Government Policy, Economic Consequences, and Following The Trail of Logic

| | Comments (0)

Something I feel the need to point out when people talk about current issues with the real estate market, for instance, housing prices fall yet again, mortgage rates hitting new lows yet again or the Federal Reserve indicating a need to keep returns low

Q: What happens when you artificially restrict demand (in this case by preventing large numbers of people from qualifying for a mortgage)

A: The price falls until it's low enough that the market will absorb the supply. Profits (return for mortgage investors) becomes non-existent. Money moves elsewhere. Because the supply of people who *don't* need a loan for property is limited to the rich, few people can buy homes. Prices for real estate fall.

Q: What happens to people who move their money from becoming mortgage investors to real estate investors?

A: As prices fall, the same money buys better properties. Capital returns become minimal, but rental returns become very attractive on their own as people who are prevented from buying are forced to rent, driving up demand for, and therefore price of, rental properties.

Q: What happens if you remove those restrictions (Dodd-Frank, et al)?

A: The above trends reverse. Those already wealthy people who moved their money from mortgage investment to real estate investment see massive capital returns as those formerly shut out return to the market.

Q: What is the net effect of this?

A: Massive wealth transfer from those consumers less well off to those with larger financial reserves, including major financial corporations.

Q: Ignoring what the politicians involved say, can I find in their actions any difference between those actions and a directed "evil plan" or conspiracy comparable to those hatched by any number of bad movie villains?

A: Thus far, those involved have gotten away with it.

Otherwise, no

I also feel obliged to point out that even if Dodd-Frank is never repealed, the intended beneficiaries are reaping large gains and will continue to reap them.

UPDATE for clarity

Q: Are the actions of these politicians a credible method of attaining what they say they want - protections for consumers, punishment of those responsible, and avoidance of a repetition?

A: No.

Caveat Emptor

Categories

,
Delicious Bookmark this on Delicious StumbleUpon Toolbar Stumble It!
Please be civil. Avoid profanity - I will delete the vast majority of it, usually by deleting the entire comment. To avoid comment spam, a comments account is required. They are freely available, and you can post comments immediately. Alternatively, you may use your Type Key registration, or sign up for one (They work at most Movable Type sites) All comments made are licensed to the site, but the fact that a comment has been allowed to remain should not be taken as an endorsement from me or the site. There is no point in attempting to foster discussion if only my own viewpoint is to be permitted. If you believe you see something damaging to you or some third party, I will most likely delete it upon request.
Logical failures (straw man, ad hominem, red herring, etcetera) will be pointed out - and I hope you'll point out any such errors I make as well. If there's something you don't understand, ask.
Nonetheless, the idea of comments should be constructive. Aim them at the issue, not the individual. Consider it a challenge to make your criticism constructive. Try to be respectful. Those who make a habit of trollish behavior will be banned.

Leave a comment

Copyright 2005-2020 Dan Melson All Rights Reserved

Search my sites or the web!
 
Web www.searchlightcrusade.net
www.danmelson.com


The Book on Mortgages Everyone Should Have
What Consumers Need To Know About Mortgages
What Consumers Need To Know About Mortgages Cover

The Book on Buying Real Estate Everyone Should Have
What Consumers Need To Know About Buying Real Estate
What Consumers Need To Know About Buying Real Estate Cover

Buy My Science Fiction and Fantasy Novels!
Dan Melson Amazon Author Page
Dan Melson Author Page Books2Read

The Man From Empire
Man From Empire Cover
Man From Empire Books2Read link

A Guardian From Earth
Guardian From Earth Cover
Guardian From Earth Books2Read link

Empire and Earth
Empire and Earth Cover
Empire and Earth Books2Read link

Working The Trenches
Working The Trenches Cover
Working the Trenches Books2Read link

Rediscovery 4 novel set
Rediscovery set cover
Rediscovery 4 novel set Books2Read link

Preparing The Ground
Preparing the Ground Cover
Preparing the Ground Books2Read link

Building the People
Building the People Cover
Building the People Books2Read link
Setting The Board

Setting The Board Cover

Setting The Board Books2Read link

The Invention of Motherhood
Invention of Motherhood Cover
Invention of Motherhood Books2Read link



The Price of Power
Price of Power Cover
Price of Power Books2Read link

The Fountains of Aescalon
Fountains of Aescalon Cover
The Fountains of Aescalon Books2Read link



The Monad Trap
Monad Trap Cover
The Monad Trap Books2Read link

The Gates To Faerie
Gates To Faerie cover
The Gates To Faerie Books2Read link
**********


C'mon! I need to pay for this website! If you want to buy or sell Real Estate in San Diego County, or get a loan anywhere in California, contact me! I cover San Diego County in person and all of California via internet, phone, fax, and overnight mail. If you want a loan or need a real estate agent
Professional Contact Information

Questions regarding this website:
Contact me!
dm (at) searchlight crusade (dot) net

(Eliminate the spaces and change parentheticals to the symbols, of course)

Essay Requests

Yes, I do topic requests and questions!

If you don't see an answer to your question, please consider asking me via email. I'll bet money you're not the only one who wants to know!

Requests for reprint rights, same email: dm (at) searchlight crusade (dot) net!
-----------------
Learn something that will save you money?
Want to motivate me to write more articles?
Just want to say "Thank You"?

Aggregators

Add this site to Technorati Favorites
Blogroll Me!
Subscribe with Bloglines



Powered by FeedBlitz


Most Recent Posts
Subscribe to Searchlight Crusade
http://www.wikio.com

About this Entry

This page contains a single entry by Dan Melson published on February 4, 2012 8:30 AM.

Pay a Prepayment Penalty Now, or Wait to Refinance? was the previous entry in this blog.

Apology for Late Publication is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.

-----------------
Advertisement
-----------------

My Links