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Handling the Booming Housing Market

May 20, 2013 Leave a comment

After going through a “housing bust,” the housing market appears to be rising out of the ashes (Wall Street Journal). Homeowners are hungry to sell and buy – in March, “75% of agents with broken Redfin said their clients’ offers were countered by rival bids” (CNN). Builders are pleased with the surge in bids, but are finding it difficult to balance supply with demand. In economic terms, the housing market is not at equilibrium. The problem lies within the market of the desired construction location. Jeff Culbertson, president of Coldwell Banker’s Southern California operations, explains that new home construction “is still moving forward at a snail’s pace” because “the cost to build the homes is often more than what the property ends up selling for” (CNN). This imbalance in cost can be mainly attributed to the housing bust, which impacted many housing markets throughout America.

In order to manage the dramatic increase in demand, one method builders have turned to is the lottery. GL Homes division president Marcie DePlaza reasons that “the lottery is the fairest way to determine the priority in which customers will be able to purchase our model homes” (CNN). It seems that these builders aren’t so much handling the demand as they are making the bidding wars a more pleasurable experience for homeowners. However, they are using commercial appeal and giving the consumer incentive to purchase with their company, ensuring that demand will not fall undesirably at any point. The process is simple: Each homeowner, pre-qualified for a mortgage and with down payments in place, is assigned a number. The number on the withdrawn bingo ball is declared the winner – and the new owner of the model home. Many of those who don’t win return to try their luck on another property, because of the reasonable pricing set forth by the builder. Buyers seem to prefer this method to the competition of bidding because, as lottery participant Neal Rosen puts it, “There was no rushing” (CNN). During the lottery, while numbers are being assigned, prospective homeowners are greeted with food and entertainment to pass the time. By making the experience more pleasurable, builders are satisfying their potential customers and making the struggle for a new home worthwhile.

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Holding lotteries won’t fix the issue of excess demand for housing, but it will make the process easier on consumers and producers alike. Meanwhile, builders are “trying to build faster and get as much inventory on the market as they can” (CNN). Using my knowledge of supply and demand in the economy, I was able to more fully understand this event in the housing market and the reasoning behind lotteries. It’s clear that supply and demand must reach equilibrium, and builders are taking great strides towards that goal by simultaneously enticing the consumer – maintaining the demand they desire – and building new homes to meet that demand. The lottery method, with its less-competitive scene, would appeal to me personally as a consumer in multiple situations. For example, many girls compete viciously to be first in line to meet a celebrity, because often times the line is cut off after a certain number of people. It would be much less violent to enact a game of chance, such as a bingo lottery, that would determine who got to meet said celebrity. Home builders, in an attempt to manage demand, have presented us as an economy with a potentially inspirational way to make recovery from disequilibrium a more relaxing process.

To read more about builders’ personal reactions to this sudden housing demand, check out this article by Catherine Rampell from the New York Times.

Works Cited:

March, In. “Housing: The Bidding Wars Are Back.” CNNMoney. Cable News Network, 04 Apr. 2013. Web. 20 May 2013.

Sunnyvale, O’Brien Homes Started Holding a Monthly Housing Lottery for Its 228-unit Development Called Fusion in. “Builders Hold Lotteries for Eager New Homebuyers.” CNNMoney. Cable News Network, 30 Apr. 2013. Web. 20 May 2013.

YouTube. Perf. WSJDigitalNetwork. YouTube. YouTube, 11 July 2012. Web. 20 May 2013.
Categories: B2 Tags: , ,

Tackling the Fiscal Cliff

February 26, 2013 Leave a comment

By far, the most interesting topic that we’ve studied in Government is the fiscal cliff. One of the main reasons why this drew my attention was because I had no earthly idea was this “fiscal cliff” was that everyone seemed to be buzzing about. I could assume from the name that it had something to do with money, but that was about it. Mr. Ostroff, our teacher, decided to take this topic one step further and challenge our class to not only define the problem, but also develop a solution. At first, I was completely intimidated by this prospect – I spend a good portion of my afternoon trying to figure out how to break it to my mother that I was going to fail Government – but after beginning the research process, I realized that understanding the fiscal cliff wouldn’t be as difficult as I made it out to be.

The fiscal cliff refers to government spending cuts and major tax increases. Should we fall off of this cliff, Americans will deal with more federal taxes and the expiration of multiple tax cuts. According to estimates from the Tax Policy Center, the average federal tax rate will increase from 19 percent to 24 percent (Robertson 7).  This would affect wages and salaries, interest income, long-term capital gains, and qualified dividends (Robertson 3). Also, households will struggle with the temporary expiration of the Social Security tax cuts along with the 2001/2003 tax cuts (Robertson 3). The 2001/2003 tax cuts refer to the Jobs and Growth Tax Relief Reconciliation Act of 2001 and the Economic Growth and Tax Relief Reconciliation Act of 2003 (Robertson 4). Although I may have to refer to my notes for specifications such as which tax cuts are expiring, I will permanently remember the fiscal cliff as spending cuts and tax increases.

Understanding the fiscal cliff itself wasn’t too much of a challenge for me after all. It boiled down to two key ideas, which I mentioned above. Of course, the more difficult part of the project had yet to be accomplished: the solution. To this day, this is the most challenging task posed to me in Government. I will never forget the countless hours I spent researching online and in my textbooks to try and figure out how my team would tackle the fiscal cliff. By the time presentations rolled around, we were still uncertain about whether our solution was ideal for America. Even Mr. Ostroff noted at the end of our PowerPoint that we basically restated the idea of the fiscal cliff itself: Our solution was a reduced amount of expired tax cuts and spending reductions. Although we had little success in determining a proper solution to the fiscal cliff, I know that everyone learned a lesson about humility from this project.

ImageWhen Mr. Ostroff first presented this topic to our class, the majority of us expressed disappointment in the fact that the government hadn’t developed a solution to this problem yet. It seemed easy to us – the inevitable solution to debt is repayment, so why couldn’t the government just earn the money to pay everyone back with?  I, personally, was slightly angry with the White House and assumed that they were simply dodging the issue altogether instead of resolving what appeared to be a simple issue. Multiple students lamented about this throughout the beginning of this lesson, accusing the government of being lazy. Pursuing our own solutions to the fiscal cliff truly humbled me and made me realize that it isn’t at all easy to come up with a solution – especially when you’re a government that is trying to satisfy its entire people! That is part of the challenge of being a democracy. They may never come up with a perfect solution, but I believe that the government can come up with a suitable resolution given enough time. The only question I have now is whether the governments anxiety has turned into complete avoidance of the entire issue itself.

Citation:

Williams, Roberton, Eric Toder, and Donald Marron. “Toppling Off The Fiscal Cliff: Whose Taxes Rise and How Much?”Joserobertoalfonso. Tax Policy Center, 1 Oct. 2012. Web. 29 Nov. 2012.

Categories: B2, Learning

Hostility Between Nations

February 25, 2013 Leave a comment

Recently in class, I learned about the nuclear testing being conducted in North Korea. This immediately caught my attention, because unlike other issues that we have discussed in class, this is a problem that threatens not only the U.S., but also the entire world. North Korean leader Kim Jong-un, as detailed by the Huffington Post, is “angering the United States and Japan” because he has chosen to conduct a third nuclear test “in defiance of existing U.N. resolutions.”

ImageMy opinion is that the international community needs to work together to develop a swift solution that will convince Kim Jong-un to cease this testing. The Constitutions Preamble declares that America has sworn to “provide for the common defence” (Textbook 287). Part of being a strong nation means being wholeheartedly devoted to protecting the people from danger, and a nuclear weapon is most definitely categorized as dangerous.

Focusing mainly on the role of the President, I have connected lessons and developed the beginning of how I believe this issue should be tackled by the United States. To begin, an excerpt from Federalist #10 lays the foundation for my solution: “There are two methods of curing the mischiefs of faction: the one, by removing its causes; the other, by controlling its effects” (2). In this case, the strong-willed faction is Kim Jong-un and his father, who promote the “military first” policy. Federalist #10 later goes on to say that controlling the effects is the only successful maneuver. Next, in order to help manage the effects of Kim Jong-uns current policy, the President needs to take initiative and meet with the United Nations to determine a way to reasonably convince North Korea’s leader to take his focus off of nuclear testing. Woodrow Wilson pioneered the League of Nations, which would later turn into the United Nations, on the belief that “the president should lead not only in national politics but also in international relations” (215). Finally, it is the Presidents duty to have a plan prepared in case Kim Jong-un decides to unleash one of his threatening missiles or simply continues to test these devices. According to Clinton Rossiter, the Presidents role as Commander-in-Chief of the Army and Navy of the United States makes him “accountable… for the nation’s readiness to meet an enemy assault” (Reader 201). Overall, the President is a major player in resolving this issue with North Korea, whether it be peacefully or – in a worst case scenario – through warfare.

Learning about current events at the beginning of each class has greatly increased my knowledge of national politics. It didn’t take long for me to realize that the ways in which nations operate are incredibly diverse, but I had another epiphany yesterday – one that was much more exciting – that completely changed how I understand politics. Throughout this course, we have learned about different types of government such as monarchy and democracy. The way in which most people, including our class, define each government is by explaining the role of the ruling body compared to that of the people: For example, a monarchy is “a government in which the supreme power is vested in the people.” I passed this off as unimportant until yesterday, when one news story changed my perspective.

I have this tradition of watching WFAA News 8 every morning before school. Yesterday morning, I sleepily turned the TV on and half-listened as the weather and traffic forecasts were presented. Then, the newscasters proceeded into their main story for the day. Robin Roberts, a TV personality on ABC’s Good Morning America, had just rejoined the show after battling with cancer. This sparked the focus of their story, in which Robin’s battle is connected to that of Brenda Coplin, a Dallas local. These women went on a journey to healing that was incredibly similar at times, but also unique to each individual. It seemed like your generic compare-and-contrast article, but something about this story made something click inside of my head. Robin and Brenda, despite their differences in how they fought with cancer, both began as a woman who sat down in a chair as her doctor prepared to give her the sad news. They were faced with a common problem. That’s when I finally realized something about national politics that I had never thought of before: Although our nations differ in their methods of ruling, we all began as a body of people trying to figure out how to manage themselves. It was a revolutionary concept for me, because I was so used to discussing the differences between nations – and the problems created by those differences – that I hadn’t stopped to think about what they have in common. I took this concept even further by connecting it to the way in which we describe each type of government: Every definition follows the basic structure of the connection between a ruling body and its people. By realizing that the diversity of governments today sprouted from the same seed – planted by the first government ever made – I have come to understand the true awesomeness of the blossoming of national politics. I conclude with a question: Could recognizing each other’s similarities, rather than each other’s differences, prevent hostility between nations?

Categories: Learning
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