Thursday, December 29, 2011

How to become rich: Choose the right occupation

According to this research paper, these are the career fields of Americans in the top 1% of the income distribution (as of 2005):
  • 31% are non-financial executives, managers, or supervisors
  • 16% are medical professionals
  • 14% are financial professionals, including management
  • 8.4% are lawyers
  • 4.6% are in technical fields (computers, math, engineering, etc.)
  • 4.2% are in skilled sales, excluding real estate and finance
  • 3.8% are in blue collar or miscellaneous services
  • 3.2% are in real estate
  • 3.0% are in non-finance business operations
  • 1.8% are professors or scientists
  • 1.6% are in arts, media, or sports
So much for the myth from late night infomercial pitchmen that real estate is the path to wealth! The top 1% are ten times more likely to be managers.

The career fields of the super wealthy—the top 0.1%—are similar, but slightly different:
  • 43% are non-financial executives, managers, or supervisors
  • 18% are financial professionals, including management
  • 7.3% are lawyers
  • 5.9% are medical professionals
  • 3.7% are in real estate
  • 3.0% are in arts, media, or sports
  • 2.9% are in non-finance business operations
  • 2.9% are in technical fields (computers, math, or engineering)
  • 2.3% are in skilled sales, excluding real estate and finance
Judging by this list, and what I've posted previously, for enterprising high school or college students who would like a successful career but don't know what they want to study, a finance, accounting, economics, engineering, math, or computer science bachelor's degree followed by a dual MBA/JD would give you a fantastic head start in life. ...But above all else, get that MBA!

Monday, December 26, 2011

How to become rich: Education and marriage

Gallup has researched the difference between the top 1% of Americans and the rest. Not surprisingly, the wealthy are better educated and married:
To better understand who makes up the top 1%, Gallup combined 61 of its nationwide surveys conducted between January 2009 and November 2011. The resulting sample includes nearly 400 adults in households earning $500,000 or more annually, and more than 65,000 in households earning less than that. The official top 1% of American households in 2010 includes those with incomes of at least $516,633, according to data from the Tax Policy Center as reported in The Washington Post.

Advanced Education Separates the 1% From the 99%

Apart from their bank accounts, Gallup finds education to be the greatest difference between the wealthiest 1% of Americans and everyone else. The Gallup analysis reveals that 72% of the wealthiest Americans have a college degree, compared with 31% of those in the lower 99 percentiles. Furthermore, nearly half of those in the wealthiest group have postgraduate education, versus 16% of all others.

More generally, college education is strongly correlated with household income. Nine percent of Americans earning less than $20,000 per year are college graduates; this rises to majorities of adults in all income groups above $100,000. Similarly, few adults in low-income households have postgraduate education, and this rises only into the teens among middle-income adults. But it sharply increases among those earning $100,000 or more, peaking at 49% among those earning between $250,000 and $499,000, and those earning at least half a million.

The educational differences between the nation's "1%" and "99%" exceed all other demographic as well as political differences seen between these groups in the Gallup data. The next-most-significant distinction is marital status, with nearly three-quarters of the very wealthy (73%) being currently married, compared with half of all others (51%). Accordingly, by 49% to 31%, the very wealthy are more likely to have minor children in the household.
The impact of marriage is pretty simple to explain: Two salaries pay more than one. Regarding education, as I've said in the past level of education matters a lot, but what you study is every bit as important. Despite the fact that society indoctrinates high school students to try to attend high-ranking universities, choosing the right college major matters far more than going to the right school.

Thursday, December 22, 2011

National Association of Realtors overstated existing home sales by 16.7%

Last week I blogged about the National Association of Realtors overstating existing homes sales over the past five years. At the time we didn't know how much the Realtors overstated the numbers. Now we know they overstated them by 16.7%:
Existing home sales during the housing bust were actually 14.3% worse than previously reported, a revision to Realtors' group numbers shows.

On Wednesday, the National Association of Realtors (NAR) revised home sale counts back to 2007 due to flaws in their original data analysis.

In 2007, there were actually just 5.04 million existing home sales, 11% less than the 5.65 million originally reported. Even worse were 2008 and 2009, when there were 16% fewer sales than originally reported. Sales in 2010 were 15% lower.

"The errors started in 2007 and continued to accumulate over time," said Lawrence Yun, NAR's chief economist. ...

The data is "key to the economic outlook," said Mark Zandi of Moody's Analytics, "and the revisions help to explain the severity of the housing crash." ...

Some industry sources had been critical of the organization's data. In February, CoreLogic charged that NAR data was overestimating sales by 15% to 20%.

When NAR investigated, it found a "notable upward drift" in the numbers compared to other measurements such as courthouse deeds records, said Yun.
For anyone confused about where the 16.7% in the title comes from, the first sentence of the quoted article says sales were 14.3% worse than previously reported, and 100 / (100-14.3) = 16.7.

Wednesday, December 21, 2011

Updated housing graph

I have updated my national housing graph. My metropolitan area graphs are still nine months out of date.

Tuesday, December 20, 2011

Housing starts spiked in November

Housing starts are up 24.3% year-over-year:
Home building spiked up in November to the strongest level in almost two years, as record-low mortgage rates and a surge in apartment and condo construction lifted activity.

Housing starts shot up to an annual rate of 685,000 in the month, up 9.3% from October and 24.3% higher than a year earlier. Building activity easily topped predictions of 627,000 starts economists surveyed by were expecting.

Building permits, a closely-watched reading that is less affected by weather than actual starts, also shot up, rising 5.7% from October and 20.7% from the year before to 681,000 homes annually. ...

Both permits and starts were the strongest readings since the spring of 2010, the original deadline for a homebuyer tax credit that sparked a temporary rebound in building and home sales.
I'd like to post some graphs, but the St. Louis Federal Reserve website hasn't updated their data. When they get around to it, the new housing starts graph will be here and the new housing permits graph will be here. The official Commerce Department press release is here.

Monday, December 19, 2011

Mortgage lenders suspend evictions for the holidays

Merry Christmas, delinquents! You get a free pass for about two weeks:
Happy holidays struggling homeowners! Fannie Mae, Freddie Mac and several large mortgage lenders have pledged not to foreclose on delinquent borrowers during the Christmas season.

For homeowners with loans through Fannie Mae and Freddie Mac, the moratorium will run from Dec. 19 to Jan. 2. During this time, legal and administrative proceedings for evictions may continue, but families will be allowed to stay in their homes, Fannie said in a statement.

"No family should have to give up their home during this holiday season," said Terry Edwards, an executive vice president for Fannie Mae.

Among some of the major banks that offer mortgage loans, Chase Mortgage said it will not evict anyone between Dec. 22 and Jan. 2. Wells Fargo will also suspend evictions during that period, but will not shut down its eviction machinery entirely. ...

Bank of America said that it would "avoid foreclosure sales or displacement of homeowners or tenants around the Thanksgiving and Christmas holidays."
The caveat is that these temporary suspensions only apply to loans in a bank's own portfolio. For loans the banks service for others, evictions will still occur.

Saturday, December 17, 2011

On the rights of Palestinians

Does Israel have a right to exist? This question is often asked by defenders of Israel as a means to establish complete agreement on the right of Israel, because anyone who says "no" will be branded as anti-Semitic (i.e. as a bigot). The question left intentionally unasked is: Does Palestine have a right to exist? Personally, I believe both questions should always occur together. Asking the former, while omitting the latter, reveals the bias—and the bigotry—of the questioner. I believe the answer to both questions is yes, but a detailed answer requires a discussion of political philosophy. I'm a libertarian, and libertarians never miss an opportunity to discuss political philosophy.

States, countries, and governments do not have natural rights. Only human beings—or, in a broader sense, only living beings—have natural rights, rights endowed to us by our Creator. However, states, countries, and governments can have artificial rights—rights created by man—as a means to protect the natural rights of their people. Natural rights are inalienable, and superior to artificial rights.

When the natural rights of human beings collide with the artificial rights of states, justice requires that the natural rights of human beings should triumph. For example, during the U.S. Civil War, the South fought in favor of the artificial rights of states, while the North fought in favor of the natural rights of human beings. The North was right. The North was just. Thankfully for human liberty, the North won.

Israel has an artificial right to exist as a means of protecting the natural rights of Israelis. But the natural rights of Palestinians also need protecting. Currently, the Palestinians have no voice in the government that controls them. They are at the mercy of Israel. The Palestinians, constituting roughly 36% of the people under the control of the state of Israel, have no elected representation in the Israeli government. That is not modern democracy. The Israeli government regularly tramples on the human rights of the Palestinians. The Palestinians have no liberty. They deserve either full, elected representation in the Israeli legislature, the Knesset, or they deserve complete independence. Currently, they have neither.

So, yes, Israel has the right to exist. But a Palestinian state has the same right to exist—and for the same reason—to protect the natural rights of its people. The right of Israel to exist is no greater than, and no less than, the right of Palestine to exist. It is moral hypocrisy to support one and deny the other. So I ask you: Does a state of Palestine exist?

Thursday, December 15, 2011

Realtors overstated home sales for 5 years

The National Association of Realtors has admitted that it overstated existing homes sales numbers for the past five years:
If you thought the U.S. housing market couldn't get much worse, think again.

Far fewer homes have been sold over the past five years than previously estimated, the National Association of Realtors said Tuesday.

NAR said it plans to downwardly revise sales of previously-owned homes going back to 2007 during the release of its next existing home sales report on Dec. 21.

NAR's existing home sales numbers, released monthly, are a closely followed gauge of the health of the housing market.

While NAR hasn't revealed exactly how big the revision to home sales will be, the agency's chief economist Lawrence Yun said the decrease will be "meaningful."

"For the real estate business, this means the housing market's downturn was deeper than what was initially thought," Yun said.

Thursday, December 8, 2011

Senators propose easier visas for foreign home buyers

I am a strong supporter of immigration. There's no way America would have grown from a sparsely-populated wilderness to the world's sole superpower without it. However, this seems to me like yet another lame attempt by politicians to re-inflate the housing bubble they loved so much:
Two senators, Charles Schumer, a Democrat, and Mike Lee, a Republican, recently introduced legislation to fast-track visas for foreigners spending $500,000 on residential property. Their Visit USA Act would allow purchasers and their families to live in America for as long as they owned their houses, though not to work there or receive any federal benefits.

The senators envisage wealthy jet-setters and well-heeled retirees boosting America’s weak housing market. As buyers would have to live in their new homes for at least 180 days a year, they would also (very handily) be liable to pay American tax on any foreign earnings.

Occupy Wall Street comes to your neighborhood

The OWS movement is now protesting foreclosures:
In more than two dozen cities across the nation Tuesday, an offshoot of the Occupy Wall Street movement took on the housing crisis by re-occupying foreclosed homes, disrupting bank auctions and blocking evictions.

Occupy Our Homes said it's embarking on a "national day of action" to protest the mistreatment of homeowners by big banks, who they say made billions of dollars off of the housing bubble by offering predatory loans and indulging in practices that took advantage of consumers.
Hopefully the OWS protesters used the occupation of homes as an opportunity to take a shower. I've heard from several sources that these people, unshowered for months, smell like rotten eggs.

Wednesday, December 7, 2011

Paul Krugman bashes Friedrich Hayek

Paul Krugman tries to frame Hayek as an irrelevant macroeconomist:
Friedrich Hayek is not an important figure in the history of macroeconomics. ...

These days, you constantly see articles that make it seem as if there was a great debate in the 1930s between Keynes and Hayek, and that this debate has continued through the generations. As Warsh says, nothing like this happened. Hayek essentially made a fool of himself early in the Great Depression, and his ideas vanished from the professional discussion.

So why is his name invoked so much now? Because The Road to Serfdom struck a political chord with the American right, which adopted Hayek as a sort of mascot — and retroactively inflated his role as an economic thinker. ...

But the Hayek thing is almost entirely about politics rather than economics. Without The Road To Serfdom — and the way that book was used by vested interests to oppose the welfare state — nobody would be talking about his business cycle ideas.
First, let me point out that Krugman uses a straw man fallacy, as he often does. He states that people claim "there was a great debate in the 1930s," but that's not the way I've ever heard it. In The Commanding Heights, for example, Daniel Yergin and Joseph Stanislaw very explicitly point out that Hayek did fall out of favor during the Great Depression, but he came back into favor when cracks started to appear in Keynesian economic theory.

Second, what Krugman conveniently doesn't tell his readers is that Hayek is a Nobel laureate. Friedrich Hayek and Gunnar Myrdal won the 1974 Nobel Memorial Prize in Economic Sciences "for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena." Krugman claims that "Hayek is not an important figure in the history of macroeconomics," but the theory of money and economic fluctuations are MACROECONOMIC concepts! And it should be obvious that the Swedes who award the prize are not part of "the American right."

That's OK. Krugman also regularly bashes Joseph Schumpeter, who gets his very own chapter in The Worldly Philosophers. In this poll, originally from a left-wing source, both Schumpeter and Hayek outrank Krugman as twentieth century economists. (Krugman's best work was done in the 1980s.)

It is true that Hayek's popularity is due in large part to politics, but the same is true of Krugman's popularity.

Friday, December 2, 2011

Unemployment rate drops to 8.6%

The unemployment rate hasn't been dropping steadily, but it has been dropping. Today it was announced that it has fallen to 8.6%, from 9.0% a month earlier.

Thursday, December 1, 2011

S&P/Case-Shiller National Home Price Index declines 3.9% year-over-year

For the third quarter of 2011, the S&P/Case-Shiller National Home Price Index was flat quarter-over-quarter, but fell 3.9% year-over-year:
Data through September 2011, released today by S&P Indices for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show that nationally home prices did not register a significant change in the third quarter of 2011, with the U.S. National Home Price Index up by only 0.1% from its second quarter level. The national index posted an annual decline of 3.9%, an improvement over the 5.8% decline posted in the second quarter. Nationally, home prices are back to their first quarter of 2003 levels. ...

The chart [above] depicts the annual returns of the U.S. National, the 10-City Composite and the 20-City Composite Home Price Indices. The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 3.9% decline in the third quarter of 2011 over the third quarter of 2010. In September, the 10- and 20-City Composites posted annual rates of decline of 3.3% and 3.6%, respectively. Eighteen of the 20 MSAs and both monthly Composites had negative annual rates in September 2011, the only exceptions being Detroit and Washington DC.