Even After the Bailouts, Housing is Still a Mess

While the recent bankruptcies and potential failures have generated concern for both Wall Street and Main Street, and the federal bailouts have offered some hope (as well as concern), the root cause of the problem - housing - is still a mess (see Reuters article).

As mentioned by Wilbur Ross, the current federal plans do not really address the housing problem. In fact, while blame is being assigned to banks and the federal government, the blame should also be shared by the American consumer who for years has been living above their means. As mentioned by Ross: "In one sense, the American consumer is the victim; but on the other hand, the perpetrator of it."

So the worry is that while the current bailouts may help to stabilize the market, the underlying housing problem will still keep the economy from growing anytime soon, with some analysts expecting the problem to carry into 2009 and possibly beyond, as excess housing inventory continues to be drained from the system.

Comments

[markg:]

The real gripe is that those of us who lived within our means now get to pick up the tab for those that did not.

And now we are going to give 700 BILLION to the same fools that said we were not in a housing bubble.

2008 Sep 23 01:25 PM

[vagrant_joe:]

Risks run both ways. Some folks took risks on buying homes 2-3 years ago with the thought that home prices would continue to increase and they would make off with a good ROI (sometimes with no money down at all). Others took the risk of not buying and possibly seeing the prices of housing running up to a level that those individuals could be priced out of the market forever (like the 1970's steep increases). Not that the author is doing this, but Paulson/Bernanke and other crooks are making it sound like they are alleviating risks took by investors -but this can only be done at the expense of others that took risks (and, should be rewarded accordingly when markets show favor to their strategy). Those that have saved money are being robbed through purposeful devaluation of the currency by those that believe that some folks risk taking is more important than others. This is not right -it can not even appear to be right. There is rhetoric which can be used to try & justify such events -but, even the rhetoric doesn't feel right. There are meltdowns in all markets -otherwise we wouldn't have seen DRAM price crashes in the early 2000's, crappy CROCS sandals prices falling through the floor, and liquidation auctions on Dovebid. Maybe the early bird gets the worm -but when that early bird has eaten too many worms and can no longer fly (too much debt), then there are coyotes and other scavengers that snack on good, plump birds. It's an ecosystem, just like any other -and when you screw with it, there are broad ramifications. Please urge your congressman to protect capitalism, not interfere with markets, and let risk takers from all sides have their fair share at working within the market.

2008 Sep 23 02:20 PM

[JasonC:]

markg - the US treasury takes $480 billion a year from the financial sector, in corporate and personal income taxes on value added there. Which pays for transfer payments to the half of the entire population that pays nothing in income taxes. In the last year, financial companies lost another $500 billion when deadbeats on mainstreet refused to pay their debts as contracted. Then you have the gall to turn around and claim you are being robbed by them!

2008 Sep 23 02:29 PM

[vagrant_joe:]

man, this JasonC guy is nuts. I've seen his posts before. So, when a neighbor doesn't pay his VISA card bill at the end of the month, we should all chip in? Sorry buddy, spew your socialism (for the greater good) crap somewhere else. VISA factors in potential losses -if they do a bad job of this, they might go out of business and people with use AMEX or other companies will pop up instead. In fact, when folks don't pay their credit card bill, VISA (well, via the banks that actually hold the debt) sell that "bad debt" off to collection agencies. Check into it -there's a whole industry out there around bad debt collection. And, guess what, it doesn't involve the debt holder knocking on a few neighbors doors asking them to chip in. I hope that many adamantly oppose both the bailout bill and the whole theory around this anti-capitalistic crap -and specifically harass their elected officials until they get the idea. This is exactly the kind of bailout/price-fixing crap that we imposed sanctions on various Korean electronics over-should the rest of the world now place sanctions on US mortgage backed securities, CDS's, and dealing with the US banking system in general?

2008 Sep 23 02:45 PM

[markg:]

"in corporate AND PERSONAL INCOME TAXES"....... Do you read your own post? And how do you know that half the population pays nothing in income taxes? I'm not arguing, just asking how you know?

What I do KNOW is that Bernanke said quite emphatically at his confirmation hearings that we were not in a housing bubble. How he could reach that conclusion, even in 2004 is a mystery. And he was clearly right on this wasn't he.

My point was, and still is, that Bernanke and co. have not demonstrated that they have the wisdom and judgement to be trusted with essentially a blank check.

By the way, I never said I was being robbed.
If you like the idea go ahead and send in a check.

2008 Sep 23 02:52 PM

[MarvinMBA:]

Paulson, Bernanke and the White House encouredged this type of behaviour. If somebody making 10 bucks an hour and can buy a 400K house with an Alt A mortgage and intends to flip it who do you think made that opportunity possible??? Of course the average guy will take advange of the opportunity but who made that possible??? And should the investor that made this possible and took the paper should he be protected. Securitized paper should be just what it says...if there is a default get the underlying asset as compensation. Because prices dropped its not fair to bail out the investor...he made it possible in the first place. This Administration is now crying foul and save me and my iinvestor cronies....if we do it will only crate a super inflationary cycle and nothing will be accomplished for anyone except the investor that will probably move off to Switzerland.

2008 Sep 23 03:10 PM

[MarvinMBA:]

If the mortgage investor though the house equity was so valuable and funded it in the first place give it to him. Why should Joe on the street who is just about broke himself pay for this speculator????

2008 Sep 23 03:14 PM

[MFI-Miami:]

The homeowner just needs to be educated on what their options are. If they knew what their rights were under TILA and RESPA, they could easily escape the the clutches of the toxic mortgages they are in without the need for governernment help.

2008 Sep 23 03:17 PM

[carey_jim:]

Everyone knows the housing bubble was about house and apartment flipping with little to very small amounts of money required for down payments.

It was a musical chairs-Ponzi scheme and when the music stopped, there was (is) blood on the playground.

Suddenly the poor, huddling masses are without homes and therefore the American people need to out the banks so the financial system can continue.

Did I miss something?

Let's see Henry Paulsen is a former CEO of Goldman and Warren Buffet is investing 5 billion and Ben Bernanke ....

I missed something.

2008 Sep 24 09:50 AM

[Lisa28:]

As mentioned by Wilbur Ross, the current federal plans do not really address the housing problem. In fact, while blame is being assigned to banks and the federal government, the blame should also be shared by the American consumer who for years has been living above their means. As mentioned by Ross: "In one sense, the American consumer is the victim; but on the other hand, the perpetrator of it."
----------------------...

Old Wilbur keeps cutting pay and benefits of employees (some places are seeing a second round of cuts after taking cuts last year), then he complains when people cant pay their bills.

And the media doesnt call him out for it---its sickening.

2008 Sep 25 07:37 PM