April 29, 2007

Spinning Sound Housing Bubble Remedies

Readers suggested a topic on the conventional wisdom on home prices. “Weekend Topic suggestion: ‘Spinning sound housing bubble remedies to appeal to political activists.’”

“The idea is that with presidential media coverage just warming up and campaign platforms being formulated, now might be a good time to try to push ’sound government policies to combat the housing bubble.’ Policies that will help manage the current crash (not bailouts) and that will prevent future bubbles from occurring.”

“Most importantly, how to spin those policies to appeal to political activists. Although the special interests that fund the campaigns will largely dictate the campaign pledges, if we can influence a groundswell of support from political activists for good policies, there’s some slim chance that politicians will one day pledge and then execute those policies because politicians know how dependent they are on activists to ‘get out the vote.’”

“For example, if you think that the tax advantages of investing in housing compared to other asset classes helped inflate the bubble, you could sell repealing those tax advantages with such spin as: it will put government finances back on a sound footing, redistribute wealth from the rich to the poor because wealthy homeowners will get a bigger tax hike than poor renters.”

“Academic studies have shown that the average worker does not benefit from housing tax breaks, all they do is transfer money that would have gone to the government in taxes to provide public services.”

“One can spin the exact same policies to activists, such as: the lifetime cap on the housing capital gains tax exemption created the housing bubble so that must be rolled back.”

“The current tax policies are a huge distortion of the sacred free markets and have caused over a trillion dollars of misallocation of capital into excess housing inventory instead of real productive capacity, - etc.”

Another reader added, “The time’s becoming ripe for a change in the propaganda re. housing. For the past several years the ‘common wisdom’ has been that inflating housing prices is ‘good’ for the average American. Unbelievably, nearly everyone bought into the concept.”

“Now, with all the foreclosures coming about, it’s starting to dawn on some that high home prices may actually a BAD thing! Today there was a whole hour show on CNN about how rampant foreclosures were trashing whole neighborhoods.”

“Right now, the pols are tending to blame the foreclosures on bad loans. But everyone knows the REAL problem is the high home prices. That’s what the flashlightlight really needs to shine on. The high cost of homes and how it’s destroyed people’s finances.”

“This idea could really pick up some traction in the next few months. Perhaps it’s time for bubble bloggers to pitch in here with ideas to get the ball rolling. Coming up with politicaly acceptable ways for politicians to re-frame this is a really good idea.”

And another said, “Amen! We do need to spread the word that ‘affordable housing’ comes in the form of lower prices, NOT higher debt that is cloaked in artificially low monthly payments!”

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Comment by aladinsane
2007-04-29 10:39:04

If we start bailing ourselves out, hyper-inflation will start in ernest, as it will be our signal to the rest of the world, that we are so done.

Comment by GetStucco
2007-04-29 10:52:10

Here are a few suggestions:

1) Eliminate the mortgage interest deduction.

2) Eliminate the $500K home equity capital gains exclusion.

3) Require Fannie Mae to produce financials.

4) Pass a law which makes clear that Fannie Mae and Freddie Mac issued debt are not guaranteed by the U.S. taxpayer.

4) Repeal the American Dream Downpayment Act of 2003 (useful reference here:

http://www.heritage.org/Research/Budget/wm378.cfm )

5) Eliminate Federally insured mortgages (e.g., FHA, Fannie Mae, Freddie Mac, etc).

Comment by Ben Jones
2007-04-29 10:54:19

‘2) Eliminate the $500K home equity capital gains exclusion.’

Yeah, but how do you ’spin’ that?

Comment by irmaron
2007-04-29 11:24:42

Let’s start by eliminating the interest deduction on the 2nd home that includes large RV’s. Let’s limit the interest deduction on 1st homes to say $12000 dollars. Both of these will cap rampant escalation of home prices.

Comment by We Rent!
2007-04-29 11:25:39

Easy - it’s a tax break that helps the (relatively) rich. It spins itself.

Comment by Mike in Miami
2007-04-29 11:36:57

2) Eliminate the $500K home equity capital gains exclusion.
Not a good idea. It hurts people that have to move due to job relocation. You should be able to buy a similar home in a different location without being penalized/taxed, especially if it’s your first residence you’re selling.
I would definitely get rid of all tax deductions and pass some anti-bailout law. If people/entities get themselves into financial trouble it’s their problem, not the tax payer’s. That applies to the flipper, to the gambler in Vegas or the speculator on Wall Street.

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Comment by BanteringBear
2007-04-29 11:47:41

That wouldn’t be an issue. As long as the entire proceed were put into the new property, no capital gains would need to be reported or paid. Kind of like a 1031 exchange, but on a primary residence.

Comment by GetStucco
2007-04-29 11:58:43

“Not a good idea. It hurts people that have to move due to job relocation.”

Huh? We have the $500K capital gains exclusion at the moment, and I see prices in San Diego off by about 25% from what they were in 2005, at least in my neighborhood. So how did that $500K exclusion help people relocating?

I would counter that if anything, recent buyers were hurt by the cap gains exclusion, as it encouraged speculative buying and unsustainable inflation which has clearly morphed into a bust. Let’s agree that fewer people would have “got stucco” if it were not for that distortionary tax break.

Comment by GetStucco
2007-04-29 12:01:29

P.S. I will conjecture that all of the subsidies I suggested eliminating were mainly put in place to help the REIC, and to keep the campaign contributions flowing from the likes of the NAR and the MBA to politicians like Senator Dodd who support policies which increase the REIC’s lock on implicit subsidies. These policies also work to the detriment of the rest of us, who have to pay the subsidies and suffer the consequences of bad policy.

Comment by CA renter
2007-04-30 02:16:21

The only reason I oppose eliminating the $250K/$500K tax exemption is because it is a tax on inflation. As most of us know, the great majority of “price appreciation” is really inflation, so if we manage to hedge against inflation (by buying a house), we end up being taxed anyway.

That being said, I agree with everything else, ESPECIALLY eliminating the MID on second+ homes.

Comment by spike66
2007-04-29 13:49:48

Easy - it’s a tax break that helps the (relatively) rich. It spins itself.

The whole basis of the tax cuts of the current admin is tax cuts that benefit the relatively rich. And the middle class and working class have gone along with it happily.
Voters have been trained to approve big tax breaks for the rich. So, no it won’t be an easy sell.

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Comment by Blue Skye
2007-04-29 11:30:10

Here is a spin attempt:

It is Regressive. The average person in the US cannot afford a $500K house much less one which that much profit is made on the sale of. It therefor uses the taxes of the average person to subsidize the wealthy and the speculator.

Comment by Ben Jones
2007-04-29 12:18:59

I agree, the idea that houses costing half a million bucks is normal needs to be shot down.

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Comment by invest3
2007-04-29 15:26:54

Eliminate capital gains taxes altogether so that other investments can fairly compete with houses.

Comment by bozonian
2007-04-29 23:52:51

That’s crap. Capital gains should be taxed at the same rate as any income. Why should “doing nothing” except shuffling money around be more sacred than working for a living. The people who are actually producing goods and services are getting shafted by the people who control the money.

Even Warren Buffet was disgusted that he pays less income tax (on a percentage basis) than this receptionist does.

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Comment by invest3
2007-04-30 08:31:21

This is the same old drivel from the confiscate the wealth crowd. Someone asked Buffett if he wanted to give his tax savings back and he didn’t answer. OK, to be fair about it while we’re eliminating the capital gains tax we’ll also eliminate the income tax. The US lived without it for the first 100+ years of the Republic and got by just fine.

Comment by HARM
2007-04-30 15:50:36

Straw man/hyperbole alert: Why would being in favor of taxing capital gains at the same rate as income automatically make you a member of the “confiscate the wealth crowd”?

If anything, taxing EARNED income vs. passive income (you did not actually work for) is far worse. I’d rather encourage people to work harder/longer than encourage them to speculate in the stock or RE markets. And while we’re at it, let’s face it –ANY tax is a form of “wealth confiscation”. Unless you’re in favor of abolishing government altogether, you have to pick your poison.

Comment by BanteringBear
2007-04-29 11:48:06

I agree with GS.

Comment by James
2007-04-29 12:20:32

@1… that would cause more payment shocks to people with mortgages.. thats a NO
@2… the 500K home tax exemption should probably be lower @ say 300K
@4 and @4… the number five typically follows 4 unless you are talking Fanie Mae financials

Totally changing the system at this point would be a mistake. Basically all we have to do is enforce existing laws and back slowly away. lets the investors/speculators take their losses.

Comment by nhz
2007-04-29 12:27:54

just imagine the situation in the Netherlands: we have the same issues plus lots of extra housing subsidies. But our HMD is FAR higher than in the US, the housing tax exemption has no limit at all and about 75% of recent mortgages are covered by a semi-government insurance against equity loss. It is so ridiculous that neighbour countries are regularly complaining with the Dutch government because it causes lots of financial troubles in the border areas.

But the Dutch system already has gotten so much out of hand that politics doesn’t dare to change a bit. The current government has vowed not to make any changes in the next four years, and they even forbid all parties to even discuss possible future changes to housing subsidies. If the conditions in the US housing/morgage market do not change quickly, I think the US is heading in the same direction as the Netherlands, where change is no longer a political option and the only way out is a huge crash somewhere in the future.

Comment by Jim A.
2007-04-29 13:05:50

So, housing subsidies are the “third rail” of Dutch politics?

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Comment by Mole Man
2007-04-29 16:25:14

It seems like the European Union might put regulations in place to attempt to tame future bubbles when it becomes clear the degree to which the bubble bursting in the Netherlands will burn away part of the value of the Euro.

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Comment by nhz
2007-04-30 01:50:30

no, definitely not - the housing bubble and the declining value of the euro (relatively to gold, commodies etc.) go hand in hand. Politicians love them both. It creates a false impression of wealth with the general public because of rising home/stock prices. And it’s the same elsewhere in the anglosaxon world. ECB just reported the latest M3 number, up 10.9% from last year.

Comment by Darrell_in_PHX
2007-04-29 13:10:18

Eliminate the morgage interest deduction, but also drop tax rates. “Most” people won’t get hit. Just the people with way overpriced houses.

Comment by spike66
2007-04-29 13:56:06

Eliminate the morgage interest deduction, but also drop tax rates. “Most” people won’t get hit.

Next year, the AMT is scheduled to hit more than 23 million taxpayers–which eliminates the mortgage deduction anyways.
Without a change in the tax laws–highly unlikely–you will hear plenty of screaming from folks who consider themselves far from “relatively rich”. There’s a time bomb built into the system–and the government is counting on that projected increase in revenues.

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Comment by Darrell_in_PHX
2007-04-29 14:20:40

Yeah I know…. AMT is rough. I may get hit with it next year.

There is your spin. Get rid of the mortgage interest deduction, drop tax rate on low ends, and fix AMT.

I’m truly not a “rich should pay more” person except it truly is the only option. They are the ONLY people with money.

Comment by seattle price drop
2007-04-29 20:14:00

re.the 500K deduction. Just go back to the way it was BEFORE that 500K thing was introduced: If you sold your primary residence, made a profit, and then bought another primary residence again within two year using that profit, you did not have to pay capital gains. If you “bought down” you had to pay capitol gains on the unspent profit. Not perfect perhaps, but a heck of a lot better than what we’ve got now.

All the 500K exemption did was encourage speculation and inflate housing costs. When it was introduced in the mid 90’s, you had to look pretty darn hard to FIND a house that cost 500 K in the US.

That exemption drove up the cost of housing fast.

Comment by TStockmann
2007-04-29 21:32:58

I’d also concur with going back to the old primary residence exclusion - but also including the one-time exclusion for the elderly. Makes sense to allow them to trade down and might reduce the signing-house-over scams that relatives use to loot an estate so as to stick the government with health bills.

Comment by Sharon
2007-04-29 10:52:38

Buyers needs to start “low-ball” offers for homes.
Don’t pay the seller’s asking price, don’t even offer near it.
This will either force sellers to drop out of the market or they will eventually sell at the lower price.
Housing market will go no way if the house prices don’t go down, way down. Buyers are waiting and willing to wait patiently now, they know that the house prices have no where to go, but down ….so buyers will wait and wait.

Comment by Judicious1
2007-04-29 11:56:31

“Don’t pay the seller’s asking price, don’t even offer near it.”

Don’t even make an offer at all. The only thing my wife and I are currently doing is:

1. pulling the car to the curb when we see an open house.
2. “accidentally” tap the horn to make sure the owner or RE agent is looking out the window
3. taking a flyer out of the box
4. looking at the flyer for about five seconds
5. putting the flyer back in the box
6. walking back to the car shaking our heads as we laugh
7. drive off

* If they make us go in the house to get a flyer we look at it for a few seconds and hand it back to them without explanation and walk out without saying a word.

Comment by implosion
2007-04-29 14:26:54

That’s good.

Comment by In Colorado
2007-04-29 20:44:22

I’m sure its a lot of fun and very satisfying, but until a majority of buyers do this, we will be considered to be cranks, not to be taken seriously. What I’m saying is its once thing for there to be no buyers, amd its quite another when a substantial number serious buyers tell sellers that prices are too high, and to call me back when you are willing to drop the price.

I think that the majority of the sheeple simply do not believe that prices will come down. And since they can’t afford the asking prices, they will simply walk away instead of making “low ball” offers.

Comment by Darrell_in_PHX
2007-04-29 21:58:03

“I think that the majority of the sheeple simply do not believe that prices will come down.”

Which is why the vacancy rate is so low. Give it a couple months of rising foreclosure rate and unqualified buyers not being able to get loans.

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Comment by Darrell_in_PHX
2007-04-29 22:01:11

OOOps… Vacancy rae is HIGH.

Listings are up, rents don’t cover costs, foreclosures are up and rising, contracts are falling out due to people being unable to get loans, fraudsters are being kicked from the system because the lenders are actually verifying data, consumer confidence is down, incentives can no longer hold up the “median price”….

Comment by need 2 leave ca
2007-04-29 11:04:42

New mantra - “If your first offer is accepted right away, you offered too much” - buyer always needs a weasel clause out so they can come back and ‘insult’ the buyer with a lower offer if first one is taken too quickly. We need a thread to see who got the most insulted seller that took the offer. Judgement criteria, is how much did the seller really lose by taking the offer in order to cut the bleeding from continuing. This migh be tough to calculate. Sellers won’t want to admit they f’d up royally.

Comment by bob
2007-04-29 11:04:43

question: do we ’sideliners’ want a more quicker/dramatic price drop-off, or do we want a more longer-term gradual/stagnant dropoff (i.e. 3-4 years). Although, very frustrating, the longer-term gradual drop-off would probably workout better for the economy and me personally - have it drop 30-40% over 3 years would be just fine in ‘10, when the last remaining FBs have just had it with hanging on.

Comment by irmaron
2007-04-29 11:30:30

I’m waiting for my wife to retire in 3 1/2 yrs and then we’ll decide where we want to live. I prefer the slow painful slide that will help weed out poorly constructed housing, that will pinpoint those areas soon to be blighted, that will make both sellers and RE agents hungry for a sale,that will stabilize housing costs and property taxes.

Comment by implosion
2007-04-29 16:56:41

What places are you thinkng about looking at to live?

Comment by nhz
2007-04-29 12:16:26

I’m sure a quick drop is far better than a slow grind, both for the economy and for most honest homeowners. But for the FB’s who are in the wrong home (way above what they can really afford) the slow drop off is probably better, because it opens many bailout opportunities that will keep them where they are for a few more years. I think a serious crash a la 1929 should be able to cure this housing madness for at least one generation. If there is no fast and serious housing crash and the FED keeps doing what they always do (inflating away), it’s probably off to the races again soon - just like what happened in Europe 5 years ago, with an even bigger bubble producing even more economic distortions.

Comment by Ben Jones
2007-04-29 12:21:08

Right we did the slow thing in Texas in the 80’s and it was very difficult. The worst aspect was the general economy suffered so much that few had the confidence to start businesses, etc, for many years.

Comment by nhz
2007-04-29 12:33:35

we had a quick 1.5 year, -40% house price crash in the Netherlands in 1980 which had very little influence on the economy. Some speculators got hurt (good lesson) and probably some people who were overextended got hurt as well, but apart from that it went remarkably smooth. Lots of other problems related to high home prices (like empty homes and serious home shortage because of speculation) disappeared overnight; very healthy. Of course, we didn’t have the huge leverage then that we have now …

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Comment by ric
2007-04-29 19:25:37

nhz - what caused that 40% drop off? My dad sold a house in Holland in 1979, and said a year later it was worth half the price. But he can never tell me why it happened. Do you know?

Comment by nhz
2007-04-30 02:00:51

to ric: there is no real explanation, but the market was ripe for a plunge. From 1975 to 1980 home prices had increased about 100% (which is a lot compared to historical records, but nothing compared to the current 600-1000% runup). There was significant speculation and flipping (like people from Scandinavia buying Dutch RE while driving through town in a bus - should sound familiar to US readers), but that too was nothing compared to what is happening now. Interest rates were high (mortgage rates around 12% when the crash started), unemployment was relatively high and the economy was not doing well. At some point buyers simply vanished from the market and the bottom fell out.

Statistics from the Dutch realtors organisation conveniently start in 1985, so they can prove that housing always goes up.

Comment by sm_landlord
2007-04-29 15:27:44

IMHO we need (and will get) a slow, grinding, crash.

My rationale for needing it is that only a long, drawn-out, rundown will serve to convince the next few generations not to repeat the same mistakes. A quick crash will tempt people to try for another runup in a few years, repeating the mistake.

My rationale for expecting the slow rundown is multifold:
1. There is still plenty of denial out there. The public just witnessed the recovery of the stock market in nominal terms.
2. There is so much damage to undo, since the pendulum swung so far this time.
3. The rest of the economy has not yet tanked, but shows signs of tanking slowly in the future.
4. Cleanup operations are sure to be overwhelmed due to the magnitude of the problem. Thus for example the foreclosure processing (overhang) should continue well past what would normally be the turnaround point.

Comment by SoBay
2007-04-29 11:04:49

“Right now, the pols are tending to blame the foreclosures on bad loans.
- But everyone knows the REAL problem is the high home prices. That’s what the flashlightlight really needs to shine on. The high cost of homes and how it’s destroyed people’s finances.”

I disagree with “REAL problem is the high home prices.” Allowing unqualified people with no down payments created artificial demand for houses. Even during the boom of 1985 -1990 folks were required to come in with cash … many times the seller would carry a 10% note and the buyer would come in with 10% plus closing. This had a nice effect of self regulating demand.

Comment by Darrell_in_PHX
2007-04-29 11:37:23

Cause and effect. The cause was the no-down, ARM, negative amortization, etc, loans that allowed people to buy homes they could not afford.

Increased prices were the effect of the cause. By allowing people to buy houses they could not afford long-term, they allowed prices to rise higher than people could afford long-term.

What we need is the same types of legislation that we got put onto banks in the Great Depression.

1) Mandated minimum debt-to-equity ratio. No more $0 down. You don’t want people willing to walk away at the first sign of a down draft.
Spin: You don’t want your neighbor’s home to be foreclosed and drive down the value of yours, so make sure they have a vested interest in not driving down your home’s value.

2) No more no-doc (liar loans) with less than 20% down.
Spin: too easy to commit fraud.

3) Companies have to hold a certain reserve level in comparison to the amount of loans they have processed. If a loan goes into default, and bond holders are able to kick it back as non-conforming, the broker needs the assets to cover.
Spin: say the downturn is becuase of the credit crunch, and say that this would restore confidence to the Morgage Backed Securities market. In fact, we know that is crud since qualified borrors can still borrow, and this regulation would stop the morgage brokers from making loans to all but the qualified borrowers, but fact is irrelivant. It just needs to sound truthy.

4) Regulations on ARMs to say the max interest rate can’t push the p&I above 33% of a household’s taxable income at time of closing, adjusted for inflation. Companies would stop giving loans to people that can’t afford them based on low “teaser” rates. They’d also make DANG sure they really know what the person’s taxable income is.
Spin: Protecting consumers from preditory lending.

Comment by nhz
2007-04-29 12:43:19

good points, but you forget that this is the greatest pyramid game ever and many people simply want to play along, maybe not just now but certainly when housing has bottomed (in the next month or so…). Your rules are making it more difficult for them to take their ‘fare share’ of the profits, and they don’t yet have the mindset to understand that the old rules are working against them when prices are declining. And of course, enforcing these rules now would seriously drive down prices, that’s a no-no for most homeowners (= majority of voters).

I’m afraid new rules are only an option once the game is over.

Comment by AKRon
2007-04-29 13:11:37

How about a requirement that copies off all documents relating to no-doc loans be submitted to the INS and FBI, for inspection? And a nice cover sheet announcing those submissions. :)

Comment by Blue Skye
2007-04-29 13:45:16

What caused this risk taking? Wasn’t the artificial negative interest rate (thanks to the FED) a more fundamental cause for manic borrowing than the manic lending was?

Comment by AKRon
2007-04-29 19:59:56

That and the emergence of CDOs and other ‘exotic’ derivatives/securities. Time to toss a bucket of water on this crazy game of ‘pass the hot potato’. Perhaps lenders should be required to keep a 50% reserve on all mortgages they sold, for as long as the teaser rate applies (and include a guarantee that they will pay off MBS holders for foreclosures any time in that period). That would either put a damper on securitization, or on teaser rates…

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Comment by In Colorado
2007-04-29 20:53:25

When I first learned of the no down, no doc loans I was stunned. I couldn’t believe that underwriters and lenders could be so naive as to not expect applicants to lie. In hindsight I guess that the were not. They saw markets that had double digit appreciation year after year and the figured that if they could charge 9% interest in a 6% market that it was a no lose scenario. Those who paid would pay a 50% premium for their loans, and those that couldn’t would just flip the house. I just can’t believe that they ignored the bubble pop scenario. I guess their thought process wasn’t all that different from FB’s: “Everyone is doing it, and you worry warts in the actuarial dept: we can’t hear you!”

Comment by Mike a.k.a/Sage
2007-04-29 19:39:23

In the end, the thing that caused the crash was the price, long before the subprime loan problem. It was the price stupid. Print T-shirts and bumper stickers that say; It’s the Price Stupid!

Comment by bozonian
2007-04-30 00:00:34

They really are the same thing. Anytime you have easy money, for whatever reason, prices on contested resources rise. It’s called “Inflation”.

Comment by marinite
2007-04-29 11:05:20

This is probably the single best/useful post to ever appear on this blog IMO. Stop reading about the bubble and posting your comments and take some political action.

Comment by Ben Jones
2007-04-29 11:17:02

But you are assuming that this economic mania will have a political solution. The original posters did make valid points about changing the notion that ever increasing home prices as a ‘good thing.’

I don’t know how, but I hope that as this thing plays out, some of this conventional thinking can be changed. It’s already started, in a way. Some editorialists/journalists now admit that prices ‘need’ to come down, for the benefit of all.

Comment by sm_landlord
2007-04-29 15:41:14

Conventional thinking has approximately the same turning radius as a fully loaded supertanker running at full steam. That’s why I favor a slow, grinding rundown - it will take time to change people’s thinking for good.

Politicians can really only tinker around the edges of this problem - the economic forces are bigger than they are. Besides, the pols have a full plate of other problems coming at them, such as the collapse of health insurance, pensions, Medicare, the Dollar, education, etc. These are all bigger problems than the late, great housing bubble, and will consume their attention. Just listen to what the presidential candidates are talking about at the debates - that is where their attention will be focused.

Comment by aladinsane
2007-04-29 11:17:56

A precious few of us want a bailout.

Plays right into our hand.

Comment by P'cola Popper
2007-04-29 11:48:55

LOL. You tricky yellow bstrd!

Comment by aladinsane
2007-04-29 11:17:56

A precious few of us want a bailout.

Plays right into our hand.

Comment by Ben Jones
2007-04-29 12:05:10

Can you explain how this plays into our hand?

Comment by James
2007-04-29 12:24:49

Done wrong a bailout will only serve to drive prices further down.

They had forclosure mormatoriums before. It really didn’t have the desired effect. Not to mention restricting risk terms. That drives away a large pool of buyers.

We are looking at the Law of unintended consequences.

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Comment by Mike a.k.a/Sage
2007-04-29 19:56:48

In 1963, an ounce of silver cost $1. One silver 1963 quarter, which is 1/4 of an ounce of silver, bought you a gallon of gas in 1963, which was 25 cents at the time. That same silver quarter today is worth $3.50 in silver, which gets you today, a gallon of gas.

In other words, that 1963 dollar back in 1963 would have bought you 4 gallons of gas. How much gas does that 1963 dollar bill buy you today?

Gold and silver are a store of value. Paper money is not.

Comment by glorgau
2007-04-29 23:16:05

Yeah, but if the quarter had been invested and gotten about 7% a year return, you’d have around $4.00 today.

Comment by RJ
2007-04-29 12:44:28
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Comment by aladinsane
2007-04-29 12:54:12

Get physical.

Comment by Blue Skye
2007-04-29 14:00:47

If gold is a store of wealth then how does it benefit the holder of it to have the currency collapse? That doesn’t make the gold worth more, it just inflicts misery on the bulk of our society. Economic chaos does not benefit any of us, no matter how well an individual guards their own wealth.

Are you really better off to have a full grainery if your neighbors are starving? I think you are better off if you live in a healthy economy.

Good for you (and for me) that you have hidden your gold under a rock. It will not make us better off to have our economy melt down as well.


Comment by aladinsane
2007-04-29 14:59:44

I’m just waiting around to pick up selected pieces of a fallen empire, on the cheap…

For a brief time, i’ll be one of the few people with vision, in a world of blind men and women.

I’m ready to pounce…

And i’ve got about a year’s worth of food, do you?

Comment by Mike a.k.a/Sage
2007-04-29 19:59:00

In 1963, an ounce of silver cost you one 1963 $1. One silver 1963 quarter, which is 1/4 of an ounce of silver, bought you a gallon of gas in 1963, which was 25 cents at the time. That same silver quarter today is worth $3.50 in silver, which gets you today, a gallon of gas.

In other words, that 1963 dollar back in 1963 would have bought you 4 gallons of gas. How much gas does that 1963 dollar bill buy you today?

Gold and silver are a store of value. Paper money is not.

Comment by seattle price drop
2007-04-29 22:04:33

And on top of the political action, people can do a lot to spread the Good News that “housing prices are falling and won’t it be grand”. Just getting the word out in a *positive* way helps a lot in changing peoples perceptions I think. “Low” prices have been so derided for so long now that even people who should be on board still dare not to be.

I talk in a very upbeat way everywhere I go about falling prices and how great it will be for communities and society in general. Gotta emphasize the positive aspects, of which there are many.

I do this with realtors at open houses. They are so lonely now that we can get into long discussions where eventually they begin to see the light, if only ever so slightly. (Most of them own several properties so getting them to acknowledge that there might be something positive about the crash is huge).

My favorite place to talk about the crash though is the bank. I’m always friendly and matter of fact. I inform them of the latest housing disaster news. When HSBC had it’s “precursor of the subprime meltdown to come” episode last Jan or Feb., they heard about it first from me.

The tellers are great because they’re all pretty young and believed forlornly that they’ll never even afford a condo in their lifetime. I explained the old lending rules, downpayments, etc. how even a public school teacher could afford a home (sanely!) a short while back and tell them, never fear, when the current dysfunctional system passes, prices will fall hard.

All the young tellers are coming to the housing crash party that an accquaintance here is having when the market tanks. And they are excited about it now.

Everyone at the bank knows I’ll be coming in for a loan after the crash.

Anyway, spread the word about how great low (sane) prices will be for everybody from here on in.

Because for a lot of people, that is still a revelation.

Comment by kckid
2007-04-29 11:09:36

Pass a law that lenders cannot lend more than 3x the verifiable income for a home and must have a minimum down payment of 20%.

Comment by nhz
2007-04-29 12:21:07

I think it would be better to redesign the system in such a way that the lenders themselves have to eat the losses if things go wrong, instead of the taxpayer and anonymous buyers who often even don’t know that they own these toxic mortgages (through pension funds etc.). If the risk is not put where it belongs, people will always finds ways around is.

Comment by GetStucco
2007-04-29 19:59:30

“3x the verifiable income for a home and must have a minimum down payment of 20%.”

That would knock the median SD home price down to $210,000 or less ($210,000 = 3 X $70,000, and the median hh income for SD lies between $60K and $70K). I am all for this kind of a proposal, as it would be a boon for the SD economy to restore affordable housing.

Comment by zeropointzero
2007-04-29 11:11:00

Much tougher enforcement of housing fraud statutes — federalize the crime, and put investigative resources behind it.

Increase disclosure requirements — including simplified loan disclosures about the kind of loan you are getting, and associated costs like insurance — right after mortgage application, and with a five day recission process. It’ll be hassle, and maybe even will cost some kind of $50 document fee — but it will be worth it. Realtors/lenders will have to better educate buyers early in the process, or risk losing sales.

For those folks who say this is unworkable — in many jurisdictions there is a 3-5 day review period for condo docs when signing a condo contract. It’s a hassle, but folks work through it.

Money spent to educate the consumer, and take mystery and power out of the hands of realtors and lenders will have a postive overall effect long term on the housing market and affordability, by not inflating the asset via underqualified or naive purchasers. Let’s not throw money at the problem — let’s increase knowledge and transparency in the process.

Comment by BPLI
2007-04-29 11:12:11

The Fed should jack rates down 500 bps and let the dollar go to 2.5 for one euro

Comment by Mike in Miami
2007-04-29 11:43:08

Pulling out all the stops, eh? Inflation would go to the triple digits, not even the spinmeisters could hide it anymore.

Comment by P'cola Popper
2007-04-29 11:52:04

There is something to be said for running the problem into one corner or the other in order to properly identify, isolate, and treat the problem.

Comment by zeropointzero
2007-04-29 11:21:17

1) Increase housing fraud enforecement on federal and state level.

2) Mandate much better real estate settlement processes — including early good faith cost/loan disclosures within a right of recission period — much as is with done with condo documents in many areas. This will be a slight burden on realtors and lenders (and even sellers and purchasers), but will help take dumb money and fraud out of the equation.

3) Tighter lending standards, overall.

Don’t throw money at the problem — instread, increase knowledge and transparency in the process for the parties involved. When you reduce the stupidity, naivete and fraud inflating the asset bubble, you are left with less artificial pressure on the asset class, and thus affordability of the asset class is helped.

I know this will make home ownership tougher on some working class folks - but it will reward the thriftier and more industrious among them with less inflated housing markets. Isn’t that what America is supposed to be about?

Comment by zeropointzero
2007-04-29 11:26:02

sorry for the double post — I thought I lost it the first time.

Comment by CA renter
2007-04-30 02:36:28

Agree with your suggestion, zero!

Comment by arroyogrande
2007-04-29 11:36:46

“Spin” that would help stop a taxpayer sponsered bailout (that happens to be the truth as well):

Bailing out a homeowner isn’t really bailing out the homeowner, as they probably shouldn’t have been in that house to begin with. No, bailing out the homeowner is REALLY bailing out the lender, ie, the banks and all of the MBS investors. The lenders will have to take a financial hit if they have to foreclose, because they are foreclosing on a falling asset. The bail-out is for THEM, to keep the income stream continuing.

Comment by Mike in Miami
2007-04-29 11:47:35

More regulation is really not a good idea. You can’t really regulate greed and stupidity. No regulation and no bail out. Let some lenders fail, let some borrowers get foreclosed on and let some investors lose their shirt. Eventually the market will “learn”.

Comment by HARM
2007-04-30 16:05:38

“No regulation” was not an option back then, and will not be an option now or anytime in the near future, though “less BAD regulation” would certainly help.

The primary reason the housing bubble went as far as it did was because of “government regulation” –of precisely the wrong sort. Fed’s 1%, the GSE-issued MBS/CMOs, Congress allowing cap gains for flip houses, etc. all contributed heavily to this mess. Basically, the housing bubble was engineerined by the Fed, Congress, and the GSEs as a “solution” to the fallout from the Dot.com bubble. We could use a lot less of this kind of “regulation” (taxpayer risk underwriting & easy credit/speculation subsidies), and a lot more of the “old-fashioned” type of regulation: forcing lenders to act as responsible fiduciaries, keeping adequate reserves, and requiring borrower downpayments & full documentation.

Comment by ronin
2007-04-29 11:54:09

Academic studies have shown that the average worker does not really benefit from taxes, all they do is transfer money that would have stayed in the pocket of the worker and allowed him to save or buy things.

We need to take a historical perspective. Not too long ago, all interest was deductible, including auto interest. At the same time, all interest income received was taxable. This was simply two parts of the same phenomenon, and was completely fair.

In the 70s ‘tax simplification’ meant that you could no longer deduct any interest, save mortgage interest. But of course, you still pay tax on any interest received.

I don’t recommend eliminating the deduction on mortgage interest, I recommend expanding it so that all interest paid is deductable, including all credit card finance charges.

That will help the economy. There is nothing government can do to help the economy other than getting out of the way and lowering taxes.

Comment by AKRon
2007-04-29 13:28:54

“There is nothing government can do to help the economy other than getting out of the way and lowering taxes.”

You are right. We need to emulate Afghanistan and its 20% flat tax (businesses only). Heck, civil order, infrastructure, securities law etc- what a waste of money! If we could just ditch the pesky ‘democracy’ crap, we could enter an economic paradise ;)

Comment by ronin
2007-04-29 14:11:30

reductio ad absurdum. The juxtaposition of only two extreme possibilities: ceaselessly increasing burdensome taxation, or anarchy.

Comment by skip
2007-04-29 16:00:22

The biggest problem of course, how unfair the payment of taxes becomes. The uber-rich have no incomes. I’d wager Mr Flat Tax himself Forbes would pay nothing with a flat tax. Only the poor slobs with jobs would pay.

(Comments wont nest below this level)
Comment by CA renter
2007-04-30 02:39:09

Which is why ALL income should be taxed equally — from labor or capital gains. By having lower taxes on cap gains, it rewards gambling over work. Bad idea, IMHO.

Comment by robin
2007-04-29 23:22:51

Interesting point. When credit card interest was deductible, I used my 15 cards a lot. Now that it’s non-deductible, I have pared my cards to three, and I use them sparingly, I use one for recurring bills, and it is tied to my checking account and direct deposit. I get 1% or more on purchases, and it is automatically paid every month. No interest costs; only rebates.

Does legislation change behavior? In our case, definitely!

Comment by irmaron
2007-04-29 12:01:08

Gotta lov it! Good article on LV housing market. “In Clark County, which encompasses Las Vegas, one of every 30 homes began the process toward foreclosure last year.” Now with the housing boom came infra structure costs and where is the money going to come from with decreasing housing costs (ie. property taxes). Maybe parts of LV will be the next Quartz site albeit with permanent structures. Welcome Nevada to your new state income tax!

Comment by need 2 leave ca
2007-04-29 12:05:50

Here is the only ‘bailout’ idea to give. Mr and Mrs. Homedebtor. The only way to get out of this is to go get your hands dirty and get to work, pay off your obligations, and then make damn sure you understand all terms and conditions of any contract you sign. Get a lawyer to review, pay him (or her) a $100 or so. Best money you can spin.

Nobody was there to bail me out when I was taken by a shsyter. I had to go to work and keep saving, and saving, and saving. I went without a car for 2 years (not very easy when you make what people think is decent money), didn’t go on fancy vacations, lived modesty, paid off my crap, and kept saving through the automated 401K way. Highly recommend the automatic where you don’t miss what never passes through your hands. Then you will see a nice chunk after awhile (depending on investment performance).

My 2cents worth. Please don’t use my tax money to bail out a bunch of overspending greedy thought they would win the lottery on a sure thing crowd.

Comment by Ben Jones
2007-04-29 12:23:44

The bail-out stuff ended up DOA, in my opinion. We should focus on sensible housing bubble remedies, and reforming the system so this isn’t repeated.

Comment by spike66
2007-04-29 14:08:22

I’m with GS on getting the government out of the mortgage business, eliminating federally insured mortgages from FHA, Freddie Mac and Fannie Mae, and repealing the American Dream ownership program.
Regulations and their enforcement should be on the lenders…all the examples on this blog have demonstrated the greed, financial illiteracy and general witlessness of much of the homebuying public. Any restraints will have to come from the lending side.

Comment by Mole Man
2007-04-29 16:57:07

This is exactly the key. It should be possible to generate broad support for changes that can be shown to help prevent or at least limit this kind of blowout in the future. For this round the damage is done, but we learned a lot about what we must not do and so have an obligation now to tune the system. Why were bogus loans ever legal? It should be possible to devise some criteria or rating system that shows what is going on with slight of hand financing just like we do with energy efficiency and pollution standards. Even the most basic assessor regulation should be able to prevent the years long meltdown of that profession.

Comment by need 2 leave ca
2007-04-29 12:13:47

Another damn good reason I am happy to be out of Clownifornia. Just another way commuters are going to be F&CK#D each day there. There is no quick fix, or good way around this big mess caused by some speeding jackass in a tanker truck. Arnold, HAVE FUN.

OAKLAND, Calif. - A section of freeway that funnels traffic off the San Francisco-Oakland Bay Bridge collapsed early Sunday after a gasoline tanker truck overturned and caught fire, authorities said.


The heat from the fire was intense enough to melt part of the freeway and cause the collapse, but the truck’s driver walked away from the scene with second-degree burns.

No other injuries were reported, which officials said was only possible because the accident happened so early on a Sunday morning. The truck driver took a taxi to a nearby hospital, Officer Trent Cross of the California Highway Patrol said.

The tanker carrying 8,600 gallons of gasoline ignited around 3:45 a.m. after crashing into a pylon on the interchange, which connects westbound lanes of Interstate 80 to southbound I-880, about half a mile from the Bay Bridge’s toll plaza.

A preliminary investigation indicates he may have been speeding as he navigated the curving road, Cross said.

The fire melted a second interchange from eastbound I-80 to eastbound I-580 located above the first interchange, causing a 250-yard section of the roadway to collapse onto the roadway below, according to the highway patrol.

Witnesses reported flames from the blaze reached up to 200 feet high.

Late Sunday morning, the charred section of collapsed freeway was draped at a sharp angle onto the highway beneath, exposing a web of twisted metal beneath the concrete.

The Bay Bridge consists of two heavily traveled, double-decked bridges about two miles long straddling San Francisco Bay. State transportation officials said 280,000 commuters take the bridge into San Francisco each day.

Authorities said the accident on a highway interchange could take months to repair, and that it would cause the worst disruption for Bay Area commuters since a 1989 earthquake damaged a section of the Bay Bridge itself.

(This version CORRECTS Corrects that freeway section funnels traffic off the bridge, instead of on)

Comment by Patch Tuesday
2007-04-29 12:18:39

The foreclosures were there all along, they were just hidden from the public’s view:


Comment by bozonian
2007-04-29 23:56:54

One of my co-workers, bought a house in Temecula, California a year ago. The funny thing is, the previous owner was doing a short sale, 10% off the top. So, last year this time prices were already going down.

Comment by need 2 leave ca
2007-04-29 12:22:23

Bay bridge route now burned down. 10 min drive now 30 min drive between OAK and SF (without traffic - between 2 am and 4 am each day). About 2 hours now the rest of the day. What effect on Bay area housing? I am open to hear speculation. Will really be a sucking wind drive from where I used to live (in Castro Valley) to SF. No good way around this part that burned down. This will really hose an already terrible drive.

Comment by jim A
2007-04-30 05:02:49

Perhaps it will have an effect similar to the effect of a ship sinking in Miami harbor.

Comment by P'cola Popper
2007-04-29 12:23:25

Here’s one guy that thinks he has the answer although I believe its just another case of a wolf in sheep’s clothing. The dude posted up his link in the discussion forum of the PNJ article Ben included in today’s Florida thread. Any of you guy’s heard of “Freedom Loan 90″ or “1st Metropolitan Mortgage”? Probably a scam.


Comment by aNYCdj
2007-04-29 12:44:28



1. We must educate our minorities in this country, yes black people must learn how to read write and speak English, and to communicate without swearing……With educated minorities it would make it very hard for predatory lending to happen….let alone we might see a big drop in crime as a bonus.

1a Then we work on white people, you would be amazed at how many “well” educated people I’ve seen in law offices, even from IVY league school cannot understand a simple apartment lease….why is the bassstard landlord screwing me out of my deposit and wants me to pay even more because i got a job offer in a new town!

Mandatory Home economics, life skills classes must be passed before graduating high school.

2. We Must upgrade the Human Resources Profession and eliminate all those 23 year old chiky-poos who are there to bang the boss behind the wifes back.

The old saying don’t trust anyone over 30…well now it’s don’t trust to anyone under 30….

We Need ADULTS to look at resumes in America, and have great people and critical thinking skills….yes they will cost more $$$$ but then we will hire the best qualified.

And when someone like me comes along with a gap on my resume because i was taking care of my father, a smart HR person would think……….hmmm if its ILLEGAL to discriminate against a woman who took 3 years off to have a baby, then why is it legal to tell man we won’t hire you because of the same 3 year gap for taking care of a sick father.. and having to work PT as a DJ.

We Have so DUMBED down our great country….and i don’t know how to stop it.

Comment by Darrell_in_PHX
2007-04-29 13:06:03

1) You can lead a horse to water, but you can’t make it drink. It isn’t just the minorities that refuse to learn while in school. As long as it is cool to be the dumbest person in school, it won’t change.

2) Sorry you’re having trouble finding work. What does that have to do with stupid lending practices?

Comment by AKRon
2007-04-29 13:23:40

“Sorry you’re having trouble finding work. What does that have to do with stupid lending practices?”

He’s about to ask you to lend him $100.00 to get him through Friday. ;)

Comment by aNYCdj
2007-04-29 13:55:16

2) Sorry you’re having trouble finding work. What does that have to do with stupid lending practices?

Well if you hire STUPID 23 year old chicky-poos to be “Loan Officers”, well…….. you get what you pay for.

Comment by bozonian
2007-04-29 23:57:49

Chicks dig dumb guys. That’s why.

Comment by SoBay
2007-04-29 13:58:37

1. We must educate our minorities in this country, yes black people must learn how to read write and speak English, and to communicate without swearing……

I was walking behind several blacks at the Mall and the only words that I could understand was when they said ‘Mother F*#ker.’

Comment by Pharmer John
2007-04-30 16:36:19

It’s kind of like watching the Smurfs.

Comment by need 2 leave ca
2007-04-29 13:10:50

aNYCdj makes great points. Everyone getting educated reduces (not eliminates) the chance that they will get taken advantage of. Problem is some asshat group will say we are discriminating because we want ALL people (regardless of race, religion, sex, whatever other malarky) to learn to read so they can take care of themselves. Somebody will say we aren’t being fair to that group.

Comment by Darrell_in_PHX
2007-04-29 14:29:07

My cousin is geneirc white boy just like me… I can’t understand anything he says either. It isn’t race specific… It is “cool” regardless of your race.

Comment by need 2 leave ca
2007-04-29 13:12:18

The buyer should hire his own lawyer (independant from the transaction) to make sure there are no hidden timebombs inside. But, rapid appreciation was going to take care of that problem.

Comment by need 2 leave ca
2007-04-29 13:12:18

The buyer should hire his own lawyer (independant from the transaction) to make sure there are no hidden timebombs inside. But, rapid appreciation was going to take care of that problem.

Comment by Housing Wizard
2007-04-29 15:20:51

I can’t think of any other way to prevent bubbles in real estate that are followed by crashes but to restrict lenders . The bozo that came up with sub-prime low-down stated income loans had no clue about lending risk .
It isn’t going to do any good to continue with these junk loans and you can see now everybody is going to sue each other . All the junk time-bomb loans did was increase the demand from speculators and unqualified buyers and thats what raised the RE prices .The cow is out of the barn now ,or is it a horse ?

I call for laws restricting low-down loans unless they are insured and the borrowers must qualify .Of course easy to read disclosures are needed for the borrowers .
The Appraisal business need to be regulated more or perhaps appraisers should be chosen by neutral boards for loans and appraisers should not be allowed contact with the realtors or loan agents .We need to protect appraisers now or they will starve unless they do the bidding of the REIC . Perhaps a third party neutral gov agency should sign borrowers up on loan applications and take their finger prints also (that’s how bad the fraud has gotten ).

Really , one of the reasons why it’s necessary for the loan business to be regulated is to make sure demand is solid ,to prevent fraud , keep areas from getting overbuild , prevent property taxes from getting inflated by a false mania ,and speculators need to have only about a 10% influence on the market , and to protect the deposits of this nation .
When someone takes out a loan ,they have to earn it, and its not just a matter of some jerk lenders and some jerk borrowers agreeing on a stupid contract . Now you can see how your brothers foreclosure can bring you down and whole neighborhood down and maybe the local bank or pension plan down also .
Real estate has always been a conditional sale and when the lenders decided they were going to make qualifying unconditional and based it on gambling instead was when the devil hatched her eggs .

In other words , you can’t have unqualified buyers and speculators on the same playing field as qualified buyers with down payments or you have just destroyed the market .

Anyway ,I think 2nd residence home will lose their tax deduction with time and the lawmakers might limit the primary interest deduction to 400k or 500K in the future .Also the tax exclusion up to 500k gains will need to come down to about 250k max in the future if the seller doesn’t transfer the gain to a new property . They should also make it a once in a lifetime capital gains exclusion rather than a ongoing exclusion .its clear that favorable tax codes contributed to the housing boom .

I just think that the lenders themselves have to try to re-write as many loans as possible at their own expense and all the other loans will just have to go into foreclosure and the RE market will go down in the process . I think lawyers are going to bring up alot of issues in the courts in the coming days about the evils of this market and it will result in over-regulation, as it always does .

Comment by CA renter
2007-04-30 02:47:25


The simple regulation that lenders must make sure that borrowers have the means to repay the loan over the entire term of the loan is the #1 way to prevent these bubbles from happening again.

Comment by HarryD
2007-04-29 17:29:38

The best education is a good recession

Comment by HarryD
2007-04-29 18:04:05

Anyone really want to bail out this greedy bunch which Time Magazine was bragging about back in 2005?

2005 cover story: HOME SWEET HOME


Comment by serf's up!
2007-04-29 18:53:13

1. Reduce and remove government zoning and permit restrictions in order to allow additional units of housing to be built as needed to fully house the population.
2. Repeat rule 1.

Please see editorial linked below, parts 1 and 2. Fully applicable to U.S. housing market.


by David Van Der Klauw
April 20, 2007

Comment by seattle price drop
2007-04-29 20:49:25

Does anybody else here think it’s wierd that this country is anti government sponsored health care but pro government sponsored home buying?

Does it help us more as a nation to have FHA/ Fannie /Freddie and the rest MORE than it would help us to have health care? Isn’t one of the major reasons businesses give for not wanting to do business here the cost of health benefits?

Maybe that’s a spin everyone could go for. There’s not enough money to go around. Why not use what the gov. currently spends propping up home prices and throw it at health care instead? Businesses would be happy and so would a lot of people.

There’s a substitute for home buying: renting. There’s no substitute for a timely root canal.

And remember, before everyone who’s anti health care goes nuts, we are talking about a politically acceptable spin here.

Sometimes I think that if people understood just how much government sponsored housing actually costs both home owners and non home owners, everybody would want the government out of housing.

Comment by nhz
2007-04-30 02:12:32

The Netherlands spends more on housing subsidies than on healthcare and education. Instead of helping their citizens get well educated and healthy so they can compete in todays competitive world economy and do something productive, they stimulate people to hang around in homes that are way beyond their means and live from the income generated by homeownership. No wonder we get the worst immigrants in the world (those who don’t want to work but feel entitled to a nice home, social security and all the other Dutch goodies).

Comment by CA renter
2007-04-30 02:48:52

Excellent point, Seattle!

Comment by Housing Wizard
2007-04-29 23:22:45

The way to spin a no bailout concept is to tell the truth that it was a housing boom mania in which borrowers were gambling on real estate going up to the point that borrowers were willing to go on loans they could not afford .Also it wasn’t hard for the REIC to find sub-prime borrowers to buy real estate when they didn’t put anything down and they had a teaser rate to lure them in . It was so easy to get into a house loan that the sub-prime borrowers said ,”Why Not ?”
Being in the lending business in prior real estate cycles I can tell you that usually borrowers were very concerned about ability to afford the payments ,and borrowers wanted value because they saved for the down payment .

My point is that it has to come out that it was a RE mania ,(no different than the speculation run-up with the stock market in 1929 based on margin stock buying .

Comment by AKRon
2007-04-30 01:20:24

How about random tax audits on 50% of low-doc and no-doc applicants. THAT would put a damper on the damned things. And you could probably run the gov’t off the fines.

Comment by nhz
2007-04-30 02:15:04

sounds good, but I don’t think you can collect very much from the no-doc crowd …

Comment by HappyRentinginMI
2007-04-30 09:27:14

Well, it’s not just ’sub-prime’ lenders that end up in trouble. My sister and BIL their home last year (Mar. ‘06) for about $139,900 (a small ranch) and built their “dream” home which cost approx. $280,000. Now, you would think by looking at those numbers that their incomes doubled right? Wrong. The incomes stayed the same, but their rationale was since interest rates were SO LOW and housing was such an amazing investment, then the time was right to build.

They did not have any savings so they signed something with the builder - who requested $25,000 down to start construction - which would give him $25,000 of the profit from the sale of their home. It took about 4 mos. to sell their home and they had to reduce it twice so the profit was only about $12,000; they had to cash-out one of the 401k’s to come up with the other $13,000.

They now have a VERY large home and no money to buy furniture to fill it. They have little or no savings and their son started college this past fall - he had to take out student loans. Oh, and by the way, they are ‘prime’ lending rate customers with very high credit scores. They struggle with the much larger payment on the house, have re-fied already (to pay off credit cards) and have to work so much (my BIL works all the overtime he can get) they are hardly ever home to enjoy the “dream house”.

I think the bubble may have built more on ‘greed’ then on stupidity - or both.

Comment by Pharmer John
2007-04-30 16:50:13

Oh no, student loans. The Horror!

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