Whatever you do on a re-mod – check that there is no clause making the mortgage “recourse”. This means they can chase you for the balance for years to come. Long after they have repossessed and sold. A non-recourse loan – you can mail back the keys!

Also, Some of the people never even made the first payment because they were flippers. They closed, moved in and put the house back on the market because some realtor said they would make a quick $10M.

We have whole neighborhoods that are empty, thousands of low end homes just sitting and rotting. Greed caused these problems.

Then on the other end of the market, $500-800M homes were selling like crazy, so the neighbors that had been there a couple years refinanced and took the cash out thinking there house would continue to appreciate since all the new homes were selling like hotcakes. They spent the money on cars, boats, second homes etc. Greed again.

None of these people deserve my tax money. Let the market work this out. Housing prices must come down. I too lived in the same house all my childhood and parents only moved when they were old. This is what homes are, they are HOMES not investments. If you make a little money when you sell thats great, but the family home is precious.

Stop all the bailouts!! This is all a joke, Freddie and Fannie are broke, and if this continues the USA will be a third world country.

I certainly agree with you regarding people who took out HELOCs having to pay the piper. But I would disagree that this is the case with most people in trouble today. The HELOCs were made possible by fraudulent flippers who were using straw buyers and dirty loan officers who drove up the prices by inflating prices with their cash out purchases for tens, and even hundreds, of thousands of dollars above market price. This caused a large panic for people who were getting ready to buy a home. Most people thought that if they didn’t then, they would be priced out of the market for good. Then the homebuilders rode this wave and preyed on the panic people were feeling to justify their ridiculous prices. The banks cooperated by offering creative financing and ignoring documentation.

I’m not saying that we should bail out people who have already gotten in trouble, but it is something to consider moving forward. And I can understand why you don’t relate food, water, electricity, etc to housing, but the bottom line is that they are ALL necessities. Setting a price range is not out of the question. It may not work to set a specific price, but it would be reasonable to say that the selling price cannot increase more than a certain percentage per year. This way you could still have equity building up in your property but it would virtually eliminate flippers and would maintain an appropriate ratio with wages and inflation which would be a step towards long-term market stabilization.

Now as to whether the govt should step in and help people, that’s a tough one. On the one hand, fraudulent buyers should not be bailed out at the expense of prudent citizens. But not bailing them out will likely have trickle down effects which will be significantly worse. On this, I think we will have to agree to disagree. I wouldn’t have any problem with the govt bailing people out and stablizing the market because I think that it would stimiulate the economy, and lower the stress levels for strapped families. This is an impact I feel has yet to rear its ugly head but will be significant. Family relationships absolutely must be strained right now with the money problems most of them have. If this results in marital fights, abuse, less time with kids, etc, I think it will have a much more lasting and drastic impact on this country than the financial impact of a bailout. Just my opinion.

Now, the piper has come and needs to be paid, and surprise, no one has the money. So, now that these people have spend themselves into foreclosure and bankruptcy, the government has to step in and help them? No way!

Apartment costs in my bubble state didn’t skyrocket. In fact, most things did not skyrocket, just the price of real estate. Plus, those who decided not refinance their mortgages and take cash out are still sitting on the same mortgages they have been since before the bubble. Those people are not losing their homes, unless some other force acts on them. As well, their home isn’t really “losing value” because of the properties around them; the value was trumped up to begin with. It’s just coming back down to earth.

When you start talking about electricity, natural gas, water and sewage, trash pickup, yes, I think government should be involved. But housing? Are you saying the government should set the price on what a waterfront property would cost, versus a property that is in a marsh? What about a property on a mountainside versus a property in a valley? Properties next to malls versus being 50 miles from a mall? Properties in farming areas versus properties in skyrise buildings downtown? I think that’s ridiculous. Electricity and water are electricity and water. Housing is a whole different matter.

I am sorry you are bitter about not seeing this earlier. I am not financially savvy. All it takes is basic math, and I can do that.

Trying to pick the exact date of the bottom is a fool’s game (or an economist’s game). I think that eventually we will revert to historical averages in terms of price/rent and price/income ratios. Looking at Zimmerman’s graph on page 7, that would be when we return to the 2.5-3.0 range for price/income that prevailed pre-2001. We still have a way to go!

http://www.aei.org/events/eventID.1813,filter.all/event_detail.asp#

One of the presenters, Mr. Thomas Zimmerman of UBS Investment Bank painted a somewhat different picture as far as how nasty things will get in the next few quarters. Leaving aside the a typical “investment banker” bashing, do folks here think this gentleman’s assumptions are sound?
(helpful to go through his slides as he speaks, note slide 15 in particular)

Much appreciated.

“The free market has the capability of providing strong stability to pricing. Supply and demand works quite well! It’s when you start to fiddle with the fundamentals that things start to go crazy. These price corrections that we are experiencing now are NECESSARY. The foreclosures going on now are NECESSARY. The bankruptcies going on now are NECESSARY. Without any of this, we will NEVER recover.”

While it is true that the free market is CAPEABLE of providing stability to the market, the past few years have shown that is also capeable of incredible financial destruction if not operated in an ethical manner. The price corrections we are facing right now certainly are necessary, but the creation of the problem in the first place was not. This problem has a lot of blame to go around, but regardless of who you blame, the root cause is greed. I just don’t feel that greed is something that should be allowed to interfere with basic necessities.

In fairness, a 3000 sq ft home is not a necessity, but when that house is selling for $500k, the 1500 sq ft house goes up in price, as does the 2-bedroom apartment, and this trickle effect makes the cost of shelter too much for most people to bear.

In regards to the free market, did you feel the same way about the price of gasoline when it was up around $5/gal? If you want a truly free market, then I suppose we should eliminate anti-trust laws and allow monopolies to dictate prices. Just imagine if electricity rates were not mandated by govt agencies. If you were paying $5/kw-hour would you still use electricity? Of course, but it would eliminate your ability to buy anything else at all and would destroy the economy. I agree with your views of an open market, just not when it comes to actual necessities.

By the way, congratulations on being yet another anonymous financially savvy person who saw this whole thing coming and avoided drinking the kool-aid. I hope you are able to maintain your views when all of your neighbors walk away from their homes in the next few years and you are partying it up with squatters.

With regard to rent controls in NYC, Thomas Sowell has a very nice essay regarding that issue in his book “Basic Economics”. Please read it. As an owner of rental property I promise you that if I was told what I could rent it for I would NEVER replace the old, single pane windows (which I did last week), put on a new roof (last fall – different house) or the new dishwasher (last Jan) or any of the other numerous improvements I’ve made to make my properties desirable. You can verify that this strategy is the normal MO for rent-controlled properties in large cities with little effort. If you controll my profits, I have no choice but to make it up on the expense side.