Them's Fightin' Words

So, it turns out that sometimes, people call you names. If you have a long-ish first name, and you don't shorten it, people might call you by shorter versions of that name. My name is Alexandra. Often, when I introduce myself as Alexandra, people say "Hey, it's great to meet you, Alex!" Um, really? Are you deaf?

I'm clearly headed for a respectable career

Sometimes people call you names that aren't related to your actual name. They might call you "Homie" (outdated gangster slang). They might call you "Tex" (because presumably you drive a pick-up truck and are kind of a tough guy). They might call you "Miley" (because they realized they named you "Destiny Hope," and so the only career path open to you would be as some sort of inspirational/motivational stripper). I mean, there are a lot of options out there.

Sometimes, they could call you a mercenary.*

Apparently Australia is not heaven. 

For those of you who rusty on world history, mercenaries are hired soldiers. They're like rent-a-cops with actual power. They are typically thought of as "scum." After all, war is a terrible, horrible, no good, very bad thing (an Alexander had a day like that, and an Alexander fought a bunch of ancient wars, and even though that name is very close, it is still not my name, barista-who-does-not-understand-gender-specific-nomenclature).

We do have some notion, though, that war might be vaguely permissible if it were tied to a sincere and temperate love of country or cause (this is why we all love Braveheart.) But mercenaries have no cause. Instead, they turn themselves into fighting machines for just a little filthy lucre. In fact, if you could create a mash-up of the worst possible ends and means, it would probably be someone who fights wars (bad means) for money (unworthy end).

And someone called ME one of those! And I wasn't offended.

My courtroom look

See, as a lawyer, I will lend my services (researching, writing, arguing) to those willing to pay for them. And because this will occur in the context of legal battles, it's sort of like hiring someone to go fight for you - except, instead of fighting with guns and swords, we're fighting with summary judgments and lesser included offenses. (Please, note the impressive blending of legal jargon into a military analogy!)

At first, it might seem sort of unjust that you could pay someone to argue your side of an issue. But wouldn't it also be unjust if those without excellent researching, reasoning, and rhetorical abilities had to try to fend for themselves in a legal system? The current system offers specialization, a market for a service, and even discounts said services when needed (it's called pro bono, and it means "I will do this for free because I am a wonderful human"). It's actually pretty great.

This is the way our world works. If I need stitches, I don't have to fend for myself. I go to a doctor, who stitches it up for me, and charges me (or my insurance company) for the service. If I'm tired of cooking, I can buy a burrito. If I need to get to New York in under eleven days, I can get on an airplane that I did not build (it took a village, really) and that I cannot operate, and I pay someone to take me there.

"Self-sufficient" snobs

This is what economists call "specialization" and what four-year-olds call "what you want to be when you grow up." Happily, we don't all have to do the same job. We don't all have to fend for ourselves, trying to be completely self-sufficient (unless you live in Brooklyn, where you'll grow a garden and ride a bike and shop at thrift stores just to prove you can). We don't even have to stay in the first job we try - with an astonishing amount of flexibility, we get to choose!

Thus, based on talents and interests and needs, we get a society full of chefs and nurses and lawyers and railway workers and engineers and accountants and doctors and cashiers and oilmen and farmers and entrepreneurs and mechanics and middle managers. And people do what they're good at, and get to charge money for it. So, in a sense, we're all mercenaries. But lawyers are mercenary in a special sense, because our jobs require fighting.

So, I take mercenary as bit of a compliment. Because even though others will cook and operate and sing and build for you, lawyers are the only ones willing to fight for you.

I got called names in:

Grayish pencil skirt, blue sleeveless button-up shirt, gold and colored glass necklace, gold earrings, coral bracelets, and chartreuse platform stilettos with bows.

*Here, we encounter a first in Adventures in Business Casual. We are blending two conversations into one seamless thought stream, because these two conversations happened in uncanny chronological proximity, making them the verbal equivalent of conjoined twins (but without their own show on TLC). 

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 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.     

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."

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

MINUS

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.   

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).

Buying a Home Is Now 45% Cheaper Than Renting

Here's another reason that the U.S. housing recovery is real and sustainable - buying a home is now 45% cheaper than renting, according to an analysis done by Trulia and reported here by its chief economist Jed Kalko:

Methodology: Trulia looks at homes listed for sale and for rent on its website, and compares the average rent and asking price for an identical set of properties in a metro area, for a direct apples-to-apples comparison. Then, Trulia factors in the total costs of homeownership (e.g., closing costs, maintenance, insurance, taxes, etc) and total cost of renting (e.g., renter’s insurance and security deposit). 

The starting assumptions are that a prospective homebuyer can get a low mortgage rate of 3.5 percent, itemizes their federal tax deductions, is in the 25 percent tax bracket, and will stay in their home for seven years. To account for the opportunity costs, Trulia calculates the net present value of the payment streams for renting and owning.

Conclusion: With a 20% down payment, a 30-year fixed mortgage rate at 3.5% and at the 25% federal tax bracket, Trulia finds that homeownership is cheaper than renting in all of the 100 largest metros by a wide margin. There is no market where the financial decision is even close, so long as you plan to stay in the home for at least seven years, finance with a 3.5% mortgage, and itemize your tax deductions.  

Based on asking prices and rents during the summer of 2012, buying is now 45% cheaper than renting in the 100 largest U.S. metros, on average – that’s a monthly savings of $771. If you plan to stay in a home for 7 years, which is the average time that Americans traditionally live in a home before moving again, it is more affordable to buy than to rent in ALL of the 100 largest metros in the U.S.

MP: Trulia's analysis would indicate that the incredible affordability of buying a home today compared to renting will provide some support to the ongoing housing recovery over the next few years.  Of course, rising home prices and mortgage rates could eventually reduce some the current huge advantage of buying versus renting, depending on how fast rents rise compared to home prices.  And as Trulia's economist points out, many would-be homebuyers don't have the 20% down payment assumed in this analysis, and might not be able to save up that amount in the short run to take advantage of the historical affordability of homeownership.  But on the other hand, FHA is providing mortgages with only a 3-5% down payment, so the lack of a 20% down payment might not be much of a constraint.    

Also, the 45% advantage for homeownership versus renting is the average.  In metro areas like Oklahoma City, the monthly cost of owning a home ($590) is as much as 63% lower than renting a comparable home ($1,576).  It make sense that such a huge cost difference would have to start translating into increased demand for home purchases, and that's probably one of the factors contributing to increased home sales around the country.  Another example is Minneapolis - the monthly cost of buying a home there ($751) is 52% cheaper than renting ($1,558), which translates into monthly savings of $807 for homebuyers compared to renters (of a comparable house), and that huge savings is likely what is driving home sales higher in the Twin Cities (see CD post below).    

2012: The Year of the Housing Recovery; Exhibit A: The Minneapolis-St. Paul Housing Market is HOT

The chart above provides evidence of the significant recovery going on in the Minneapolis Area real estate market, based on new data for market activity there in August:

1. Closed home sales during the month of August in the Twin Cities increased by 12.3% above last year, and by 45.6% above two years ago. On a year-to-date basis, the 27,413 homes sold so far this year is the highest for any January-August period since 2006. 

2. Pending home sales in August (4,877) were 19.5% higher than the same month last year, and 36.3% higher than August 2010.  

3. The average marketing time for houses sold in August was 107 days, down from 141 days last year and 131 days in 2010, and was the shortest average marketing time since at least 2006 (except for the 106 days in July of this year).    

4. The median sales price in July was $179,000, a 15.5% increase over last year and a five-year high for the month of August.  The median price increase in August was the largest year-over-year gain since January 2004 and the sixth straight month of year-over-year increases.

5. The average sale price as a percent of list price in the Minneapolis area was 95.1% in August, the highest percentage for an August since 2007, and above the 91.2% average for the months of August in 2010 and 2011.  

6. The "months supply of inventory" in August was down to only 4.1 months, the lowest level in almost 7 years, since the fall of 2005.  

7. The inventory of Twin Cities homes for sale in August was only 16,806, the lowest inventory level since December 2003.   

MP: By every relevant measure (double-digit increases in median sales price, closed sales and pending sales; ongoing decreases in average marketing time and increases in the percent of list price received, etc.), the real estate market in the Minneapolis-St. Paul Area is experiencing a strong and robust recovery this year, and the housing market conditions there are reflected very closely in many other metro areas around the country.  To quote Brian Wesbury et al. at First Trust, "This is what a housing recovery looks like."  

In fact, with the home inventory level in the Twin Cities currently at a nine-year low and the months supply of homes at a seven-year low, the biggest challenge for the Minneapolis-area real estate market is now a shortage of homes for sale relative to the increasing demand as rents rise and interest rates remain near historically low levels.  With the tight supply of homes listed for sale and more buyers coming into the market, we can expect multiple offers and further increases in home prices going forward in the Minneapolis area.  Continued increases in home prices will eventually result in more homes being put on the market for sale, which will boost inventory levels and contribute to a sustainable cycle of recovery for the Twin Cities housing market.

Here's how the Minneapolis Area Association of Realtors concludes its comments on the August sales report:

"There's reason for optimism going into the last third of 2012 and even into 2013, and housing is actually playing a large role in that positive outlook."

CD Post Re-Written by a Montana TV Station?

Read this CD post from last Wednesday on North Dakota oil output in July, and then read this news report posted yesterday by TV station KTVQ in Billings, Montana, and notice these similarities (especially the last comparison):

CD: North Dakota pumped another record amount of crude oil during the month of July at a rate of more than 674,000 barrels per day.

KTVQ: In July, North Dakota pumped a record amount of crude, at a rate of more than 674,000 barrels a day.


CD: The state’s oil production in July was 59% above a year ago.

KTVQ: Compared to a year ago, July's production level was up 59%.


CD:  North Dakota produced 62% more oil than Alaska in July, marking the fifth consecutive month that North Dakota has out-produced Alaska. The Peace Garden State surpassed Alaska’s oil production for the first time in March to become the country’s new No. 2 oil state, behind only Texas now.

KTVQ: July marked the fifth month in a row that the state of North Dakota produced more oil than Alaska. It was back in March that North Dakota surpassed Alaska's in oil production for the first time to become America's second biggest oil state.


CD: North Dakota continues to lead the nation with the lowest state unemployment rate at 3 percent in July, and more than five percentage points below the national average. 

KTVQ: North Dakota also continues to lead the nation with the lowest unemployment rate at just 3 percent - more than five percentage points below the national average.

Coincidence?

Great Moments in Government Regulation: Massage a Horse in Nebraska, Go to Jail for Up to 20 Years

The Institute for Justice is reporting that a woman in Nebraska could face up to 20 years in prison for massaging horses without a license.

“That’s the absurd fate Karen Hough could face if she wants to continue her business in Nebraska. A certified instructor, Karen has been massaging horses for years. Massaging a horse is believed to deliver many health benefits, including relieving tension, improving circulation, and alleviating muscle fatigue.”

“Earlier this year, she applied for a license in equine massage but was told only veterinarians can become licensed. A 2007 memo from Nebraska’s Board of Veterinary Medicine and Surgery asserted that “no health professional other than licensed veterinarians and licensed veterinary technicians may perform services/therapies on animals.” This means Karen would need to spend thousands of dollars and seven years of her life just to acquire a government permission slip to do what she’s been doing for years.”

Read more here.

Market, Real Estates Updates

1. DQ News -- "Southern California home sales rose to the highest level for the month of August in six years, fueled by low mortgage rates, a healthier move-up market and near-record levels of investor and cash buying. The median price paid for a home rose to a four-year high, lifted partly by the ongoing shift toward fewer foreclosure resales and more mid- to high-end deals." 

MP: August home sales in Southern California increased 14.2% compared to last year, and the median sales price increased by 10.8% to the highest level since August 2008.     

2. DQ News -- "The Bay Area posted its strongest home sales for the month of August in six years, the result of low mortgage interest rates, an improving economy and increasing demand in mid- to move-up market segments. The median price paid for a home eased back a notch from June and July, but was well ahead of last year for the fifth consecutive month." 

MP: Sales in the Bay Area increased 14.2% above last year, and median prices by 10.8%.  

3. The Bloomberg U.S. Financial Conditions Index closed today at the highest level since early July 2007, more than five years ago. The index is updated daily by Bloomberg, and assesses the relative strength/weakness of the U.S. money market, bond market and equity market, and is considered a useful gauge of bank lending conditions and the overall availability of credit in the economy.  

4. The S&P 500 Equal Weighted Index closed today at the highest level in the index's history, which goes back to 2003.  

5. According to yesterday's September MarketPulse Report from CoreLogic, "the housing market is accelerating in all areas, sales are up, mortgage performance is improving, and prices are rapidly improving."

6. The S&P 500 Homebuilders Index closed today at the highest level since early August 2007, more than five years ago.  

Upcoming Documentary on America's Longest War: The War on Drugs, "A Holocaust in Slow Motion"

 
The soon-to-be-released documentary "The House I Live In" is an inside look at America's longest war, The War on Drugs, from executive producers Danny Glover, John Legend, Russell Simons. From the film's website:

"Filmed in more than twenty states, THE HOUSE I LIVE IN tells the stories of individuals at all levels of America’s War on Drugs. From the dealer to the narcotics officer, the inmate to the federal judge, the film offers a penetrating look inside America’s criminal justice system, revealing the profound human rights implications of U.S. drug policy."
 
Here are some quotes from the trailer above: 

"The Drug War is a holocaust in slow motion." 

"The Drug War is a war on all Americans." 

"You have to understand that the War on Drugs has never been about drugs."

From a review by US News:

Two years after he was elected president in 1969, Richard Nixon first used the phrase "war on drugs," in a tough speech on drug policy. Four decades and more than 40 million drug-related crimes later, the war on drugs is still simmering.

And now, just months before the presidential election, a new documentary "The House I Live In" explores the ways in which that war could be rethought. The film also implicates President Barack Obama, who promised a compassionate drug policy while running for president but requested $25.6 billion for drug enforcement in 2013—the highest yearly total ever.

A reviewer from The Boston Globe says "I'd hate to imply that it's your civic duty to see "The House I Live In" but guess what - it is."   

The movie will be in theaters on October 5.  

Photo of the Day: Ben Bernanke As a Child Preparing for His Future Role as Fed Chair

QE Forever

HT: Moe

2012: The Year of the Housing Recovery, Updated

1. "The number of improving housing markets across the country rose to 99 in September, according to the National Association of Home Builders/First American Improving Markets Index (IMI), released this week. This is up from 80 metros that were listed as improving in August and includes representatives from 33 states as well as the District of Columbia. The IMI identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months."

Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. said, “This solid growth is an encouraging sign that housing continues on a slow but steady recovery path that is gradually advancing from one local market to the next.”

“More metros across the country are experiencing a sustained uptick in house prices, employment and new building activity as rising consumer confidence in local market conditions pushes more people to consider a new-home purchase,” observed NAHB Chief Economist David Crowe.

“Combined with recent positive reports on builder confidence, housing starts and new-home sales, the September IMI adds to the growing consensus that housing is finally moving in the right direction, which in turn is spurring more potential buyers to get off the fence,” added Kurt Pfotenhauer, vice chairman at First American Title Insurance Company.

2. "Des Moines area home sales spiked 27% in August over a year earlier and climbed nearly 11% over July, a report from the Des Moines Association of Realtors today shows. The average sale price pushed 3.3% higher to $172,839 in August over a year earlier. Pending sales climbed 13.1% to 897 in August over a year ago.  In August, homes were on the market an average of 98 days, 14 days fewer than 112 days in August 2011. Homes were on the market five days fewer than in July."

3. The S&P Homebuilders ETF (XHB) tracks the "S&P Homebuilders Select Industry Index" and includes holdings of Pulte Homes, Standard Pacific, Toll Brothers, MDC Holdings, USG and other homebuilders, construction companies, and companies that supply products to homebuilders or home buyers. The XHB closed Wednesday at 24.87, the highest level since August 2007 more than five years ago.  Over the last year the XHB is up by 74%, or more than three times the 23.3% increase in the S&P 500 Index.  

Update 1: 

4.  "CoreLogic today released a new analysis showing that 10.8 million, or 22.3%, of all residential properties with a mortgage were in negative equity at the end of the second quarter of 2012. This is down from 11.4 million properties, or 23.7%, at the end of the first quarter of 2012. Approximately 600,000 borrowers reached a state of positive equity at the end of the second quarter of 2012, adding to the more than 700,000 borrowers that moved into positive equity in the first quarter of this year."

"Most borrowers in negative equity are continuing to pay their mortgages. The share of borrowers that were underwater and current on their payments was 84.9% at the end of the second quarter in 2012. This is up from 84.8% at the end of the first quarter in 2012."

“The level of negative equity continues to improve with more than 1.3 million households regaining a positive equity position since the beginning of the year,” said Mark Fleming, chief economist for CoreLogic. “Surging home prices this spring and summer, lower levels of inventory, and declining REO sale shares are all contributing to the nascent housing recovery and declining negative equity.”

“Nearly 2 million more borrowers in negative equity would be above water if house prices nationally increased by 5 percent,” said Anand Nallathambi, president and CEO of CoreLogic. “We currently expect home prices to continue to trend up in August. Were this trend to be sustained, we could see significant reductions in the number of borrowers in negative equity by next year.”

Update 2:

5. DQNews updated its National Home Sales Snapshot today and reports that national homes sales for the most recent 30 days of home sales increased 11.3% compared to the comparable period last year, and the median sales price increased by 7.5%.  DQNews' home sales snapshot is based on 98 of the Top 100 U.S. metro areas, and covers about two-thirds of the nation's home sales. 

North Dakota Oil Production Sets Records in July, Monthly Output Exceeds 20m Bbls. for First Time

The “Economic Miracle State” of North Dakota pumped another record amount of crude oil during the month of July at a rate of more than 674,000 barrels per day, according to data released today by the state’s Department of Mineral Resources. Oil production during the month of July exceeded 20 million barrels for the first time in state history, establishing a new record for monthly oil output. Here are some other highlights of North Dakota’s record-setting oil output in July: 

1) The state’s oil production in July was 59% above a year ago, and followed annual increases of 71.1% in June and 75.5% in May. 

2) North Dakota produced 62% more oil than Alaska in July, marking the fifth consecutive month that North Dakota has out-produced Alaska. The Peace Garden State surpassed Alaska’s oil production for the first time in March to become the country’s new No. 2 oil state, behind only Texas now. 

3) The number of oil wells in North Dakota increased to 7,303 in July establishing a new state record for active wells. Over the last year through July, an average of almost seven new oil wells were put into production every business day, and each of those new wells is the equivalent of adding a new $8-10 million business to the state’s economy, see recent CD post for more details. 

4) The amount of oil produced per active well in North Dakota increased to 2,861 barrels during the month of July, which was almost 20% above the oil output per well during July last year, and likely reflects the increased efficiency gains from advanced drilling technologies like “pad drilling” that are gaining popularity. 

As a result of the state’s oil boom, North Dakota continues to lead the nation with the lowest state unemployment rate at 3% in July, and more than five percentage points below the national average of 8.1%. There were ten North Dakota counties with jobless rates below 2.0% in July, and Williams County, which is at the center of the Bakken oil boom, continues to boast the lowest county jobless rate in the country at just 0.7%. The exponential growth in North Dakota oil production has fueled exponential growth in the state’s oil and gas jobs, which have tripled in less than three years. Overall employment throughout the entire state has increased 6.8% over the last twelve months, almost five times the tepid 1.4% pace of job growth nationally during that period. 

Bottom Line: July’s record-setting oil production in North Dakota continues to make it the most economically successful state in America, with record levels of employment and income growth, the lowest state jobless rate in the country, a state budget surplus of $1 billion, the lowest home foreclosure rate in the country, strong housing and construction markets, and jobless rates in ten of the state’s counties below 2.0%. North Dakota’s economic success, job creation, and energy-based prosperity is being driven by the development of the state’s vast energy resources, especially the ocean of shale oil in the state’s Bakken region. It’s an economic model that could easily spread energy prosperity elsewhere if more domestic energy resources were opened up to greater exploration and drilling for oil and natural gas.

The Micro-Welfare-State Runs on Coffee

So, as some of you may have noticed, I'm in law school now!

Oh hey, caramel cheesecake friend

This is hilarious and unexpected, mostly because a year ago I thought I wanted to grow up to be an economist and that I'd never ever ever go to law school or be a lawyer. Surprise! I was wrong.* It turns out law school is everything I ever wanted - it's full of hard books where grammar and punctuation matter, your brain gets lots smarter, and you can get into a really heated argument about an imaginary case for fun. Yep - for fun. It's like if you lived your whole life as a vegan, and then discovered cheesecake existed. AMAZING.

The bird is actually on a pizza stone 

So while I'm over here noshing on some intellectual cheesecake, it turns out that the cafe/food service at the law school is in the process of being replaced. Now, I just came from a tiny college where we didn't have a food service, and instead fended for ourselves in the streets of Manhattan (I was playing the Hunger Games before you thought it was cool. I've battled for the last piece of free pizza - and lived to tell about it). So, in my mind, being without a cafe/food service is part of life. But this is not true.

See, in this magic place called "law school," there are amazing things called "endowments" and "donations," which lead to "free things." For the past two weeks, this has meant that every morning, we have coffee, cream, sugar, bagels, cream cheese, and sometimes yogurt. The first day, it was a surprise. The second day, it was a happy "oh, it's here AGAIN?!?" All subsequent days, it was a veritable bloodbath to get there before the free coffee ran out.

What happened? Simply, a little bit of grace became an entitlement.

CORNUCOPIA OF GOODNESS

The first day of law school, I walked past a table with bagels and coffee and figured either I missed an email (which, considering the amount of time I spend checking email is kind of impossible), or this was a nice "in case you forgot your breakfast, here's a happy little bonus for you" gesture. I thought "awww, how sweet. What idiot forgets his Wheaties on the first day? I don't need this."

The second day of law school, I walked past the same table of food and thought "Hmmm. How long is this going to keep happening? Is there a sign?" Sure enough, a little sign said that this would be there until we had food service again. I got some coffee.

The third day of law school, I held out on coffee for a bit, and then walked over, only to find out that the coffee was GONE. I was indignant. How dare they put out free coffee and RUN OUT? Didn't these people understand that we were very tired law students? And the nearest coffee shop was a seven-minute walk in 103 degree heat. INJUSTICE! I was supernaturally fatigued, so I went home (five-minute walk) and made my own coffee. After I got back, they replaced the coffee. I looked at the time so that I'd never miss the afternoon refill again.

Look at my all-natural food mound!

The fourth day of law school, I decided to be polite and wait a bit before getting coffee. It was all gone. I was hoping they'd have some yogurts, but there were none out. Bummer. I ate a protein bar I had along.

This has continued, in varying degrees, for seven days of law school. And guess what? Pretty much everyone has had a similar reaction. It's gone from a novelty to a research project to a system to beat to something we can't live without to something to use only if it's better than what you already have.

In other words, UT Law created a micro-welfare-state. And it offered the same alarmingly bad results, just in a shorter time frame as the American welfare state.

First, it was something there as a bonus. A little bit of grace if you fell on hard times and forgot your breakfast or lost your job.

The goal.

Then it was a system with its own set of rules. It would last until new circumstances arose (like a working food service, or you getting a job). It implicitly created perverse incentives for those new circumstances to arise. (You're rooting for freebies.)

Third, living without it became a crisis and a personal insult to you and your way of life. An inconvenience became a grave injustice. Life without free coffee (or a check from the government)? AN OUTRAGE.

Finally, it's a system to use if it's a little better than what you could be doing. Make minimum wage for 40 hours a week, or collect a check for no hours of work? Meh, government check is good, unless I have something better. No yogurt? Meh, I'll eat this protein bar I have laying around.

Readers, you know me. You know how much I love a bargain. But if that bargain isn't sustainable, if that bargain reads like an effort to create a free lunch, if that bargain creates perverse incentives, then that's not a bargain. That's a very expensive way to give a little grace. Sure, we all need a little grace sometimes. But if giving out a little grace ends up costing billions, perhaps we ought to scale back and only give a little grace, right?

I acted really entitled in a micro-welfare-state in:

Multicolored striped pencil skirt, blue sleeveless button-up shirt, gold earrings, brown watch, brown and gold flower ring, and russet platform wedge sandals.


*This may be the only time I admit in writing that I was wrong about something. Don't quote me out of context - the last thing I want to do is turn on the TV in 40 years and see some blurb running across Matt Lauer's knees (they will have kept him alive, convinced he's the answer to ratings) about how "Promising political candidate Alexandra ___________ [please let my last name have changed by that point] admits "I was wrong." More, right after our water-skiing hamster bit!" NOT. HAPPENING. 

Coming Apart: Two for One Churches

So, a few weeks ago, we dropped my sister off at college in Tulsa, Oklahoma. For those of you not from Tulsa, you should know a few things.
1. There is a QuikTrip (the cool kids call it QT) at every intersection.

Klassy.

2. The three remaining corners in the intersection will have at least one of the following:

• A church
• An Indian* Smoke Shop
• A place to buy fried food with ranch dressing 

Since we know a bunch of people in Tulsa, when Sunday morning rolled around, it became imperative that we visit not one, but TWO churches.

That's right kids. Two churches. One Sunday. Oh yeah.

Do I look like a hallelujah?

The first one was an 8:00 service at my uncle's church. I know that 8:00 sounds like a reasonable time to begin something, but when six people are sharing a bathroom, you have to get up early to get ready on time. I mean, really early. In fact, my mom said she was pretty sure that Jesus was still in his robe and slippers. (This is the part of the show where I insist that it was my mom who said that, and that I would never ever make a joke with such bad theology ... unless I had thought of it first, of course.)

Not the Holy Spirit made visible ...

Since my grandma goes to that church, and my uncle preaches there, we were sitting in the second row (which for all practical purposes was the first row, because the first row was empty). Somewhere around the second hymn, I got a terrible sneezing attack. Sometimes (typically at socially inappropriate moments), my nasal lining just freaks out and won't stop sneezing. This was one of those times. My mom handed me gum. The sweet old lady behind me handed me a bunch of tissues. I tried to keep it together. I mostly just sneezed in front of the entire 8:00 AM congregation. Sneezing aside, it was the last Sunday for their music minister, and it was a really nice service. We took communion, we saw family friends, and I finally stopped sneezing. All in all, a success.

After church 1, we went to church 2! Here, we enjoyed a fellowship breakfast before the service, and my nose decided to not freak out, thankfully. We saw people from our missions trip to Honduras earlier this summer, and saw more family friends, and we took communion again.** Again, an overall success.

Not Me. Really. 

Now, granted. I don't usually go to two churches on one Sunday. But I always go to church.

I'm not saying this to be some sort of "holier than thou" uppity snob. Instead, I'm trying to explain that for as long as I can remember, church has been part of the rhythm of my life. Not only is church a big part of my schedule, but Jesus is a big part of my life. My best friends have come from church. My most difficult intellectual problems have been theological. Most of my decisions stem from my relationship with Jesus.

And it turns out that that's really important in a free society.

As Charles Murray points out in Coming Apart, a free society doesn't really work without what he calls "religiosity," and what I'm going to bluntly call Christianity. In order for people to operate largely without government intrusion, sure, they need to be industrious, they need to get married, and they need to be honest. But most importantly, they need Christianity.

Youth group - where 12-passenger vans live on

Christianity (or, in Murray's book, religiosity at large) provides people with a moral compass. Additionally, church provides a social glue—a foundation upon which to build a community. Church in the West has been there for the weddings and births and deaths and picnics and youth group trips and homeless outreaches and a hundred other things. It provides a social gathering, a place to form deep relationships, and a hub from which to serve others. Church is important.

Even for those only nominally committed, church has huge benefits to society as a whole. It makes people more trusting of their neighbors, which encourages actual neighborly behavior. (It turns out when people hear about the Good Samaritan, they're more likely to be one ... and more likely to trust someone else to be one, too.)

When you put it like that ...

As we close our discussion of Coming Apart, I have a small public service announcement. Murray explains that one of the downfalls of our society in the last 50 years has been that the upper-middle class knows how to live successfully, but they've quit sharing those strategies (industriousness, marriage, honesty, religiosity) with others. They've become ashamed of having the right answers. So if I've sounded bossy or like I have all the right answers, I'm sorry. But you knew that this was a snarky blog, so hopefully your feelings will recover eventually ...

If we want to be a free people, a people committed to industriousness, marriage, and honesty, then we need to be a religious people. That doesn't mean going to two churches every Sunday. But it means going to church. Even if it makes you sneeze.

I went to two church services in:
White and purple medallion patterned sheath dress, purple pendant necklace, green crocheted earrings, black wooden bracelet, and green stilettos with cork platforms.


*It's never a "Native American Smokeshop." It's an "Indian Smoke Shop." I don't make the rules ...
** I'm non-denominationally protestant, so this was a lot more communion than I get on an average Sunday.