Mayor Dave and MG&E Promotes Renewable Energy

Madison was green before green was cool.




If Madison Gas and Electric can offer renewable energy, why can't any utility?

Too Many Homes

A bank destroys 16 partially built homes to end government fines. It’s too bad the government didn’t stop the fines and donate the homes to the homeless.



Our society's biggest short-term problem is we have too many places to live. It should be a good problem to have.

Stress Test House Price Predictions Right on the Money

Calculated Risk did an excellent post showing a graph of how house prices have tracked in comparison to the baseline and adverse estimates used on bank “stress testing”. Although it’s only been two months, the actual real estate prices are coming in in between the two estimates, closer to the adverse estimate.

The accuracy of the prediction (so far) highlights how much baloney is out there regarding real estate. From the NAR to many local Realtors, we’ve seen nothing but deception about the real estate market. I wondered if it was just because real estate is such an imperfect market that maybe even experts can’t work out what’s going on. It turns out they can.

If it is possible to work out future real estate prices and they are going to fall between 13% and 24%, why don’t they fall instantly? I suspect the answer is misinformation from Realtors. If everyone accepted these predictions, prices would fall instantly because there are not many people who are willing to pay 20% extra just to execute a transaction a year or two earlier. Enough people are spreading misinformation that market participants are confused as to what is going on.

I cannot explain why Realtors seem to lie more than other industry associations. The lies seem to be ones that would decrease sales volume, which is how they make their money. Maybe it’s because they know they’re at risk of becoming obsolete. Computers do some of what Realtors used to do. When you look at the fee taken by all the people involved in a real estate transaction (i.e. title company, title insurance, home inspector, loan fees, taxes) the amount the Realtors take is outrageously high.

There will always be a need for someone to help people find buyers for their property and to handle some of the administrative stuff. If Realtors want to continue this function and continue charging around 6% of sale price, they need to provide top notch help and to start being honest.

I don't mean to condemn Realtors. They have helped me in both of the two real estate transactions I have made in my life. My honest question, though, for the organization as a whole is, “Why do you guys lie so much?”

Populist Backlash Will be Against China and Inflation, Not Taxes

I've been hearing talk of a populist backlash against some of bailout measures started by President Bush and now carried on by President Obama. I would welcome a non-partisan backlash against growing government and deficit spending, but I don’t believe we'll see one. If we do have a backlash, it will be in the following areas:

• A nationalist backlash against US dependence on China – Lately they've been expressing concern about our loose monetary policy. Regardless of whether people agree with US monetary policy (or even know what monetary policy is), they might get tired of having to answer to China
• A backlash if inflation occurs – People remember the recessions of '02 and '91 more clearly than the inflation of the 70s. Inflation isn't all that bad, but since it's new it might seem scarier than a recession without inflation, which is fresher in people's minds. The higher nominal rates that come with inflation might make the housing bust more painful, as rising interest rates depress real estate prices.

If we push the fiscal and monetary stimuli levers too far, we will have these conditions and the political firestorm that comes with them.