Seasonal Effects in Housing

Econbrowser has some bad news about the current housing market:

In a typical year, most new home sales occur between March and August. In each of those months we usually might expect 35% more homes to be sold than at the seasonal low in December. This August, home sales were actually less than in December, the first time that's happened in the 44 years these numbers are available.

For comparison, using MLS data on home sales, the 7 Rivers Region saw 102 listings sold in December of 2006, while August of 2007 saw 155 listings sold. That is a 52% increase. Although August 2007 is 11% below August 2006, at least its not below December of 2006!

A Plug

A plug for a fellow economist and cyclist. Francisco Torralba has a new blog econweekly, you should check it out. Looks like he has a great post on what the goals of the Fed should be here.

I think the Fed should stop caring about recessions. In fact, Congress should mandate so.

I think it sounds like a pretty good idea, but good luck getting congress to mandate that.

Besides being an economist he is also a cyclist on the U Chicago club, and as a Catalan speaking Spaniard, I bet he can climb...

Milk Prices

According to this NYT piece:

Driven by a combination of climate change, trade policies and competition for cattle feed from biofuel producers, global milk prices have doubled over the last two years. In parts of the United States, milk is more expensive than gasoline. There are reports of cows being stolen from Wisconsin dairy farms.

I've heard as little as a few years ago, all dairy farms in Wisconsin were cash flow negative. I guess this means things have turned around.

For an interesting look into the economics of the dairy industry read this fedgazette piece which covers the price problems of 2002-2003. And this piece discusses the economies of scale disadvantage most Wisconsin farms face.

Technological advances in dairy production—from automated milking parlors to computer systems and management protocols—have dramatically increased dairy productivity, the number of pounds of milk a cow can produce. The average cow can produce four times more milk today than in 1930. But those technologies are most economical on large-scale operations, and small farmers have been unable or unwilling to grow large enough to incorporate them. A 1998 Minnesota State Colleges and Universities analysis of Minnesota dairy farms found that small dairy herds (under 100 head) averaged 17,699 pounds of milk per cow per year, whereas cows in large herds (300+) produced 21,284 pounds.

Left Behind

Yesterday I went to my first UW Madison Econ department seminar which played host to Derek Neal. He has some Chicago school data before and after the implementation of high stakes testing and in his paper entitled Left Behind By Design: Proficiency Counts and Test-Based Accountability.
His thesis is captured well with this quote.

"We were told to cross off the kids who would never pass. We were told to cross off the kids who, if we handed them the test tomorrow, they would pass. And then the kids who were left over, those were the kids we were supposed to focus on."*

They find evidence that high stakes testing, when the standard is set high enough to be unreachable for some results in no improvements in test scores in the tails of the distribution.

Some interesting observations:
1. High stakes testing leads to teaching more intensively to to the students close to the proficiency standard while ignoring the students in the tails of the distribution. Much like teaching to the test ignores important skills that are unrelated to those required for the test.

2. The higher the proficiency standards the more children are left behind, as the probability of them becoming proficiency decreases with rising standards, the teacher's effort shifts up the ability distribution. So if you really don't want to leave any children behind, you need to make sure the standards are attainable for all students. Of course this will result in less teaching effort being allocated to the upper tail of the distribution.

3. Even a value added metric is difficult to design in that we often treat test scores as cardinal measures when they are likely no better than ordinal. Thus the teaching effort may not be uniformly distributed across student ability if test gains are easy to get in certain areas of the ability distribution.

No Child Left Behind (NCLB) is up for renewal, and it doesn't sound like they have any hope of getting the incentives right.

It still seems to me to a value added approach would be a better direction for NCLB to go. It certainly minimizes the problems associated with merely comparing proficiency rates across very different schools. And it is more in line with what we mean when we talk about learning. Under NCLB, a school that has the brightest students and 100% proficiency would be considered successful even though the students might not be learning anything.

Time to Refinance?

When interest rates were falling, did you wonder as I did if it was the right time to refinance? I remember hearing a rule of thumb, if the interest rate had fallen by over 1% and you expected to be in your home for more than 5 years, it would most likely make sense to refinance. As an economist this answer was never precise enough for me. So I should have sat down and calculated the exact rate at which I should refinance, but the procrastinator in me always put it off. Now thanks to my good friend Sumit Agarwal, I don't need to do any heavy lifting or mathematical computation.

Sumit and his co-authors have a nice little calculator up at the NBER website.

Optimal Time to Refinance Calculator

Wow. Rates never fell low enough for me to refinance, so it looks as though my procrastination paid off. Well, it saved me the time it would have taken to calculate the optimal rate anyhow.

Foreclosures

A recent tribune article reports foreclosed properties are up from 2006 for La Crosse county.

Home foreclosures in La Crosse County this year are up by nearly a third over the pace in 2006, mirroring a statewide rise of nearly two-thirds.

Fifty-two La Crosse County properties have been foreclosed on through July of this year, with another 17 scheduled for foreclosure. That’s well ahead of the 40 foreclosures at this time last year, according to the La Crosse County Sheriff’s Department.

Of the 52 completed foreclosures in La Crosse County so far this year, 28 were in La Crosse, 10 in Onalaska, six in Holmen, five in West Salem, two in Bangor and one in Coon Valley.

Foreclosures statewide are up 63 percent this year to 5,925, compared with 3,627 filings in the first half of 2006.

Nationally, foreclosures are up 56 percent, according to a report by RealtyTrac, an online marketplace for foreclosure properties.

By my calculation there were 127 filed from 1/1/2007 to 7/31/2007 whereas there were 114 filed from 1/1/2006 to 7/31/2006, an increase of about 10%.

The difference could be merely definitional. The article cites data from the county sheriff and discusses foreclosed properties whereas I'm using court filings.

The chart below depicts foreclosures in the Wisconsin counties of the 7 Rivers region (Jackson, Juneau, La Crosse, Monroe, Trempealeau, and Vernon). The data for the remaining part of 2007 is estimated, but we appear to be on the same pace as last year. Thus making this year relatively unremarkable compared to last, which is when we saw the large spike. Hopefully that means we are through the worst of it.

Music Man

NYT Magazine has a good piece on Rick Rubin specifically and the music industry more generally.

Back in the library, the singer-songwriter's demo is ending. Rubin opens his eyes, blinks and says to Kusatsu: "We may have found one. Does he have any other songs I can hear?" While Kusatsu cues up the next sampling, Rubin texts an assistant on his BlackBerry. Within minutes, a chocolate protein drink is brought to him. As Rubin sips, he listens to the next track — a derivative, meandering song that drones like early Dylan without the lyric sophistication. With his eyes closed, Rubin begins to shake his head slowly. He looks disappointed. "And you wonder why people don't buy CDs anymore," Rubin says. "One song is great and the other is. . . . "
...
That old way of doing things is obsolete, but luckily, fear is making the record companies less arrogant. They're more open to ideas. So, what's important now is to find music that's timeless. I still believe that if an artist gains the belief of the listener, then anything is possible."
...
Rubin sees no other solution. "Either all the record companies will get together or the industry will fall apart and someone like Microsoft will come in and buy one of the companies at wholesale and do what needs to be done," he said. "The future technology companies will either wait for the record companies to smarten up, or they'll let them sink until they can buy them for 10 cents on the dollar and own the whole thing."

The CD is dead. I just bought a few after a very long hiatus and am regretting the fact that 11 of the 12 tracks are a complete waste. Next time I'm buying the one track I like DRM free. I've just got to train myself to listen to music differently. I'm still stuck in the album model of listening. Time to get good at making mix playlists. I guess I should go watch High Fidelity again.