HARM

Housing Solution: Crashing Home Prices or Cheaper Mortgages?

Peak-bubble housing prices must be protected at all costs! Remember, housing is unique, unlike any other commodity (where lower prices is generally viewed as a good thing for regular working people). And government is much better at setting the fair market value than Mr. Market, everyone knows that.

Sky-high housing costs at insane DTI levels --like we *still* have in CA-- encourages people to take on massive levels of debt they will never pay off, and to become captive to the banking and real estate industry. This "stimulates" the economy, when people must work 2-3 jobs apiece and spend every dime they have to service that hungry 'gator.

What do you people think would happen if people stopped getting mortgages at 10-11X HH incomes? Utter chaos, desolation... Max Max, that's what! Why... without monster mortgages people might begin... (*gasp*) SAVING again --the Horror! The absolute worst outcome for our economy is for housing along the bubble coasts to come down to a level truly affordable for working or middle-class family incomes. We must do *anything* to prevent this!

Please write your Congresscritter and demand that they man those ramparts!

MORE BAILOUT SCHEMES to protect high prices & executive bonuses!
MORE ARTIFICIALLY CHEAP MONEY from the Fed!
MORE COMPLICATED, DODGY LOANS to help prop up those prices!

Credit Suisse: Housing Bottom More Than a Year Away

@jimmy46,

Let's also not forget more recent "incentives" for Wall Street and reckless borrowers & lenders:

2008: Congress & Bushco raises the CLL from $417k to $729k, hands the Fed a blank check to bailout the GSEs, passes "Hope Now", Fed bails out Bear-Stearns, etc.

And yet, despite all the tax breaks, incentives and plain-old taxpayer bailouts, prices are still falling. Guess all the king's men can't put Humpty-Bubble back together again...

Sellers' 'Hopeful Overvaluation' Dragging Out Housing Bust

Malkiel,

Where is the "hate" in my previous post? I was talking about rational self-interest and the importance of removing emotion from what is, at the end of the day, a financial decision.

I'm not denying that underwater sellers have a tough decision to make, they do. However, their options are not as limited as you seem to think. For one thing, they can request a SHORT SALE, where the lender recognizes that house values have falles, and are willing to forgive the difference between what the seller owes on the house vs. what it can be sold for today.

Congress and the Bush Administration have also gotten into the act, and are now *encouraging* lenders to agree agree to CRAM-DOWNS of principal on houses that are worth less than what borrowers paid (and threatening legislation as well). They have already passed a law that ELIMINATES TAXES on "forgiven" debt from short sales.

Underwater sellers today *have options* other than simply feeding a hungry alligator, and draining their 401ks/IRAs/penions and life savings in the process. Recognizing this isn't "hate", it's reality.

Sellers' 'Hopeful Overvaluation' Dragging Out Housing Bust

"Many homeowners, perhaps most homeowners who are stuck on their price stay that way because they have no other viable strategy in the marketplace than to keep paying the current mortgage and wait for a buyer at the price they need to leave without becoming homeless and penniless..."

Hope is not a very viable "strategy". Nor is "needs based" pricing.

The question underwater sellers *should* be asking themselves (but probably won't), is, "Which course of action will leave me worse off? Pricing competitively and selling now at a smaller loss, or, wishfully "holding out" and selling later, likely at a much larger loss --plus tens of thousands more good money thrown after bad in mortgage interest payments, taxes + upkeep?

Mental accounting and irrational loss aversion continue to reign supreme in the housing market.

U.S. Home Prices Go From Bad To Worse

@User 118927,

Amen!

U.S. Home Prices Go From Bad To Worse

Even though this was a fairly straightforward data-driven post, I thought it was interesting it was titled "U.S. Home Prices Go From Bad To Worse".

Why are falling prices (especially in hyper-inflated markets) invariably interpreted by the media as a "bad" thing, while rising prices are invariably greeted as a "good" thing?

When prices were rising at double-digit clips, reckless lending was going gangbusters, and affordability levels dropped to single digits here in CA, very few pundits showed much concern. And yet this was a very real bread-and-butter problem for the 98% or so of residents whose main reason for purchasing real estate was for (*gasp*) actual shelter --not speculation.

What falling prices means to me (and I suspect, the vast majority of the home-buying public) is a long-overdue correction, and a much needed boost to real affordability. I could give a rat's ass whether some crooked Wall Street financial alchemist gets his multi-million-dollar bonus this year, or whether some lazy, greedbag Casey Serin clone can retire rich at 30 by driving up prices on me (preferably 'not' to both). However, I DO care whether or not I --and millions of other working class people like me-- can afford to buy shelter in the communities in which they live and work.

I tend to put working-class peoples' interests ahead of speculators and Wall Street banksters, but I guess I'm just crazy that way.