How I wish I could get an unbundled subscription to the Wall Street Journal

I cannot do my job without reading it, and its reporters are still excellent, even in the Murdoch era.  And in general, I have learned to ignore the rantings of the editorial page, which basically say that if a policy is first-order good for poor people, it is bad for poor people, and if a policy is first-order bad for poor people, it is good for poor people.

But there is one worthy in particular, sitting high in his aerie at the tip of Manhattan, whose misogynistic braying should be issued (if at all) from his parents' basement: James Taranto, the eager defender of sexual assaulters.  That I am sending any money at all his way is a constant annoyance.

Hannah Green writes on the problem of how victims of rape who are college students are treated

In Open Magazine (an Indian newsweekly), she writes:

Angie Epifano always wears the same necklace. It is simple—a round blue stone set in silver on a silver chain. When something reminds her of her rape, she holds the pendant in her palm and concentrates on how it feels. This brings her a sense of calm.

“It’s called ‘grounding,’” she says, touching the pendant during a Skype interview. It’s a technique psychological counsellors teach those who have experienced rape or other types of trauma: when something occurs in their daily life that reminds them of what happened—whether it’s seeing their rapist, or a certain smell or sound—they must concentrate on something else that will bring them back to the present.

“Some people have a memory that they think of, or a place that they felt safe in, like a wooded space. Or they’ll think of their favourite food or just anything that will bring them back to reality. If you were to run into or see your rapist—that’s the kind of tool that will help you get through the encounter.”

Read the rest here.

Ten Favorite Metro Systems--A Personal View (reposted from Forbes blog).

10) New York.  Butt ugly, smells bad, too many rats, but gets you a whole lot of places at reasonable speeds.

9) Washington, DC.  Very pleasant, beautiful stations, and when working properly, fast.  But its major design flaw (lack of double tracking) means that if one train goes down, the whole system gets gummed up.  And it is not maintained well enough.

8) London.  See New York, except I haven’t used it enough to see a rat.

7) Delhi.  Modern and fast, but you sure better like your fellow human if you are going to use it.

6) Tokyo. Miraculously efficient, but see Delhi.  As such, it reflects its city.

5) Kiev.  Metros may have been the only economic thing the Soviets did well.

4) Seoul.  Longest system in the world.  Clean and reliable.

3) Taipei.  Almost luxurious.

2) Paris.  If i weren’t for the strikes, it would be as close to perfect as a metro system gets.  The Louvre-Rivoli station is so beautiful, you wouldn’t mind waiting for a long time there.  On the other hand, you rarely have to.

1) Barcelona.  Goes everywhere, swiftly, cheaply, comfortably.

[Update: Hong Kong needs to be on the list too.  Maybe 2.5?]

Who Moves? Not Old People? (reposted from my Forbes blog)

A meme is out there that baby boomers, having raised their children, are ready to downsize.  (See here).  Some scholars, such as Arthur Nelson at Utah, say that as the population ages, there could be a mass sell-off of houses which will lead to a collapse in house prices.

One of our Ph.D. students here at USC, Hyojung Lee, and I are redoing a paper I did with Patric Hendershott about 17 years ago on the impact of age on the demand for housing.  Back then, Pat and I found that the effect of age was pretty minimal.  But times have changed, and so Hyojung and I decided it would be worth redoing the exercise using current data–the 2006-2010 American Community Survey.  We decided to look at moving behavior over the entire five years, and in 2006 and 2010 individually, since 2006 was a boom year for housing and 2010 was a bust year.

After controlling for marital status, income, educational levels, race and ethnicity, and geography, we estimated the impact of age on the propensity to have moved in the previous year.  The results are summarized in the graph below (for those who want to know, these are the coefficients from a linear probability model):

As you can see, basically the propensity to move peaks in the early 20s, and then declines to about age 50-55, and then stays pretty flat for the remainder of life (although in 2010 the very oldest seem to have a slightly greater propensity to move).

Some other findings: those never married are most likely to move, while those widowed are least likely to move (after controlling for age).  This implies that the typical elderly person is even less like to move than is implied by the graph above.  Asians are the racial/ethnic group most likely to move–non-hispanic whites, hispanics and African-Americans have similar propensities.  Mobility increases with educational attainment.  Higher income people move less than low income people.

We are doing a lot more work with this data as we prepare it for a paper, but in the meantime, our findings suggest that a mass sell-off (which means mass moving) arising from aging is unlikely.

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House Prices in Southern California need to Rest now (reposted from Forbes).

From my Forbes blog:

DataQuick today reported that house prices in Southern California have risen 28 percent from the last year.  A year ago, people who were buying houses in this part of the world were getting a good deal.  Now, the deal is so-so.

Take a look at the table below (it is something I constructed for my class on mortgages and mortgage backed securities).  The numbers on the vertical axis (.03,.05,.05..)are cost of capital numbers–the financing costs of owning a house.  Generally speaking, the cost of capital for owning a house is the mortgage rate plus one percent, which reflects that the cost of the equity in the house (the down-payment) is higher than the cost of the mortgage.  The numbers across the horizontal axis (10, 15,20…) are rent-to-price ratios.  Suppose you can own a condo for $360,000; the rent on the same unit is $1500 per month or $18,000 per year.  The price to rent ratio is then 20.

In the example given here, we are looking at a household that pays a federal marginal tax rate of 25 percent, a state marginal tax rate of 7.9 percent, faces closing costs of 3 percent, annual maintenance cost of 2.5 percent, a property tax rate of one percent, a Realtor commission of 5 percent, and expects to hold the property for five years (feel free to email me at richarkg@usc.edu if you wish to put your own assumptions in the spreadsheet that produced the numbers listed below).

As it happens, I have been looking at costs and rents in Westwood, a neighborhood just west of Beverly Hills and on the other side of the 405 from Brentwood.  Rents on 2 bedroom units run around $28 per year per square foot; prices are around $650 per square foot, so the price to rent ratio is around 23.  With current mortgage rates at 4.5 percent, the cost of capital is 5.5 percent.  So lets look at the cells that are bolded: a price to rent ratio of 23 and a cost of capital of 5.5 lies in the middle of them.  The numbers in the cell is the amount of appreciation that is required each year that one holds a property for renting and owning to break even with each other.

So right now, for owning to be a better financial deal than renting, prices must rise around 4 percent each year.  Is this feasible in the long run for Los Angeles?  Yes, because over the long term, prices in LA tend to rise by about the rate of inflation plus one percent, so if we think 3 percent steady state inflation is in our future, we should be fine.  But will it rise much more than inflation plus one percent for a long time?  I doubt it.  And of course, CPI growth is less than two percent right now.  House prices are about where fundamentals say they should be, but it is time for increases to slow down.

				Price to Rent Ratio
		10	15	20	25	30
	0.03	-0.031	0.003	0.020	0.030	0.036
	0.04	-0.024	0.010	0.027	0.037	0.044
	0.05	-0.017	0.017	0.034	0.044	0.051
Cost of Capital	0.06	-0.009	0.024	0.041	0.051	0.058
	0.07	-0.002	0.031	0.048	0.058	0.065
	0.08	0.005	0.039	0.055	0.066	0.072
	0.09	0.012	0.046	0.063	0.073	0.079
	0.1	0.019	0.053	0.070	0.080	0.087

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