Author Archives: legallysociable

Looking at how consumers are the major beneficiaries of fixed-rate mortgages

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The historical development of the fixed-rate mortgage, usually 30 years in the United States, helped contribute to the post-World War II suburbanization boom in the United States. Several scholars take a look at who exactly benefits from the fixed-rate mortgage (FRM):

The FRM clearly occupies a central role in the U.S. housing finance system. It has been the dominant instrument since the Great Depression and currently accounts for more than 90 percent of mortgage originations. The FRM is regarded as a consumer-friendly instrument, which is one reason why it enjoys enduring popularity. But the instrument can cause problems for both current and prospective borrowers. And part of its popularity is due to government support as well as past regulatory favoritism. The FRM is heavily subsidized through the securitization activities of Fannie Mae and Freddie Mac. These subsidies, which lower the relative cost of the instrument, are an important factor in its popularity. The FRM also imposes costs on the mortgage industry and on investors in mortgage securities—costs that are likely to rise as the economy recovers. Importantly, the FRM is a onesided design. Consumers, particularly those who utilize the prepayment option, benefit while investors and taxpayers bear the cost.

The PDF file linked to from this document has a lot of interesting information. A few thoughts about this:

1. The fixed-rate mortgage came about because of particular historical conditions and interests. Prior to World War II, other kinds of mortgages were sold.

2. The fixed-rate mortgage is not as common in lot of other countries around the world. There are other ways the mortgage market could be set up.

3. The authors suggest that the FRM is the primary mortgage instrument in this country because of governmental approval. Here are the final two sentences in the conclusion of the PDF:

There is nothing so special about housing finance that necessitates the government absorbing the credit risk of the vast majority of the mortgage market or underwriting the interest-rate risk of the that market. Two episodes with massive taxpayer loss should convince us of that fact.

But I think this may be overlooking the cultural and symbolic value Americans place on owning a home. While this scheme may put taxpayers on the hook, Americans also value homeownership, particularly as a lynchpin of the American Dream. Most (if not all) presidents since Calvin Coolidge have pushed policies that would boost the homeownership rate. From FHA and VA loans to Fannie Mae and Freddie Mac, the government has poured billions into homeownership. So while consumers might benefit from this setup, would we be willing as a nation to push for different types of mortgages that might make it more difficult for Americans to purchase a home?

How social class might affect a family’s view of its pet

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Some sociologists have examined the relationship between people and their pets. Indeed, there is even an American Sociological Association section titled  “Animals and Society” (read their rationale here).  Here are the thoughts of two sociologists on this dynamic between pets and their owners:

Sociologist Elizabeth Terrien discovered in a study of dog owners that people from rural backgrounds view dogs more as guardians that should be kept outside. More affluent people tend to see their pets more as children and describe them in terms such as “child,” “companion” or “partner in crime.”

Terrien found that those with Latino backgrounds were more likely to use the term “protector” or “toy” to describe their pet’s role.

Carey also refers to sociologist David Blouin’s three main categories of pet owners:

“Dominionists,” who view pets as useful but replaceable helpers. Many of the people in this category in Blouin’s study were immigrants from rural areas.

“Humanists,” who pamper their pet much like a human child, let their pets sleep in their beds or leave money in their will.

“Protectionists,” who have strong opinions about how animals should be treated and decide what they think is “best” for an animal (untying a dog tethered to a tree, for instance, or determining when a dog should be put down).

I wonder if we could map these ideas on top of Annette Lareau’s ideas about class and parenting styles in Unequal Childhoods. Lareau suggests that lower-class parents practice the accomplishment of natural growth, a more independent view of children and not encouraging children to challenge external authorities, where middle- and upper-class parents practice concerted cultivation where children are encouraged to speak up and parents give children the activities and cultural tools to get ahead. These categories seem to line up with the idea of these two sociologists: pets are more replaceable and functional for lower-class people (“dominionists”) while pets take are much closer to family members in more wealthy families (“humanists” and “protectionists”).

I also wonder if there is work comparing the treatment of children in families to treatment of pets. What might the impact of this be on children?

Additionally, it sounds like there could be some value judgment regarding which of the three approaches is most appropriate. How do “humanists” and “protectionists” view “dominionists”?

Wellbeing among American cities

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Gallup surveyed 188 metropolitan areas in the United States in 2010 and then ranked the cities according to their Well-Being Index. Here is the top 5:

1. Boulder, Colorado

2. Lincoln, Nebraska

3. Fort Collins-Loveland, Colorado

4. Provo-Orem, Utah

5. Honolulu, Hawaii

Here is some information on how the index was calculated:

The Gallup-Healthways Well-Being Index score is an average of six sub-indexes, which individually examine life evaluation, emotional health, work environment, physical health, healthy behaviors, and access to basic necessities. The overall score and each of the six sub-index scores are calculated on a scale from 0 to 100, where a score of 100 represents the ideal. Gallup and Healthways have been tracking these measures daily since January 2008.

In terms of analysis of these findings, Richard Florida has some thoughts. My guess is that Florida will tie these findings to own ideas about the creative class, a group that tends to live in cities that are college towns, have younger populations, higher level of innovation, and more cultural opportunities.

(A side note: I’m not sure who came up with the headline for Florida’s thoughts but calling these “America’s New Happiest Cities” may not exactly be the same things as measuring “well-being.” The Gallup index goes beyond “life evaluation” and “emotional health” to include other factors like physical health and workplace environment.)

Posting good online pictures of homes for sale

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Having moved in the last two years and as someone who studies housing, I have recently seen a lot of online pictures of homes for sale. The pictures should help a potential buyer make a decision about a home: does it have the features one wants? But often, one finds pictures that are completely unhelpful: they are taken at a bad angle, highlight some of the worst things about a home, or really don’t offer much information at all. Here is one example of a picture I found on Redfin.com for a home for sale in Downers Grove, Illinois:

Perhaps the back door couldn’t be opened because the home is a foreclosure. But really, can’t the photographer open the screen door and take a picture of the back yard (which has a nice deck and swimming pool – though it does back right up to a set of townhouses) that actually shows its good features?

This is not just an isolated shot. While there is a picture of the living room, kitchen, one part of the bathroom, and the basement, one of the seven pictures total also features the laundry room:

Of all the shots I could have in order to assess whether I might want to purchase what looks like a nice house, seeing the laundry room doesn’t help much. And it appears the seal of the door into the room is coming off.

I don’t mean to pick on this particular house; this is a problem for many houses listed online. I have heard of realtors using photographers to get the best shots – I bet this makes a difference in the long run. Since much of homebuying seems to be about impressions (at least in the initial whittling-down phase online), these kinds of bad pictures don’t help.

(A side note: I would be interested to hear from realtors on whether these online pictures make their job easier or harder. On one hand, it limits their corner on information – now the average consumer can do some of the searching themselves while the information available to the average homebuyer was more limited before. On the other hand, perhaps this is a more efficient use of realtor’s time as homebuyers already have whittled down their list of options before asking the realtor to show them homes. This could be an interesting research project.)

The dropping of two-story ceilings

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One commonly cited architectural feature of McMansions are two story ceilings, often in the entryway to the home or in the family/great room. A new survey suggests that builders are pulling back on these tall ceilings as people alter their priorities:

Now, trends are more down to earth, another sign of the times. Yes, high ceilings open up living spaces. But many homebuyers want to take advantage of the wasted space on the second floor with perhaps another bedroom. Issues concerning energy inefficiency, sound transmission and a lack of coziness also pointed to the desire for lower ceilings.

Builders have gotten the message. A survey of builders across the country revealed that 14 percent of homes this year will be built with two-story foyers and 12 percent with two-story family rooms, a substantial decline from previous years, said Stephen Melman, director of economic services for the National Association of Home Builders…

“Customer feedback describes two-story open spaces as cold and austere,” Parkman said. “That goes against the current trend toward warmer and more functional spaces. Rooms with two-story ceilings actually can be a negative for some buyers.

This change goes along with plans builders have to construct smaller and greener homes.

What will be interesting to watch is to see how the architectural profile of the McMansion changes in the coming years. The two-story foyer is common but so are other features like a multiple-tier roof (many gables), a brick or fake stone facade, and more. If future McMansions lose these features and for good reasons (such as wanting to be a bit smaller or greener), will they no longer be called McMansions? Or will there be other features of such homes, such as their size or neighborhood, that will still invoke the term?

The synchronicity of stock traders

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In recent years, sociologists have produced a number of interesting works regarding the behavior of economic insiders. In a recent study published in the Proceedings of the National Academy of Sciences, the authors argue that stock traders have fairly synchronized behavior:

Sociologist Brian Uzzi of Northwestern University in Evanston, Illinois, and colleagues analyzed all trades taking place in a single firm of 66 employees over 2 years. As is usual in trading firms, the employees specialized in different markets—housing, autos, or health care, for example—so they had no obvious incentive to copy one another’s behavior. Each trader typically bought or sold stocks about 80 times a day, which the researchers allotted to second-long time windows.

A 7-hour working day is roughly 25,000 seconds, so the chance of one employee’s 80 trades randomly synchronizing with any of his colleague’s is small. Yet Uzzi’s group found that up to 60% of all employees were trading in sync at any one second. What’s more, the individual employees tended to make more money during these harmonious bursts…

This is interesting information in itself: there are common patterns to behaviors in which we might typically assume that traders act on their own. But perhaps the more interesting aspect of all of this is why these trader’s actions are so synchronized. Here is what the authors suggest:

They believe the synchronized behavior is simply a general indicator that the market is ripe for safe trading. Although each individual trader has a short-sighted view of his or her specialist market, the traders’ collective monitoring of events in the outside world means that, at some point—indeed, at 1 second—group instinct prompts many of them to buy or sell together. The researchers found that instant messaging among traders spiraled at times of synchronicity, which seems to support this view. Trading out of sync, Uzzi says, would mean the trader misses out on the time when the market information was optimal for a return.

So even with specialized tasks, these traders are then monitoring broader conditions and responding to group behavior. This seems to fit with other sociological research that suggests that economic decisions that often get chalked up to things like rationality or intuition are influenced by social factors.

There is an intriguing implication as well:

Uzzi thinks trading firms could capitalize on the phenomenon by giving their employees more money to trade when they are in sync. But he warns that the traders themselves must never be told about the decision. “It is well-known that once people become self-conscious of their own behavior, their behavior changes,” he says.

So will behaviors (and outcomes) change if this article becomes common knowledge amongst traders?

Sociologist says Oprah has been in front of media trends

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Oprah has been moving her operations to her own television network, OWN (the Oprah Winfrey Network). A sociologist discusses this move:

I see OWN as a smart move for two reasons. First, Oprah is only one person. She has been working nonstop in front of the camera for nearly 30 years. It may be time to think about how to develop her brand in a way that is not completely dependent on her as a frontwoman. Second, the move to cable may be a good choice in a media context where the center of gravity is shifting away from network television premised on the existence of large mass audiences.

In further comments, it is suggested that Oprah’s popularity is partly due to her positioning within the media landscape:

Oprah is an icon for many reasons, but surely one is that her career trajectory has closely mapped changes in the larger media landscape. Beginning in the daytime television talk show format, pioneered by Phil Donahue, Oprah fully realized the potential of the genre as she leveraged her fame on multiple media platforms including, radio, television, film, Broadway, books, magazines, and the Internet. In addition to her work in daytime talk, some of her most recognizable products are her highly successful lifestyle magazine O, her roles in high-end dramatic works for film and stage, like The Color Purple and Beloved, and her ill-conceived philanthropic project for girls in South Africa (also a documentary). Although these projects did not all succeed equally well, they have cemented Oprah’s cultural prominence and sheer ubiquity. They also demonstrate Oprah’s ability to take risks.

I would also note that Oprah is a global media phenomenon. Unlike other big celebrities in the United States, Oprah has taken advantage of the increasingly expansive syndication of the digital era to build a mass international audience.

This sort of perspective is a broader one, moving beyond Oprah’s personality or the atmosphere of her show and emphasizing how Winfrey has been very effective at working at the forefront of the changing media. Particularly in expanding to newer platforms, Winfrey has built her brand beyond just a talk-show.

I wonder how much of this is post-hoc analysis. When Oprah was building her show and audience, just how risky was she? Looking back, we can see that she has been successful. But there must have been other personalities and celebrities that attempted to follow similar paths. How exactly did Oprah get ahead or leverage these particular technologies? How risky were her decisions compared to others? Was she a first-adopter or just in the opening waves of certain changes?

“Sustainability thinker” suggests sprawling suburbs can’t really be green

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A common target of those concerned with being green and sustainability are American suburbs. While some might suggest that suburbs can become more green (read here and  here), Alex Steffen, a sustainability thinker, suggests it really isn’t possible:

What’s a sustainability trend that you wish would go away?

Shallow redesigns of suburban life. You see a lot of proposals these days that seem to suggest that all that open space is perfect for farming, or that we can power our McMansions and cars with solar panels, so even the suburbs can “go green.” The brutal reality is that newer, more sprawling suburbs—and especially the cheap boom-years exburbs—aren’t just a bit unsustainable, they’re ruinously unsustainable in almost every way, and nothing we know of will likely stop their decline, much less fix them easily.

Unfortunately, it isn’t really clear what Steffen means by this. What constitutes a “shallow redesign” versus something more substantive? Would Steffen agree with New Urbanists that suburbs can be redesigned in ways to promote green behavior? This statement is also interesting: “nothing we know of will likely stop their decline.” They may be in decline now due to financial concerns (the budgets of local communities, the ability of homeowners to purchase large new homes) but does that mean that they will be on the decline forever? Could we have the same type of sprawl with just more green single-family homes (like LEED Platinum homes)? What sort of suburbs, if any, would he be in favor of?

As I read Steffen’s comments, I thought about the trade-offs those interested in being green and sustainability might have to make regarding American suburbs. Given the popularity of suburbs in American life, both as an ideology and an actual destination of a majority of Americans, can this movement really claim that suburbs as a whole are bad? Instead, most arguments seem to be incremental: suburbs can be modified in ways, such as having LEED homes or more mass-transit or more fuel efficient cars, that retain some of their key attributes without turning it into city life. But even with these sorts of incremental arguments, I wonder how many of the commentators really wish that suburbs would just disappear but can’t admit such things because the American public would react negatively.

What happens when even the schools in well-off sububs don’t meet the NCLB standards?

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With the increasing standards in the No Child Left Behind Act (NCLB), the Department of Education recently suggested that the number of schools that are not meeting standards is likely to dramatically increase:

The Department of Education estimates the percentage of schools not meeting yearly targets for their students’ proficiency in in math and reading could jump from 37 to 82 percent as states raise standards in attempts to satisfy the law’s mandates.

According to this “Fact Check,” schools are not labeled as “failing.” Rather, there is a process such schools would go through if they do not meet the NCLB increasing standards:

Obama’s terminology wasn’t quite right, though. There is no “failing” label in the No Child Left Behind Act. And schools that do not meet growth targets — aimed at getting 100 percent of students proficient in math, reading and science by 2014 — for one year are not subject to any intervention.

Those unable to do so for two or more consecutive years are considered “in need of improvement.” The consequences then become stiffer each year, starting with offering students an opportunity to attend another school, and escalating if the targets remain unmet.

As more schools are unable to meet these standards, what happens when suburban school districts in fairly well-off suburbs don’t meet the standards? Many of these communities use their well-performing schools as a selling point. Suburban home buyers and businesses are influenced by school performance and perceptions about school districts.

Having schools labeled as “not meeting standards” (or in possible public jargon, “failing”) would be a blow to the idyllic image and high status of a number of suburban communities. Beyond schools, suburbs are supposed to be places where Americans can be safe and at least their children can get ahead. Suburbs could try to give a more technical explanation for the NCLB data but this could prove tedious or difficult to understand.

One possible outcome  of all of this (suggested to me by a colleague outside my department) might be that this is when NCLB will truly be done: when monied suburbs realize that the legislation says their good schools are not making adequate progress.

Update on “baseball McMansions” in Arizona: White Sox also facing issues

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Yesterday, I wrote about a new spring training facility in Arizona that one writer dubbed a “baseball McMansion.” While this particular park may have issues, it is not the only one. The Chicago White Sox also recently moved to the same area. Because of the economic recession, the White Sox are having attendance issues and the mixed-use development that was supposed to surround their facility has not been built:

Small crowds on the west side of the Valley are an alarming trend as the White Sox and other neighboring teams try to rebound in the wake of a depressed area.

“The opening of the Rockies-Diamondbacks stadium (Talking Stick at Salt River Fields) is definitely pulling people away,” Sox chairman Jerry Reinsdorf said before 10,074 fans attended Wednesday’s game between the Sox and world champion Giants. “Now you have six teams in the east valley…”

But the Glendale area hasn’t developed into what the Sox thought when they decided to move from Tucson after the 2008 season.”One of the attractions to putting this ballpark here was the plan for what was going to be built around it,” Reinsdorf said. “By now, in our third year, we were supposed to be looking at restaurants and retail and a hotel and condominiums. And the guys who were going to do that went broke. So we’re sort of sitting out here by ourselves.

“All of the projections for the Phoenix area growth had Glendale in 10 years being the population center of the valley, a ton of people west of here. And that stopped. But at some point the economy will come back. This is too vibrant an area. And when it does come back, those projections will come true. So it’s just a delay.”

It may be some time before the White Sox and other teams see an uptick in attendance and building as Arizona has been hit hard by the economic recession, evidenced by foreclosures and a slowdown in development. Reinsdorf sounds quite optimistic about the future – perhaps he has to be if he has put a decent amount of money into this project.

it seems like now would be the time to look into why exactly the White Sox and other teams moved to this area. In their projections about Glendale, was their any allowance for a growth slowdown? Was the main draw the growing population in this area or were there certain financial incentives that made this move attractive? And what will happen to these spring training complexes if population growth in this area is limited for a significant amount of time?