DEVEDE

Nowhere Near a Real Estate Bottom

While there is no disputing the seriousness of this credit "bubble" we are encountering, I take issue with the author (aka Free Market Bull) over his/her remark that millions will simply walk away from their homes and abandon them, with many homes being apparently near worthless recks. Sounds like a scorched Earth conspiracy to me.

Yes, indeed there is more dirty laundry out there regarding this credit mess and more defaults to come, but I fail to see this event feeding us an endless stream of deadbeat homeowners for years. What would perhaps be helpful is for some respected, credible entity within the banking/mortgage sector coming forward with some truthful statistics that clear the air on how much money was lent during the last several years using 'lax' policies. That would be money loaned to either speculators flipping houses for a quick buck or to folks that would have been marginally or non-qualified for a mortgage under past practices of prudent lending. Perhaps having this data might help place some believeable bounds on the magnitude of the problem. Instead we get nothing but lots of hot air and a steady stream of alarmist blather from a cadre of psuedu experts, talking heads and those people with a private self-serving agenda that otherwise have no worthy credentials to be rationally discussing this matter. (i.e., it's a textbook example of the 1st Amendment in hyper-overdrive.)

For the exception of those people in financial trouble who were otherwise speculating or those in trouble who are willing to easily give up on the dream of home ownership, where are the vast majority of the other people that really what to keep their home going to live? And why will someone in their right mind give up their property and walk away simply because their equity supposedly has vanished? How will they know this unless they are currently in default OR they are urgently trying to sell into a depressed market? Do we really believe property values will rationally trend toward zero?

As you point out real estate is rather illiquid, and that is true even during reasonable market conditions. So unless the owner is in default, or they were speculating heavily beforehand and now in default, why would any sane person otherwise choose to leave their home? Would you sell your home in a panic simply because a local realtor told you local values were down? I think not.

I have more confidence in the average American Joe or Jane that owns their home with a mortgage. They still want a solid roof over their head, they seek stability in their lives, they pay their bills and they are not prone to abusing the condition of their home when their name is listed on the deed.

As far as your remark about a recession is concerned, hey wake up and smell the coffee! We're there friend. Will it be a nasty one? Hard to say except that I think that the vast majority of we responsible homeowners are not ready to pitch a tent yet or hit the rails as the]hobos did in the 30s.

That's one man's opinion.