders. Doze the homes down. Drops the supply...

Sat, 09/24/2011 - 08:42 | 1704841 Paul E. Math
Paul E. Math's picture

Bastiat's broken window fallacy writ large.

These homes are worth a lot less than claimed on the books but they are not worth 0.

There are many people who have refused to overpay for a house and it is pathetic that you would rather bulldoze those homes than see one of your friends or family buy it for fair value.

Bulldozing homes is an act of pure spite and stupidity. 

Paul

Sat, 09/24/2011 - 10:55 | 1705046 snowball777
snowball777's picture

As a glazier, I take offense. ;)

Sat, 09/24/2011 - 10:22 | 1704999 Pool Shark
Pool Shark's picture

 

 

"Bulldozing homes is an act of pure spite and stupidity."

Not if it substantially reduces the costs of providing public services to blighted neighborhoods (i.e., "throwing good money after bad").

See Detroit...

Sat, 09/24/2011 - 06:34 | 1704689 BandGap
BandGap's picture

This idea has been floated before.  I would take a chunk of land of my choosing in lieu of a home and ask not to be taxed on my income anymore, federal tax or FICA. If I am not going to draw, I am not going to pay.

The arrangement should take into account the amount paid to SSI - I am topped out, I want the best deal being offered.

The federal governement was the largest holder of open lands in the US before the housing debacle.  I'll take 80-100 acres in Wisconsin (except near the Mississippi).  Then leave me alone.

Thank you very much.

Sat, 09/24/2011 - 06:17 | 1704678 Moe Howard
Moe Howard's picture

No hope.

They will bulldoze those houses because it is easier and cheaper. They are not paying out social security anyway, so why would they make a deal? They hold all the cards, the indivdual, none.

I got an email this morning with more of this pipe dreaming. Supposedly an 80 year old man wrote to the paper in FLA and suggested they give a million dollars to each of the over 50 workers [claim is there are 40 million of them in the work force] with the requirement they 1. buy a house 2. buy a car 3. leave the job market.

The claim is that it will fix the housing market, the job market, the car market.

I have a better plan, free pussy, beer, drugs and viagra to those who need it. That will fix the unemployed women problem, the consumer problem, the war on drugs problem, and the erection problem. And the unemployed male problem, because they won't care. That is all they are working for anyway.

Sat, 09/24/2011 - 05:39 | 1704660 mrdenis
mrdenis's picture

A much better way to help housing would be to let homeowners deprecate there primary residence on their tax return much the same way a RE investor does ...say a 20 or 30 year ...this would work wonders for the housing market

Sat, 09/24/2011 - 04:36 | 1704639 Lord Koos
Lord Koos's picture

So, assuming these people are too old to hold much of a job, if any -- they get a house and then have nothing coming in for food, medical expenses, etc.

Sat, 09/24/2011 - 00:13 | 1704448 Peter Pan
Peter Pan's picture

This proposal is half baked and dead on arrival, although the writer is earnestly looking for a solution.

If you are looking for funds with which to pay pensions, it would be better to get the banks to hand over the money they pay as bonuses in exchange for the toxic shit they created. The toxic assets will then be given as bonuses to Wall St boys and pensioners get the cash.

Fri, 09/23/2011 - 21:56 | 1704229 dolly madison
dolly madison's picture

I like the idea, for anyone who wanted to make that trade with the government.

I also want to add that not every house gets ruined by vacancy.  It depends on the climate.  The house I live in now had been vacant for 10 years. The reason it was okay after all those years is that the climate here is very dry.

Sat, 09/24/2011 - 09:36 | 1704927 Translational Lift
Translational Lift's picture

"The house I live in now"

= The house:

I bought

I rent

I squat in??

Fri, 09/23/2011 - 21:41 | 1704205 zorba THE GREEK
zorba THE GREEK's picture

Most repossessed houses that the gov owns are in very poor condition. Appliances have been removed,

copper plumbing stripped, water damaged, full of black mold. Most would have to be torn down or at least

gutted and rebuilt from a shell. Many still have people living in them as they have nowhere else to live. 

Evicting previous owners would cause a problem for shelters and local communities with increases in

homeless people. Property values in many neighborhoods are still declining due to the presence of

empty foreclosed homes. It would be nice to think that such an idea could work but alas it is only

a pipe dream and not at all practical. I do like the idea of giving run-down homes to unemployed

vets for them to fix up and sell or live in. At least they deserve a break and would give them something

to do until the job market improved.

Sat, 09/24/2011 - 08:46 | 1704847 Paul E. Math
Paul E. Math's picture

Here's a novel idea: sell the homes on the open market for whatever price you can get.

Let the housing bubble crash - it was nothing but an unsustainable ponzi scheme in the first place.

Any time, material, resources spent now to preserve this ponzi is just good money thrown after bad.

When will we wake the fuck up?

Paul

Sat, 09/24/2011 - 09:32 | 1704919 Translational Lift
Translational Lift's picture

BINGO!!!  +$54TT

Sat, 09/24/2011 - 13:53 | 1705530 boiltherich
boiltherich's picture

I have advocated this since I first came to ZH, I would not only require the banks to sell, I would require them to sell within 6 months of the foreclosure, provided the foreclosure was not facing a legal challenge in court.  No matter the bids received, they would have to take the highest bid they can get within a two week window of marketing the place, this BS of having to sell on the courthouse steps is SOoo 1775, I say there should be a foreclosure court, similar to small claims court where lawyers are not permitted to represent either side and there is no appeal, the judges order is final, nearly all of the time a foreclosure would be uncontested because the homeowner knows they did not pay and the bank was not at fault, so this would not become a new bureaucracy, but once you are 90days behind for any reason your mortgage goes into deep freeze for say 6 months as a grace period for you to catch up, if you do it is like an automatic workout agreement that tacks all arrears to the end of your mortgage and your credit is not damaged by it, but if you do not get caught up in that half year you are by law forced to vacate the premises.  Then the bank has shall we say 90 days to accept bids and they must take the highest offer. 

Of course there are always going to be flaws in any system we can devise, an ex of mine was very VERY wealthy because his father was president of a bank during the depression, he had been just rich but the depression gave him the ability to first deny needed credit to land owners, then to foreclose upon them, buying their property for mere pennies on the dollar when the land was sold.  He went from as I said merely rich to incredibly wealthy.  He emerged from the depression as one of the largest industrialists in the western US at that time. 

My house is in foreclosure, has been since the bank mislead me not once but twice as to their intentions.  A year and a half since I moved out and it is in permanent limbo.  So is my credit, I can't rebuild as long as they hold the place.  Did I make a mistake by trusting the bank?  Believing they had to by law honor their commitments?  OK, maybe so, but I am no criminal and what is going on here is a punishment for imaginary crimes.  The worst part of it is that we are led all our lives to believe that we have rights, guess what sukka, the banks and government say "I got your rights, right here," as they grab their crotch with one hand and flip you the bird with the other. 

Sat, 09/24/2011 - 01:51 | 1704552 boiltherich
boiltherich's picture

100% disabled vet here, you could start with giving me my old house back that the bank fucked me out of, but I would not live in it, I would rent it out to some elderly type that needs a break on the rent, but the neighborhood has gone so far down hill I do not even like to drive over there to see if it is still standing. 

Fri, 09/23/2011 - 21:24 | 1704182 boiltherich
boiltherich's picture

What would have merit is an exchange, instead of allowing new (energy efficient) home molder into the ground unused till they have to be bulldozed and then building low income housing for welfare/elderly, why not bulldoze the substandard housing first and place those people into newer houses? 

Oh, good people don't want trashy poor people in their sphere of vision, with their roach infestations, their lack of class and priorities, hell, they probably have tats and biker buddies with no mufflers on their hogs as well. 

So, I can't say I blame you, all too often you can take the okie out of the trailer but you can't take the trailer out of the okie. 

Still, allowing, no forcing the markets to re price to a real market value would solve that, it would mean the worst and most substandard housing would be what was left over when all households were formed that could be, people would buy as much as they can afford and I see a lot of really nice foreclosures that have to be better than living in some aluminum box in a bad area. 

But you all seem like nice people, mostly anyway, so please do not hold your breath because you will die before they fix this mess, in fact you might just die of old age before anything is fixed.

Fri, 09/23/2011 - 18:27 | 1703753 nmewn
nmewn's picture

I likey ;-)

Fri, 09/23/2011 - 13:15 | 1702043 AdahPrice
AdahPrice's picture

How about this plan?  If you work for Wall Street, then, at year's end, instead of getting a cash bonus, you get a McMansion bonus.  Your Wall Street firm gives you one of the empty McMansions it owns.  In fact, EVERYONE working for Wall Street gets one, even the janitors.  Wall Street helping Wall Street.  Almost like, neighbors helping neighbors, or something.

Fri, 09/23/2011 - 13:11 | 1702020 keating
keating's picture

I think the idea has merit, but I have always held that all foreclosed houses should either be sold at absolute auction within two weeks of vacancy, rented out triple net to the highest bidder, or donated to charity. Nothing is worse that letting a good house go vacant for a few months.

SS checks are a bit different. As long as there are working printing presses, there will be ss checks. Until there is hyperinflation, those checks are what old folks live on. I would never advise an elderly person to swap liquid cash for an asset that is hard to sell. I would be willing to offer a rental to them in one of these foreclosed houses, triple net, as a cheap place to stay after they sell their own home.

 

The other options which one might consider are co-op ownership, where a parent and their kids own a property jointly, with some combination of life tenancy, shared equity mortgage, or equity modification by investing in upkeep. This would take a house otherwise worthless after foreclosure, provide some investment from kids to parents, as well as ongoing cash flow, and the kds get the remainder when grandma dies.

 

Lastly, where I live, you can have 3 boarders. It might be possible to have such an arrangement as a co-op, where someone can be voted out if they are  a jerk, and four elderly folks can share a kitchen and a few hours of VNA every day. I think this happens more in UK but it could work here.

 

Fri, 09/23/2011 - 12:38 | 1701789 Cpl Hicks
Cpl Hicks's picture

Why do I want a second home?

I can't live in it.

I can't maintain it, much less bring it up to code.

I can't rent it.

I can't sell it.

Fri, 09/23/2011 - 12:41 | 1701788 blueRidgeBoy
blueRidgeBoy's picture

seniors are one of the largest defaulting groups.  Look, you're 89, your years are numbered, you need to move to assisted living, your home is in disrepair.  What do you do?  Pay to fix up the place so you can then sell it at a loss in a depressed market?  No.  You walk away - who cares about your credit record?  You won't likely live 7 more years anyway.  A lot of seniors are doing this math.  And they keep their SS checks.

Fri, 09/23/2011 - 12:29 | 1701742 Blue Water
Blue Water's picture

How about doing this for new college grads, with their future social security contributions going to pay for the cost of the house, up to the amount of the purchase, with interest credited to them at some long term treasury rate?

Fri, 09/23/2011 - 12:21 | 1701688 Piranhanoia
Piranhanoia's picture

I am trying to figure out what the author's sentiments are with the redistribution of that which is neither his nor the governments.  Are you a communist or a fascist?

Fri, 09/23/2011 - 13:32 | 1702201 bugs_
bugs_'s picture

Having the government own all the homes (and possibly rent them) is certainly communistic.

Having everyone dependent on their government check is fascistic (imho).

This is privatization.  This is taxpayer debt elimination.  This is dependency reducing.

For some it would mean personal freedom and peace of mind.  For those that decide to stay with their check it would mean the government would have an easier time paying the reduced outlays.

Fri, 09/23/2011 - 12:21 | 1701683 g speed
g speed's picture

better ask the termites--I think they have first dibs.

Fri, 09/23/2011 - 12:24 | 1701711 g speed
g speed's picture

After outlawing Clordain on the insistance of the rid a bug industry the houses made of sticks are good for three years max-- then the termites and wood ants move in.   the gov't --clueless as usual.

Fri, 09/23/2011 - 13:19 | 1702061 Boxed Merlot
Boxed Merlot's picture

Fipronil has taken over where Clordain left off.  Awesome stuff, especially for colonizing pests. 

By the way, many homes being constructed just before the final hurrah come with built in pesticide treatment manifolds that allow for pesticide applications directly into the interior of the wall cavities throughout the home. 

Pretty neat trick but I'm sure our nanny state will eventually come to our rescue and put a stop to this practice as well.

Fri, 09/23/2011 - 12:14 | 1701648 Are you kidding
Are you kidding's picture

Why not just have the government rent them out and use the money to pay SS?

Fri, 09/23/2011 - 11:40 | 1701429 DosZap
DosZap's picture

 Most elderly folks need another house like a hole in the head.

The upkeep, and taxes alone would murder them, and cause 90% to lose them due to non payment of same.

Now, if the gov gave me the option now, today, yeah I would take it now.As long as I got a home valued at or very near what I paid in.

 

 

Sat, 09/24/2011 - 00:00 | 1704432 Cursive
Cursive's picture

Most elderly folks need another house like a hole in the head.

Exactly.  bugs_, this "solution" misses the point that we have oversupply.  There is not enough demand to meet the supply.  The bubble popped and there is no reflating it.  Only time and a move back to fiscal sanity will heal these wounds.

Fri, 09/23/2011 - 11:26 | 1701366 Boxed Merlot
Boxed Merlot's picture

A worthless government owned house has just been exchanged for a worthless government supplied pension.  Is this not the perfect match?  You now have a fixer upper real asset instead of a broken down paper promise...

 

Throw in a Home Depot gift card and we'd have the modern equivalent of 40 acres and a mule.

 

 

Fri, 09/23/2011 - 11:24 | 1701351 NEOSERF
NEOSERF's picture

Would be interesting if SSI offered you a lump sum now or your "expected" payments over the last 20 years of your life...talk about a run on a bank..

Fri, 09/23/2011 - 12:43 | 1701815 blueRidgeBoy
blueRidgeBoy's picture

where does the line form?  I'd opt out now if I could just keep my future "contributions"

Fri, 09/23/2011 - 11:15 | 1701278 lizzy36
lizzy36's picture

Bugs, nice contribution ;)

Fri, 09/23/2011 - 11:06 | 1701226 Ruth
Ruth's picture

If the house is free and clear can you get a reverse mortgage?  Most lenders don't even want to do reverse mtgs now.  Good idea bugs, but lenders and govt prefer moral hazard and collusion than common sense solutions, if you don't show how this in the short term blows out a balance sheet and passes gas to their large lobbied corporate mealticket, then this won't get off the ground.  Thank you for contributing to the convo and thinking outside the box.  Keep thinking!  Two for one, I give that one and probably a well liked idea to the masses.  And this assumes Medicare and Medicaid stays somewhat of a version of itself.

Fri, 09/23/2011 - 10:53 | 1701160 brokesville
brokesville's picture

great more section 8 dumps in your neighborhood coming soon

Fri, 09/23/2011 - 10:27 | 1701035 Sequitur
Sequitur's picture

Real estate will go supernova, destroying neighborhoods and balance sheets in the process. I warned people from 2003 to 2007 the prices people were paying were beyond stupid. I never purchased. They did. Now I'm sitting on a nice pile of cash and income-producing assets. They are bankrupt, most having filed for BK in 2009 and 2010.

If you're sitting in a house, listen to me close: dump it if you reside in a state with bubble pricing still baked in, like New York or California. Wait and see what happenes when homes fall to 2x annual income (mark my words, it's coming).

We are in a deflationary spiral. Credit/debt is being destroyed. Money becoming more valuable. Income-producing assets are king, debt is death in this environment.

Fri, 09/23/2011 - 21:10 | 1704162 boiltherich
boiltherich's picture

I did too Sequitur.  My best friend from childhood bought a 60 year old craftsman style house in Santa Rosa CA in 2001 on the edge of a good neighborhood, the other way was commercial and a main artery, loud, a block from a main fire station, a hospital with helicopters landing and taking off all hours.  His mother had given him like 86,000 for the down payment on a purchase price very near 400k, the place was tiny, no front yard, small back yard.  I held my tongue when I saw it but thought WOW, I know prices here are high but this is really absurd.

In 2005 I saw a property a little west of Eugene, quiet and woodsy with 14 acres and good water, a really cool house that was large and only  tad funky, very nice property, I did not have my credit in order or I would have snagged it, $189,900.  But, it had my friend's name written all over it, he used to love rural woodsy counties with open spaces and clean forests.  I told him about it, I said the market was peaking and that houses like Sonoma pricing was ridiculous, he could sell there and walk away with enough to buy the Eugene property outright.  Well nearly anyway. 

You never heard such indignation, he actually claimed I called his house crappy and not worth what he paid for it.  Which I did not comment on his particular house's merits, but I did say that nearly ALL real estate was way overpriced and set to fall almost any time now.  That was late 2005.  After 37 years of friendship he has not spoken to me since, and I believe part of it has to do with his first getting unfairly P.O.'ed at me for saying he overpaid, then being RIGHT about it as he found out a short while later.  His house will end up consuming his entire inheritance from his mother's estate.  Money he had planned to supplement his own income and later retirement.  Gone now, banksters ate his lunch.  And dinner.  Drank his coffee too. 

Sat, 09/24/2011 - 22:38 | 1706572 krispkritter
krispkritter's picture

What's the saying? "Pride goeth before the fall..." You tried, but it's not your place to save anyone but yourself.

Fri, 09/23/2011 - 11:02 | 1701201 snowball777
snowball777's picture

Damn straight; like matter/anti-matter annihilation. Like you I never bought the bubble and am circling like a happy vulture until the corpses arrive. My favorite RE phrase? 'just reduced'!

Fri, 09/23/2011 - 10:58 | 1701184 BanjoDoug
BanjoDoug's picture

13 years ago I transferred out of Calif (selling at the RE bottom) and came to Oklahoma.   I purchased, but not in a bubblearea, & not a McMansion, NTL, I expect my very nice 1600 sq ft home, on property, to drop in value, but the mort & payments are so low that I could pay it from a welfare check....  BTW my annual engineering salary exceeds the orig cost of my home.

Fri, 09/23/2011 - 11:06 | 1701222 snowball777
snowball777's picture

Well done (aside from having to live in OK).

Fri, 09/23/2011 - 10:22 | 1700995 swiss chick
swiss chick's picture

BRILLIANT

Fri, 09/23/2011 - 10:02 | 1700917 PulauHantu29
PulauHantu29's picture

RE headed down for the next generation due to massive oversupply and the millions of zero down mortgages (which are still being handed out).

GL!

Fri, 09/23/2011 - 09:46 | 1700835 johnQpublic
johnQpublic's picture

actually not a bad idea, conditionally not owning a home already or mandate chosen property is within walking distance of your present home

for maintenance purposes/easy rent collection etc

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