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'Housing Market Setback Forecast" the newspaper headline said. A recently released report on housing says that home sales are down more than 25% and the inventory of unsold homes is about 50% higher than it was the same time last year.
This is just one of innumerable stories about the woes of the housing market. We all understand about human beings having woes. But how can a housing market have either setbacks or woes?
Moreover, why should politicians be riding to the rescue of the housing market with the taxpayers' money?
We hear all sorts of sad stories about people whose homes are "underwater" or who are facing foreclosure. But why should our attention be arbitrarily focused on these particular people, rather than on the many other people who would benefit from being able to buy those same houses, if the prices came down?
The government is artificially keeping the prices up with subsidies and with pressures on lenders to accommodate the current occupants. Can we not walk and chew gum at the same time? Is our attention span so limited that we can only think about one set of people that the media and the politicians have chosen to highlight?
Do other people count for less just because the media don't put their pictures in the paper or on the TV screen? Or because politicians are ignoring them?
Rainy Day Is Here
Sometimes we are more concerned about some people because they are especially deserving. But this cannot be said about those who borrowed money to buy homes that they could not afford, or who borrowed against the equity in their homes, and now find that what they owe is more than the home is worth.
If anyone is especially deserving, it is those who had the common sense to avoid taking on bigger financial obligations than they could handle, but who are now expected to pay as taxpayers for other people's irresponsibility.
No doubt some people who are facing foreclosures might have been able to continue making their mortgage payments if they had not lost their jobs. But since when were we all guaranteed never to lose our jobs? People used to put money aside "for a rainy day." But now people who have spent like there are no rainy days are supposed to have the taxpayers pay to give them an umbrella.
What about the people who saved and put their money in a bank? Those who blithely say the banks ought to modify the mortgage terms to accommodate people who are behind in making their monthly payments forget that, however "rich" a bank may be, most of its money actually belongs to vast numbers of depositors, most of whom are not rich.
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Posted By: TruthSpeaker(510) on 1/4/2011 | 2:20 AM ET
@dwdrury - I live in Northern California 150 miles north of SFO. My $200k equity went to $150k underwater thanks to the Democrat lead Fannie and Freddie collapse. Thanks Barney and Chris!
Posted By: dwdrury(3280) on 1/4/2011 | 12:57 AM ET
Suppose you need to move. Two years ago, your current house was worth, say, $400K. Now it may fetch, oh, $300K. Funny thing is, same can be said for an equivalent house in your new locale. What was once an even swap is still an even swap, just at a lower dollar value. And what that really means is (a) you get a cap loss, and (b) the local property tax valuation is lower than before the bubble burst. It all comes out in the wash.
Posted By: mrtriax(1090) on 1/3/2011 | 9:55 PM ET
Dr. Sowell is 110% right again as usual. Sadly our education system fails to teach real economics or fiscal responsibility. Far too many high school and college graduates simply cannot do the math needed to determine if they can afford a house or not. And they naively trust the lenders to honestly screen them for eligibility. They used to, but they have been coerced into making loans they know are poor risks in the name of social (economic) justice.
Posted By: dawninamerica(5) on 1/3/2011 | 8:42 PM ET
The public was following the trend set by the Fed (see Kaynes commenting on Lenin on inflation). We could never have gotten into this problem without a weaker dollar raising (home) prices. Why not sell the mortgages at the market, like Merrill Lynch did at 22 cents on the dollar rather than prop up the banks that over paid for them? The new buyer could go to homeowner in trouble to ask if he could handle a $22,000 mortgage more easily than a $100,000 one: no foreclosure in the neighborhood.
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