It's easy to see the need for such programs. Theoretically, they keep people in their homes and bring some stability to fragile housing market. But the plethora of programs announced since the housing crisis started have largely been failures, suggesting that any effort to fight foreclosures and boost home sales is going to be a futile one. ...
Not even record low mortgages rates have boosted home sales or enticed a debt-weary public. Of course, this doesn't seem much of a shocker. Experts say home prices — which have fallen by more than 30% since 2006 — are still inflated by 15% to 20% in many areas.
So why try to prop up prices any longer with federal programs? ...
Evidence is mounting that government interference in the housing market might be doing the broader economy more harm than good, at least for the long-term. ...
The few who are buying homes now might likely be overpaying for them. And many latching onto their properties are being convinced it's okay to continue trying to pay off a home they can barely afford — echoes of the homeownership encouragement that led us into the bubble in the first place. ...
Paving the way for a true market correction would not be easy to endure — letting home prices free-fall is a scary thought. But is a gradual decline that could prolong real economic recovery really any easier to stomach?
Thursday, September 02, 2010
Aid for homeowners may be doing more economic harm than good
Fortune Magazine questions the usefulness of government programs to aid struggling homeowners:
Subscribe to:
Post Comments (Atom)
Posts
Big whoop on the Fortune piece.
ReplyDeleteLoved this graph:
"And many latching onto their properties are being convinced it's okay to continue trying to pay off a home they can barely afford -- echoes of the homeownership encouragement that led us into the bubble in the first place."
What exactly does "many latching onto their properties" -- latching?
And what exactly is his suggesting? That they sell and bring a big fat check to the closing to cover their losses or just mail the keys to the bank?
The only point the story raises -- a duh moment -- was about the 8K credit front loading sales.
The Fortune piece was a pre-labor day gotta-write-something-before-I-take-holiday piece.
The story makes the case that the federal government should stop attempting to intervene in the housing market.
ReplyDeleteAnon above missed that point.
Yes, people who are financially strapped and living paycheck to paycheck in order to cling to a home via a mortgage they cannot afford would be better off putting their energies into some other effort that will serve them better in the long run. (such as getting out of their mortgage)
Rob said...
ReplyDelete"The most ABSURD real estate bubbles have been going on in India and China for the past 20-30 years, where homes have appreciated about a THOUSAND times. A one thousand US dollar investment in India's metro real estate in the 1970s is now worth more than a million US dollars. Home owners in India and China are unbelievably rich and are far more wealthy than their Western counterparts. Despite the ABSURD appreciation in the past 30 years, the mentality in India and China is that real estate is the easiest and best form of investment, with values doubling every 2-3 years. Note that these so called homes in India and China are small, with little features, very low quality, have no good infrastructure and so filthy that no sensible person would spend even a 100 bucks on, yet are being sold and bought for millions of dollars each in the greatest PONZI game ever played. Note also that the median income in these places is still just a few thousand dollars per year, yet the median home prices are about a million dollars. This PONZI game has created inflation, which then fuels the PONZI game even more and you get the idea. Compare all of this to the United States. Homes have hardly even tripled in value in the last 30 years, and yet, we are quick to point this out as a bubble. We are playing the reverse PONZI here, where we want to destroy absolutely fabulous homes to complete worthlessness. A regular 2000 sqft 4-BR American home would cost several million dollars everywhere in the world except in the USA, where it costs a measly USD 200000. Yep, Americans want everything for free. If it is not free, it has to be a bubble."
Rob you are an IDIOT! Who is paying a million dollars for a filthy, very low quality home in India? Do you even know anyone in India?
Bill
Anon 2, explain:
ReplyDelete>Yes, people who are financially strapped and living paycheck to paycheck in order to cling to a home via a mortgage they cannot afford would be better off putting their energies into some other effort that will serve them better in the long run. (such as getting out of their mortgage)<
That's really easy advice to hand out. What are you suggesting they do? Walk away from their mortgage? Tank their credit? Where will that leave them?
And, then, of course the folks that do walk away from their mortgage that will be trashed as irresponsible. For that reason, no one will take what that Fortune piece said seriously.
"Where will that leave them?"
ReplyDeleteAre you sure you don't mean "Where will that leave ME"?
In any case, indentured servitude (upside down on a mortgage which prohibits savings or discretionary spending) is no way to spend one's life.
Too many people confuse "living life" with "making monthly payments".
Enjoy.
"Who is paying a million dollars for a filthy, very low quality home in India?"
ReplyDeleteI think the dude is confused. I think those figures are comparing income vs home cost. In other words, the filthy home in India is actually $300USD...but because the average salary in India is actually $0.00001 per year, that home is like an American making $50K a year wanting to buy a home for $1Mil
>In any case, indentured servitude (upside down on a mortgage which prohibits savings or discretionary spending) is no way to spend one's life.<
ReplyDeleteGot it.
Here are the three most important things to know about posting on this blog.
-- Renting is almost always better than owning.
-- If you are upside down the best thing to do is walk away from your mortgage.
-- If you walk away from your mortgage you are a contemptible symbol of all that is wrong with America.
"-- If you walk away from your mortgage you are a contemptible symbol of all that is wrong with America."
ReplyDeleteWhat will help is when people finally realize that we in the US need to pare down our consumption and move toward a sustainable lifestyle. The world will be a better, happier place.
"Got it. "
ReplyDeleteNo, what you've "got" is your fingernails clawing into the soft muck of the eroding economy. Anger is part of the grieving process. Go ahead: get it out of your system and work on the next phase of the process: Bargaining.
Unemployment numbers ticked upward today.
The future is going to look very different from 2006. If you aren't positioned well to deal with the shifting reality, then you should look in the mirror when blaming someone.
Merry Christmas and Happy New Year.
Links to recent articles on China’s fake growth and absurd bubble :
ReplyDeletehttp://www.ibtimes.com/articles/59556/20100904/china-s-real-estate-bubble-inflates-growth-story-and-masks-risk.htm
http://detnews.com/article/20100802/NATION/8020324/In-China–state-fuels-real-estate-bubble
The fact that China and India are in a bubble doesn't make housing in the US anymore affordable.
ReplyDeleteLets face it the US consumer driven debt engine that was powering the world economy is now dead. The housing bubble was encouraged to drain the last bit of credit out of the US consumer to keep the system from collapsing for a few more years.
The average US consumer is no longer able to take on the required debt to make the ponzi banking system grow. With out perpetual debt growth the everything collapses.