"We made it easy for people to buy houses and difficult for them to hold onto them," said Tom Clark, an executive vice president with the Metro Denver Economic Development Corp. One out of 128 homes in Adams County is in foreclosure, nearly nine times the national ratio.
In Arapahoe County, one out of every 161 homes is in foreclosure, seven times the national ratio. Other counties with heavy foreclosures are Denver, Weld, Larimer, Elbert and El Paso.

Foreclosures, like a funnel cloud, tend to create their own downward spiral once they get started, said Lori Strange, director of planning and resource development at the Adams County Housing Authority in Commerce City. Lenders who suffer a large number of foreclosures try to recover whatever they can, often underpricing the market, she said. That further depresses resale prices, making it harder for sellers needing to get out to pay off their mortgages.

That triggers more foreclosures, more pressure on lenders to dump properties and more downward pressure on prices.

U.S. average home prices rose by almost 11 percent in 2004. Adjusted for inflation, the price of the average home in the sample increased by 8 percent–the fastest pace recorded in 30 years. Last year, home prices rose 11 percent, but rents only increased by 2.7 percent nationwide. In 2003, the 7 percent gain in home prices also outstripped a 2.4 percent gain in rents.

"The third quarter saw the ARM (adjustable rate mortgage) share of total mortgage originations rise to 43%... The number of thrifts with significant or high interest rate risk rose to 23 in the 3rd quarter, up from 16 the prior quarter."

Some 43% of first-time buyers, David Rosenberg of Merrill Lynch recounts, put zero money down on their home purchases last year; by contrast, two years earlier, 28% bought a house with no down payment. Well over a quarter of the mortgages in '05 were of the dicey "buy now, pay later" variety.

Shelter, you see, which accounts for about 30% of the core CPI is measured not by the dictates of the marketplace, how much houses actually fetch when they're sold, but by a strange -- make that perverse -- yardstick called owners' equivalent rent. Homeowners are asked how much they think they could get were they to rent their abodes.

The result, as Tony Crescenzi, chief bond market strategist for Miller Tabak, deftly puts it, is that "surging housing is suppressing the CPI." Rental income, he reports, has fallen to $147.8 billion, from the peak of $186.6 billion back in April 2002. "This weak pricing pressure in the rental market," he comments, "is weighing upon the owners' equivalent rent portion of the CPI" and, we might add, providing a distinctly distorted picture of what's happening in housing and inflation as a whole.

Hey Mr. Smith, I am writing to say that I enjoy your blog. It’s very professional and you always have interesting data to support your points. I think today’s post on AMERICA’S PRESCRIPTION DRUG CULTURE is spot on. My wife and I rarely watch the evening news, but when we do we are amazed at the barrage of advertisements for drugs. RESTLESS LEG SYNDROME???? Gimme a break! I’m sure you’ve read BRAVE NEW WORLD: I WILL NOT TAKE SOMA…EVER. Anyway, thanks again for your work, I enjoy it.

I enjoyed your article(s) regarding property taxes and the housing bubble. I've been wondering about this problem for some time. The subject doesn't seem to come up much and it's an important issue.

We live in Washington on the Olympic Peninsula. The problem is surfacing here, especially for older folks on a fixed income. A friend of mine, who is in her seventies, recently complained that her property tax just doubled. It wasn't a small amount - over $1,000 per year. It will be interesting to see what happens when more properties are reassessed.

1. Excellent overview of the property tax situation. I have a friend who has a small business doing research at the San Mateo County Recorder's in Redwood City. When he has a little downtime, he sometimes helps people off the street who want to look up property information and don't know how to navigate the computer. He says it's shocking to these folks just how many extra taxes, fees, bond measures and the like are added to a piece of property. It's shocking to him that they can vote and can still be that ignorant.

2. While you gave a great overview of the tax situation in the world, you neglected to mention that we constantly pay taxes on taxes, which is supposed to be unconstitutional. Since I save every receipt for everything (except those in my pocket used to wrap abc gum), I can fairly accurately tally how much sales tax I pay all over the place each year. And that's not even counting the taxes on taxes for household utilities, gasoline, and items such as automobiles.

3. When you consider all the taxes, fees and encumbrances that businesses pay and therefore pass on to the consumer as a cost, the real tax rate that we as individuals pay is higher than even the most ardent communist could imagine.

Enjoy the sunshine for the next few days. They haven't found a way to tax it... yet. Keep up the good work.

Now this is an extraordinarily important report that, even though I didn't help author this report, I want to hammer on it for a few minutes because I think it's something that everyone should be talking about and virtually no one is. It was commissioned by the U.S. Department of Energy, paid for by the U.S. Department of Energy. Science Applications International Corporation compiled the report. Robert L. Hirsch was the project leader, and the title of it is "Peaking of World Oil Production Impacts Mitigation and Risk Management."

Now U.S. DOE asked ASIC basically two questions: is global peak oil a real problem, and, if so, what should we do about it? Now this is the executive summary that they came up with, and I'll read it to you. "The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached , liquid fuel prices and price volatility will increase dramatically, and without timely mitigation the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking."


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Now this report is extraordinary because, well among other reasons, economists have been telling us for some time that peaking of world oil production, even if we need to be thinking about it at all, is really a very small issue because as prices increase, they'll stimulate more exploration. They'll stimulate the production of alternative fuels, and they'll stimulate conservation. And with the combination of all three of those factors, we should make a very smooth and easy transition so that 25 or 50 years from now, we'll all be driving hydrogen cars down the street. No one will know that anything even happened. There won't even have been a bump on the road. We'll look back, and we'll say, what was that all about?

Well, the Hirsch report says that, in fact, those price signals will come at least 10 years too late and maybe 20 years too late to make a real difference. In other words, yes, we can make a transition, but it takes time to prepare that transition before the price signal arrives. For example, we all know we could be driving more fuel efficient cars right now as was mentioned. There are European cars that are already getting 100 miles to the gallon and more. Problem is it takes time to change over the U.S. car fleet.

First of all, U.S. manufacturers have to retool and start making those much more highly efficient cars in large quantities. That will take probably four or five years. Then, not everyone buys a new car every year. I happen to drive a 25-year-old Mercedes diesel that I run on biodiesel, but that's not too uncommon. A lot of us drive cars that are 1-, 2-, 5-, 10-, 15-years-old. So that's going to take 15 to 20 years to change out the entire U.S. car and truck fleet. So we're looking at a process of transition there that will likely take 20 to 25 years.