Toxic Homes

Have you ever heard of the Beveridge Curve? Me neither. But it has nothing to do with drinks.

I was just reading the Modeled Behavior blog and there's an interesting post about friction in the job market being caused by "underwater" mortgages.

Basically, the Beveridge curve has job vacancy rate on the y-axis and unemployment rate on the x-axis.

When unemployment is high, job vacancies should be low. But that hasn't been true in recent years! Why?

Apparently, people end up being stuck in their underwater homes and can't move to places where their skills are needed. 

This American Life had a great episode about toxic assets that were bought on purpose by reporters of Planet Money. They interview people with underwater mortgages and discover elaborate schemes of those who made bank (sort of) from the subprime mortgage crisis.

Sigh. Housing is stressing me out. Still looking for a place to live in SF. Looking through Craigslist postings is always entertaining.

There was a post that said, "Home is shared by 2 guys and 2 girls. We like to cook dinner together, sometimes at 4:20 PM." I thought, "What? 4:20 PM is so early for dinner! I'll never get to bond with my housemates because I get out of work so much later!" And then it hit me...like the strong smell of pot when I take the bus home sometimes.

Response from Professor Case! (Of the Case-Shiller Index)

Response from Professor Case @ Wellesley regarding Nami's question on my previous post:
Thanks, Professor!

Question: wait, what about this in america, now? http://www.calculatedriskblog.com/2009/08/research-on-homeownership-rate-through.html
from homeowners to renters?
explain plz

Response from Professor Case:

In 1989, Greg Mankiw and David Weil wrote a paper called "the baby boom the baby bust and the housing market." It made a big splash because it said the housing market would collapse in the U.S. during the 90's. He found a very strong correlation between household formation and house prices. Since the baby boomers were housed and the baby bust meant fewer households would be formed, he called for a big bust. Needless to say he was wrong. The 1990's and 2000's saw the biggest boom ever. I wrote a paper called "Land Prices and House Prices in the United States" published in an NBER volume edited by Jim Poterba some years ago, taking issue with Mankiw's result. I am attaching a copy. The real issue is how long will the boomers stay in their houses? I suspect they will stay a long time. They also buy houses like we buy cars...many own more than one. Consumer confidence is also not a strong predictor of behavior. Look at pages 40-45....Finally they forgot immigration....in the 1990 census we discovered about 10 million folks that we didn't know we had.... I also wrote the attached paper fpr Brookings

soooo

...contrary to what you read, there may no be such a big housing market effect...Quigley and I also find that falling house prices don't lower spending

Karl E. "Chip" Case