Correct me if I'm wrong, but if we allow foreclosures to happen people lose their homes...

[Cant trust em]

then there winds up being a glut of homes on the market. Supply goes up and demand stays constant making home values crater further, right?


I know that some feel that people should just be allowed to lose their homes and move to apartments or wherever. Won't this make the current downturn look like a trickle?

I read this in a user comment on some story and it just didn't sit well with me.

[EFerrari]

1. Yes. And empty homes in a neighborhood drive down prices, too. n/t

/oops

[Historic NY]

2. and then empty home become vandals targets........vicious spiral

[EFerrari]

17. It must feel terrible to be in those decimated neighborhoods. Unsafe.

There's nothing worse than feeling unsafe at home.

[AngryOldDem]

12. Exactly.

And that's what people like Rick Santelli don't get. Foreclosure relief is not about "rewarding bad behavior." It's about protecting the health and safety of the societal infrastructure. Make no mistake: at some point even Santelli will be caught up in the morass. It will just take a little longer for the likes of him than it will for the rest of us. I don't think it's hyperbole to say that. Our inner cities are already dead or dying and the decay is starting to spread outward. Keeping at least housing somewhat stable is not a "perk" or "reward" but crucial now to civil order.

I'm not surprised at the myopia, really, after months of seeing trillions being partied away by those who are greatly responsible for getting us into this mess. But it is distressing and maddening just the same.

[Mojorabbit]

3. and then the state needs to use

more resources to help the displaced families which probably in the long run costs more than helping people stay in their homes.

[Andy823]

4. Yep, I am sure that

All those who are "mad as hell" about having to pay for their neighbors mistakes would be even more ticked off it the price of their homes dropped by thousands of dollars because there were to many homes on the market! idiots like the guy from CNBC or what ever channel he was on, would be talking a different story if they lost their jobs and now face losing their home! Idiots don't think before they speak!

[FreakinDJ]

5. Ooops - the value of their home already fell 40%

It pays great to be a pissed off A hole

[HiFructosePronSyrup]

6. Yes, of course.

People complaining about this housing "bailout" because they aren't facing foreclosure is like the hand complaining that the foot is getting antibiotics for flesh-eating disease.

[taught_me_patience]

7. Home prices need to come down

They are still to expensive and trying to "stabilize" the market at an artifically high price is not productive.



http://www.ritholtz.com/blog/2009/02/homes-still-too-pricey-to-stabilize/

[Cant trust em]

10. What happens if the 9 million people facing foreclosure

that the foreclosure plan will help wind up losing their homes? Prices are too high and they are coming back down, but I'm not sure we want your graph to look even steeper.

[taught_me_patience]

11. I think the government should spend the money

trying to get people facing foreclosure, and clearly unable to pay, into rentals. Obama admitted the foreclosure plan was to shore up housing prices. This is not what we need to do. If you live in your house, for it's intended purpose - shelter, you should not care about the day to day or even year to year fluctuations in the value of your house as long as you can afford the payments. The "steepness" of the graph should not matter to 95% of homeowners. It does matter to financiers because the quicker the graph gets to historical norms, it signals normalcy is returning to the market.

[Cant trust em]

19. The 95% is partially true

A lot of people aren't speculators, but look at it as a long-term investment strategy when they one day look to sell that home and move to more modest living situations in their older age. Or pass that asset on to their children.

When I look at your graph you posted previously. It looks like based on a historical steady increase in housing prices we're nearly where prices should be if we didn't have the bubble. I'm concerned that having 9 million additional units on the market would drop it even further than it would be otherwise.

[JVS]

22. But housing is a consumer good, not an investment. People should realize this.

If you think your home is an investment, you've become a de facto speculator.

[EFerrari]

21. That's not going to work for a lot of people until wages catch up

to cost of living or, whatever the term is. I don't know anything about economics but, part of the reason people use their homes as ATMs is just to make ends meet because their wages aren't adequate. People can go on about consumerism but the truth is, American workers have been f#cked for a long time and they turned to the one place they had equity to tide them over.

[taught_me_patience]

13. I'll also add that the housing bubble

was the greatest credit bubble in the history of the world. You can expect overcorrection to the downside as a natural consequence of the bubble deflation. It is the normal course of business.

[SoCalDem]

18. In Cannibal Capitalism, crashes are always Darwinian..

Millions of people will lose their houses (many were only renting a home they could not afford, anyway)...prices will bottom out, banks will have to EAT a lot of debt (many more will fail), and the people with cash will buy up the empty houses, at bargain basement proces,..and a whole new cycle will start..and will burn the fingers of our grandchildren, when they are our ages..

[global1]

8. By The Other Responses Posted On This Thread You See The Vicious Cycle We'd Be......

getting ourselves into if we don't help out those that are in danger of losing their homes. Another cycle is the 'job cycle'. To me that is the engine that will get this economy going. People that are employed and paid a decent wage - feel good about themselves and their situation. They begin to go out to eat. Go to movies. Buy things. Which in turn put other people to work - either serving them or making more product for them to buy. Which in turn puts more people to work - making the raw materials that are needed to make the things that other people buy. More people working. Less unemployment. Less unemployment monies payouts. People spending money - puts monies in the tax coffers. Sales tax. Property tax. etc.

This is the cycle we need to be on.

One of the things the corporations didn't think about is if I keep raising prices and laying off or firing people - who is going to buy the things I make? Sure they can send jobs overseas to save a buck. They can penny pinch and not pay their employees a decent wage. They can work them harder and harder and pay them less and less - but if they can't afford to buy the things that the corporation makes - what good is it. The corps have shot themselves in the foot. Eventually - even the rich people will start to feel the hurt because that which made them rich is no more.

Bottom line - people need to feel good about themselves and they need to trust the companies, banks, stock market firms that they need to deal with. Until that happens - we won't be able to get out of this hole that the greedy have dug for us.

It's about time that this point sinks into the heads of the Repugs, corporations and the wealthy in this country. We aren't going to be whole again until some people suck it up and let us on the bottom and middle feel some respect for oneself and trust in the system.

I'm actually afraid that if and when we climb ourselves out of this hole - that greed will once again take over and we'll find ourselves in the same situation down the road.

[billyoc]

9. House prices are overvalued by an order of magnitude.

I know that doesn't sit well with the average real estate speculator(AKA homeowner).

[JVS]

14. People should stay in the houses out of pure public interest in avoiding homelessness and...

decay of the physical housing stock. Also avoiding a massive disturbance of the rental market by their influx should be avoided.

However, trying to prop up people who bought houses they can't afford should be avoided. Those who are unable to pay their mortgage should be renting the house and not be essentially given the house at taxpayer expense (I say taxpayer expense because the banks who hold the mortgages and thus own the house are likely to be nationalized)

[Cant trust em]

15. That makes the most sense to me

These people who are going to be foreclosed on will no longer own their homes. They are now rentors of the house. The banks can hire property managers to run the houses.

[KittyWampus]

16. Exactly. Also, homeowners deduct the interest on their mortgages. Renters don't get that write off

Why should people who rent subsidize owners or even their landlords?

That's what happens when you pit neighbors against each other and start saying "why should I bother helping to put out the fire in your house" or "why should my taxes pay for your kid's education".

Libertarianism gone amok.

[Vinca]

20. Yes. I think the people in trouble need to be looked at individually.

Some may not be able to pay an adjusted mortgage, so they might as well let the chips fall and get on with it. In an ideal world, everyone would get to keep their home, but in real life, some people got caught up in big screen/swimming pool/granite countertop fever and really overdid in the refinancing department or purchasing department. If you had a $40,000 salary and bought a $400,000 no money down home, you'll be in trouble no matter how low the interest rate is. In the end, you can't bail out everyone, but something is better than nothing.