|
Owning May
Be Cheaper Than Renting!
Broadcasters
Turning Off Consumers
Halloween
Homeowner Strategies
 Republican
success will bring opportunities
and risks.
As we approach next week’s federal election the likely
outcome is becoming clear. Republicans will probably take
over the U.S. House of Representatives, and Democratic
control of the U.S. Senate will be reduced substantially.
Despite potential gains of as many as 50 house seats,
Republicans are likely to control the House only by a small
margin due to the current large Democratic
advantage. Democrats will likely
retain control of the Senate by a small margin, and will
lose their ability to end Republican filibusters. How will
the new federal legislative makeup align with the views of
most American homeowners on important economic issues?
Most homeowners are centrists and political moderates
according to election exit polls and other voter research.
Those with party affiliations are split almost evenly
between Republican and Democrat, and the number of
independents is nearly as large as either and is growing.
Based on current poll results of individual races there are
likely to be fewer moderates in the new Congress than there
are currently. Even in the current Congress,
centrist/moderates may be the most underrepresented major
demographic group in the country. Fewer than 60 of the total
535 U.S. representatives and senators are generally
considered moderates – either “Blue Dog” Democrats or
moderate Republicans.
This may explain why a plurality (43%) of
likely U.S. voters believes that neither Democrats nor
Republicans in Congress are the party of the American
people, according to an October Rasmussen Reports national
telephone survey. Nearly as many see a need for a new third
party.
The economy is a top election issue to 86% of voters,
according to another recent Rasmussen poll. Deficit
reduction also scores very high in similar polls, and the
two issues are linked in the minds of many. Most voters
believe that the Republican Party is more committed to both
priorities. From that standpoint most homeowners should be
heartened by Republican electoral success.
Healthcare is the second most important issue to voters (76%
in the Rasmussen poll). Public support for healthcare reform
has also eroded, and 53% of voters now support its repeal.
Many Republican leaders have vowed to repeal the last
Congress’s healthcare package. The Republican advantage on
these two most important issues is their primary advantage
in the coming election.
Tax is another important issue, and a priority to 63% of
voters in the Rasmussen poll. A slight majority of the
public (51%) now favors extending the Bush tax cuts for the
wealthy, and most Republicans generally support extending
those cuts across the board rather than just to those with
low and moderate incomes.
However, the Republican’s ability to deliver on these issues
is limited, as is their potential for maintaining their
current level of voter support throughout the next Congress.
Senate Democrats and the President will still be able to
block their efforts or force compromise. Even in the House
of Representatives their slim advantage will not guarantee
success. Within the House Republican party there is likely
to be substantial friction between the new Tea Party
representatives and the remaining Blue Dog moderates. A few
of the latter tilting the vote to the Democrats on key
issues would make the new House Republican leadership appear
ineffective, and erode the party’s public support.
When they get down to the details, Republicans may lose
further support. Contrary to public perception of their good
intentions, the Republican Party has not had a better record
than the democrats when it comes to deficit reduction. The
kinds of program cuts the Republicans are willing to make on
social programs are not the kinds of programs Democrats are
willing to cut. Each of those programs also has its
constituency, and there’s no way the Republicans will be
able to carve out significant budget cuts without raising
substantial opposition from many parts of the electorate. In
addition, maintaining support for extending the Bush tax
cuts for the wealthy will be hard to maintain while the
party simultaneously seeks to cut many programs benefiting
low income and middle class voters.
The same holds true for healthcare repeal. Despite the
current lack of public support for the recent healthcare
package, many of its specific provisions are widely
supported. Retaining the popular ones will pose a
significant budget challenge. Republicans will not be able
to prevent focus on this dilemma during public debate on the
legislation’s repeal, and that focus will undermine their
repeal efforts and their public support.
The ongoing foreclosure crisis may create new challenges for
Republican policymakers. There is widespread public
indignation over the recent foreclosure “robosigning”
controversy, and all 50 states are investigating mortgage
lender foreclosure procedures. This may lead to state
sanctions and/or new regulations, but the early signs are
that lenders will be able to assemble the required
documentation in most cases and will be able to carry out
most of the foreclosures. At the same time, public support
for the Administration’s efforts to mitigate foreclosures
has been eroding. Those efforts may have helped slow the
decline in home values, but they have had limited success.
They have been undermined by tepid cooperation from mortgage
servicers and a variety of other factors. It is unlikely
that Republicans will support extensions of the
Administration’s current foreclosure mitigation efforts.
However an even bigger challenge to home ownership and the
economy may be emerging, and that issue could create a
serious policy challenge for Republicans.
The robosigning controversy has also breathed new energy
into class action lawsuits against mortgage lenders and Wall
Street firms by investors in packages of subprime and other
risky mortgages. In a nutshell the investors are claiming
that they were misled regarding the quality of those
securities and that lenders have acted irresponsibly in
other ways as well. They want the lenders to buy back those
tarnished securities, which could cost Bank of America alone
over $100 billion. A successful outcome of even more
widespread investor lawsuits could create another U.S.
financial crisis given the immense amounts in question. It
would also create a problem for the many Republicans with
close ties to the financial services sector, such as
presumptive future House Majority Leader Boehner, who has
received substantial campaign support from mortgage lenders
and other segments of the financial services sector. The
threat of another financial sector meltdown would create
calls for another round of budget busting financial sector
bailouts by taxpayers similar to those instituted by
Presidents Bush and Obama. Republicans will find their
newfound popularity short-lived if they are unable to
respond to this challenge decisively.
One thing is certain about the new Congress. As a result of
the near parity between the two parties they, and the
Administration, will only be able to enact legislation
through compromise. If it happens the remaining moderates
and centrists will be greatly empowered despite their
reduced numbers because their votes will be critical. Such
an outcome would be great news for American homeowners. If
it doesn’t, the popularity of Congress will erode further.
With control of the House, Republicans will be far less able
to pin the problems entirely on the Democrats, and their
current advantage in the eyes of many voters will be greatly
reduced if not eliminated by the next presidential election.
It should be an interesting two years.
top
Owning May Be Cheaper Than Renting! 
In many cities it is now cheaper to own than rent.
This is an increasingly powerful motivation for
future home purchases in those areas. Not only is
home ownership intrinsically preferable
to renting to most consumers, but the ability to
eliminate the risk of future rent escalations is a
strong economic incentive as well. As home values
and mortgage rates have dropped, the effective cost
of owning a home has also dropped. As a result
growing numbers of renters are finding homes
affordable for the first time.
In its October 8 Rent vs. Buy Index, Trulia.com
identified 10 cities where the average cost of
renting a two bedroom apartment, condo, townhome or
co-op is more than the effective cost of owning an
average asking price for a single family home,
condo, townhome, or co-op. In its comparison Trulia
factors in the tax savings from the mortgage
interest and property tax deductions, so the
homeowner’s monthly payments will still be somewhat
higher than the renter’s payments.
In Miami and Jacksonville Florida, Phoenix and Mesa
Arizona, Fresno, Detroit, Columbus, Nashville,
Arlington and El Paso Texas, it is less expensive to
own than rent.
High foreclosure rates, falling home prices and
widespread unemployment are major factors in driving
home prices down. Some areas, that have seen
relatively little loss in home values, were more
affordable even before the current recession because
selling prices were more realistically aligned with
local incomes.
It still costs much more to own than rent in many
major cities. Based on the same means of comparison,
renting is cheaper than buying in New York, Seattle
and Fort Worth and many other cities. Healthy local
job markets are a major reason for the difference.
The top ten cities most expensive and least
expensive to own relative to rent are below. In the
charts below Trulia.com expressed its results in a Price-to-Rent Ratio which establishes a threshold
for locations where ownership cost are lower than
renting. A Price-to-Rent Ratio of 1-15 means
that it is much less expensive to own than to
rent a home in this city. A Price-to-Rent Ratio
of 16-20 means that it is somewhat more
expensive to own a home in this city. The total
costs of ownership of a home in this city are
greater than the costs of renting, but it might
still make financial sense depending on the
situation. A Price-to-Rent Ratio of 21+ means
that the total costs of owning a home in this
city are much greater than the costs of renting.
From a strictly economic standpoint you would have
to own the home a fairly long time and assume a
healthy appreciation during that time for home
ownership to make sense.
Top 10 Cities to Rent vs. Buy
Top 10 Cities to Buy vs. Rent
To see how the largest 50
cities in America ranked on this month's Rent vs.
Buy index,
click here.
top
 Broadcasters
Turning Off Consumers
Want to watch the World Series
on the Internet? Fuggetaboutit.
New barriers to consumer utilization of the Internet
are being erected by content providers. Fox
Television recently blocked Cablevision’s Internet customers
from accessing Fox content on Hulu and Fox.com. Some
have long feared that Internet Service Providers
(ISPs) would be the ones that might block access to
content. There have been a few attempts in past
decades by ISPs to do
so, and most were quickly snuffed out by the FCC.
Instead it turns out that the content providers are
swiftly becoming the kings of content blocking.
Such efforts by content providers are counterproductive in many respects.
Advertisers indirectly pay for their content, and the
more consumer eyeballs that Fox and others can
deliver, the more they can charge the advertisers.
Consumers have been able watch the programming for
free over the air if they have a digital TV
converter, on cable TV, or on the Internet through
their Internet service provider. Now we have a
situation where content providers simultaneously want to charge
consumers indirectly for access to those advertisers
(indirectly, through fees imposed on cable TV or ISP
intermediaries). To us this double dipping is not
only shortsighted, but could also lead to mass
balkanization of media content and reduced total
viewership.
There are other examples of content providers
blocking access to content, which can be illegal in
some cases. Real estate brokers, who provide home
buyers online content about homes for sale both
through their local broker-owned MLSs (multiple
listing services) and through Realtor.com, have
sought to ban listings of “discount” real estate
brokers. The latter typically charge home sellers only a 1%
real estate commission instead of the normal 5-6%
commission, even though those discount brokers are
members of their local MLS and the National
Association of Realtors. This effort to protect high
real estate commissions hurts not only the discount
brokers, but home buyers and sellers as well. Unlike
a situation where a business or consumer might
willingly pay for an added value of some sort
(faster downloads for example), this practice adds
no value and actually subtracts value. Fortunately
the Federal Trade Commission has intervened numerous
times and all of the MLSs that have tried to exclude
discount brokers have been forced to rescind the
practice.
In cases where there is effective market
competition, content providers don’t have the
ability to block content unless they pay for that
access directly or indirectly. Charging buyers will
reduce their use of the content. The sellers on eBay
will move to Amazon if
eBay decides to charge buyers or any of their
intermediaries for access because the result will be
fewer buyers and lower selling prices (and vice versa). If they
both wanted to charge buyers for access, Craigslist probably wouldn’t
mind at all. Unique media content, such as a
television series, is by its nature a
monopoly so its owners can get away with practices
that a competitive marketplace would not allow.
While companies like Fox can legitimately argue that
as property owners they have the right to try to
monetize their creative products in every way
possible, this does not mean that charging at both the
front and back ends is the wisest business strategy
and it will certainly make things harder for
consumers. Fox could probably make more money by
maximizing the number of consumer eyeballs through
free distribution and charging advertisers more
because they are reaching larger audiences as a
result. The world would be less Balkanized and the
lives of consumers would be much easier.
top
Halloween
Homeowner Strategies 
Homeowners will be dealing with this important challenge in
different ways.
One of the most important questions faced by homeowners is
of course, what kind of candy to buy for Halloween, and how
much. The American Homeowners Foundation informally surveyed
neighbors, friends and colleagues to see how they dealt with
this major challenge. It turns out that there are many
different approaches and many different factors that affect
their decisions.
The first question is whether or not to buy the “good
stuff.” The definition of “good stuff” varies from one
homeowner to another. Generally it means the more expensive
and more popular candies, but to many there are additional
qualifications as well. One neighbor told us that “Hersheys
and M&Ms are the gold standards of Halloween candy because
just about every kid likes them. However I usually buy
Reeses peanut butter cups because they’re my personal
favorite, and I get the leftovers if there’s a light turnout
of ghosts and goblins.” Based on this season’s sales data
from stores that sell Halloween costumes, that neighbor is
more likely to open their front door to Snookie and The
Situation than a ghost or goblin.
Peer pressure and self defense also play a factor in
homeowner’s decision to go with the good stuff. “I know
there’s far less chance that my windows will get soaped if I
hand out the good stuff instead of candy corn,” one of our
friends told us. Based on other dismissive comments about
candy corn, it appears to be the Halloween equivalent of the
fruitcake as a Christmas present. Another told us that he
knew from his kids that the neighbors always gave out the
good stuff, so he felt he had to do the same. “If I don’t,
the neighbors’ kids will give my kids a hard time the next
week, and they’ll tell their parents that I’m chintzy as
well. I just can’t let that happen.”
Some homeowners follow a two candy strategy, buying a mix of
good stuff and cheaper candy. One of our colleagues does
this to save a little money. “I buy enough good stuff to
meet the expected turnout. I’m not a candy eater, so I buy
inexpensive hard candy for a backup in case of high
turnouts. That way I’m not stuck with expensive leftovers.”
Another couple told us that they take the opposite approach,
saving the good stuff as the backup so they’ll be able to
enjoy any leftovers. There may be some interesting
correlations in these different approaches, because the
latter couple is quite a bit overweight, while the former
individual is quite thin. This possible linkage certainly
merits further research by the Food and Drug Administration.
Candy dissemination strategies also vary. Most homeowners
will hand the candy to the kids and/or drop it into their
bags or little pumpkins. Many are more generous if they like
the kid’s costume, know and like the kid, or it’s a
neighbor’s child. Some homeowners simply hold out the basket
of candy and let the trick-or-treaters take what they want.
One homeowner cautioned against this approach. “Some
teenagers will try to dump your whole basket of candy into
their bag.” Another homeowner said that he is tough on
children he feels are too old to be trick or treating. “I
refuse to give candy to someone who needs a shave,” he
noted.
All seriousness aside, there are some precautions that all
homeowners and parents should follow on Halloween. The city
of Norfolk VA recommends that homeowners should:
1. Make sure your yard is clear of such things as
ladders, hoses, dog leashes and flower pots that can
trip the young ones.
2. Pets get frightened on Halloween. Put them up to
protect them from cars or inadvertently biting a
trick-or-treater.
3. Battery powered jack o'lantern candles are
preferable to a real flame.
4. If you do use candles, place the pumpkin well
away from where trick-or-treaters will be walking or
standing.
5. Make sure paper or cloth yard decorations won't
be blown into a flaming candle.
6. Healthy food alternatives for trick-or-treaters
include packages of low-fat crackers with cheese or
peanut butter filling, single-serve boxes of cereal,
packaged fruit rolls, mini boxes of raisins and
single-serve packets of low-fat popcorn that can be
microwaved later.
7. Non-food treats: plastic rings, pencils,
stickers, erasers, coins.
Parents should accompany their younger children on
Halloween. They should wear bright clothing and carry a
flashlight for their own and their children’s safety. Older
kids should be told of any unsafe neighborhoods they should
avoid. The U.S. Food and Drug Administration recommends that
parents take these simple steps to help their children have
a fun – and safe – Halloween:
1. Children shouldn’t snack while they’re out
trick-or-treating. Urge your children to wait
until they get home and you have had a chance to
inspect the contents of their “goody bags.”
2. To help prevent children from snacking, give them
a light meal or snack before they head out – don’t
send them out on an empty stomach.
3. Tell children not to accept – and especially not
to eat – anything that isn’t commercially wrapped.
4. Parents of very young children should remove any
choking hazards such as gum, peanuts, hard candies
or small toys.
5. Inspect commercially wrapped treats for signs of
tampering, such as an unusual appearance or
discoloration, tiny pinholes, or tears in wrappers.
Throw away anything that looks suspicious.
top
|
Please take the time to contact your legislators and express your
views on pending policy issues covered in this
month’s Home Base. It's easy - you can reach your
legislators by email in a couple of mouse clicks,
and you can use the content in Home Base and
elsewhere on our website to help you develop your
message.
To look up the phone number, email, and/or postal address of your
U.S. Representative or your two U.S. Senators, (or
your state representative or state senator)
click here. You can also look up which
legislators represent your zip code if you don’t
recall their names.
A personal meeting is a particularly effective way
to get their attention and reinforce your message.
Many legislators are also happy to meet personally
with their constituents when they are back home on
weekends or when Congress is not in session. Most
are back in their home states now running hard for
the November election, so they are particularly open
to hearing the views of their constituents.
Please consider also requesting a follow up
face-to-face meeting in their home state or home
district offices near you when you contact their
Washington DC offices on policy issues.
Is there a policy issue that is particularly
important to you which significantly impacts
homeowners or home ownership? Any member may propose
a position on a policy issue, so please check the
American Homeowners Grassroots Alliance's 2010 Issue
Guide.
If it isn't on the list, we invite you to send us an
email and tell us why you think the American
Homeowners Grassroots Alliance should take a
position and work on it.
|