That is the thing that Florida is facing. Many of these large condo projects take years to finish and many are in the hole before they are even completed. The question now is do they complete the project or cut their losses? There are many of these that I have seen in Orange County and I imagine that they will be completed but they will take large losses. There is a rather prominent bankruptcy going on in the OC regarding this matter.

@New Zealand Renter,

The thing with housing starts is that once housing is built, it is added to the new pool of already existing homes. That is, starts are more dependent on the growth rate than the sheer population number. If you look at Los Angeles County you will find many homes built in 1940 or 1950. Some cities have seen a tiny amount of housing starts during this “boom” time but it doesn’t mean that they were short housing units. Once they are added they become part of the entire housing buffet. Also, many housing starts happen in blossoming states such as Arizona or Nevada reflecting a similar trend as the one you mentioned.

Either way, the dropping number in housing starts in relation to the current amount of monthly inventory points to a troubling picture. We are at a peak amount of housing in the current marketplace and there are certain areas where projects are still coming live. I know of a few in Los Angeles County that are in the early phases and won’t be completed for 6 to 9 months. These are large projects with a few hundred homes. Do they simply stop building?

We also have the downsizing of many baby boomers. This year the oldest baby boomers hit peak retirement age and we will now have an onslaught of people retiring and potentially selling their homes to downsize. No need for 5 bedrooms when there is only two people. This will add to inventory on the market. There seems to be a convergence of many factors at once going on.

@Exit,

Many tax bills have a deadline hitting at the end of this month, especially if you pay it in semi-annual payments. People in the early stages of foreclosure are worried more about staying afloat than paying their taxes. I think we’ll see the full ramifications once tax filing season is over.

@AnnScott,

That was a great report. Amazing the sheer amount of jumbo loans out of California. If we are to raise caps it will be to essentially bail out this state. It is interesting to note that caps are revisited annually and if the median price goes down, caps may in fact drop. We already saw that Southern California took major hits last year. Any reform or action will take months if not a year and by that time, the market may have already taken the cap issue out of the picture because of lower prices. And another point that the study highlights which is something we already anecdotally knew is that many jumbo mortgages are toxic products. These are not going to be bought by government sponsored entities. So what is then the point? Clearly the bubble was fueled by negative amortization loans, subprime products, and interest only loans which even if caps are raised, conventional mortgages make a small number of the jumbo market. If you are to take a conventional jumbo loan the market would still be in the current condition because people simply cannot afford a fully amortizing conventional mortgage.

@Ian and AnnScott,

Regarding the tax issue, on its face value the fair tax seems fair as Ian pointed out in his argument. It makes the issue extremely simple since it eliminates a lot of the overhead including the IRS but it isn’t 23 percent but 30 percent. It is a matter of wording. For example, say you buy a candy bar for $1 you will end up paying $1.30 for the markup price of the fair tax. It is a 30 percent pre-tax mark-up but 30 cents on $1.30 is 23 percent hence the 23 percent number.

And as Ann pointed out, those with higher incomes will be able to keep more of their money. Let us assume a, oh I don’t know, a hedge fund manager investing in subprime mortgages made $1 billion for the year. If he can get by on only spending $100 million, the other $900 million is essentially tax free. At this level his tax rate is about 2 percent. Proponents will argue that he will pay taxes once he spends but come on, is he really going to spend more than $100 million?

This tax issue is very important and deserves a deeper debate since this “tax rebate” we are currently hearing about impacts the discussion. Also, lower income families already pay a lower rate of taxes and spend nearly all their income on consumer goods so front loading a sales tax would unfairly burden them. There is a provision in the fair tax for this but I’m not sure how viable it would be. Better tax issues to discuss are one’s like the AMT hitting middle class families.

Also, I would say that the middle class squeeze is happening on the $50,000 to $150,000 households. The bulk of the population in the U.S., approximately 95 percent of all households makes less than $150,000 per year. The majority of the discussion should be here. Also, how fair is it to give tax breaks to companies that use offshore tax havens and corporations to shield income? Or look at the BofA Countrywide deal where BofA stands to benefit from writing off losses that Countrwide will surely face with the subprime implosion of its portfolio? Income that BofA earns can be offset by sucking up a company on the cheap and avoiding paying income taxes. How does this benefit the economy in the long run? The top 10 percent own 80 percent of all financial assets and the bottom 90 percent hold only 20 percent of all financial wealth. Clearly something wrong is going on here and people are finally starting to wake up and are saying, it’s the corporate welfare stupid.

Oh, BTW, the stock markets of the rest of the world reacted to the plans of the American government by plunging. This is one huge butterfly flapping….

God Bless America!

Example 1:

Household with $48200 income and 2 people and maried filing jointly. Not enough to itemized so standard deductions and exemptions of $17,500 leaves a taxable income of $30,700. Income tax is $4218 (8.75% pf gross) and Medicare/Social Security is another 7.65% or $3687. Total federal taxes = $7905 or 16.4% of gross.

Since this household has to spend at least 90% of what they make in order to live, they would be paying 23% tax on what they spend. Say they spend 90% or $43,380. They would have to pay $9977 in “Fair Tax” (a lieif I ever did hear one.) Given that $43,380 + 9977 = $53,357 and that is more than their income, they would have to cut their spending by $8,111 in order to still be able to save 10% of income and pay this incredibly stupid tax.

After federal tax income now = $40295 - 10% to savings $4820 = $35475

After the federal ’stupid sales’ tax income would be $48200 -10% to savings $4820 = $43380 -23% tax of $9977 = $33403. This ‘help the rich’ tax would cost the median household 20.6% of their income.

Yep - real “Fair” when the median household is OUT $2072 with the ‘moron sales tax/’

Example 2:

Jacqueline Mars (heiress to Mars Candy fortune who has never worked a day in her life and has an income in the top .001% which is $6,000,000 and up.) Income at least $6,000,000 from ‘investments’.

Now she only pays 15% on capital gains or $900,000 or so.

With the ‘idiot fair tax’, lets say she spends $2,000,000 and leaves the other $4.000,000 in investment accounts. She pays $460,000 in the “insane Fair Sales Tax at 23%.. She pays NOTHING on the other $4,000,000.

Tax bill now = $900,000 (15% of income)

Tax bill with the idiot tax = $460,000 (if she can figure out how to spend at least $166,666 a month.) and only 7.6% of her income.

What deliberate pathological liar ever named this piece of garbage ‘Fair”????

Under it that household that has to spend its income to live would pay 20.6% of its incomein ffederal tax and have to cut its spending for necessities.

The uber rich get out of paying taxes on the vast majority of their income and can easily pay only 7.6% of income in Federal Taxes.

Another ’stick it to the bottom 95% so the upper 5% don’t have to pay.’

Quit peddling these disgusting lies - only thing the peope pushing this bullhockey want to do is help the very very very rich pay less by making the rest pay a LOT more.

http://www.projo.com/ri/providence/content/BZ_CONDOS_RENTALS_01-17-08_7P8KHS9_v60.1ac13cd.html