A Second Mortgage Disaster On The Horizon?

CBS News ^ | Dec. 14, 2008 | Scott Pelley

[Terabitten]

Regardless of how many mortgages "fail," people have to find a place to live anyway. It's not as if we're dealing with a system of 100 families, where 10 have been foreclosed out of their homes and we now have 90 families living in 100 homes. There's still a need for those 10 "extra" homes, though not at the prices they were at before the foreclosures.

That's part of the problem -- seems like nobody's building modest sized homes anymore. Try to find a builder specializing in modest 3 bedroom 2 bath 12-1400 square foot homes.... virtually impossible. Everybody was building McMansions, or, if they were doing 3br/2ba, were outfitting them so lavishly that the prices were out of reach for most folks.

[Alberta's Child]

You're right.

My point is that regardless of what it cost someone to BUILD those homes, they still have a value attached to them. Maybe the value is a lot less than the cost to build . . . but surely SOMEONE at SOME PRICE would move into such a home.

[Terabitten]

but surely SOMEONE at SOME PRICE would move into such a home.

And that's what foreclosure sales are for! So what if the house sold for $450k two years ago -- if it sells at foreclosure at $300k, then $300k is what the house is now worth. Foreclosure is like hitting the "reset" button on the market value of the home.

I bought a 3 bed, 2 bath house in 1998 for $96k. I sold it in 2002 due to divorce for $105k. It was on the market in 2006 -- for $160k. That house had NOT gained $60k in actual value. It was still only worth around $100k, but an irrational market had shoved the price up 60%. Left to its own devices, the market WILL correct itself, and the market value of many houses will be drop. In the end, though, it's the healthiest thing for the economy and the market.

[Alberta's Child]

Exactly!

[Paul Ross]

Those governments have absolutely NO leverage with us at all.

Seems to me that China has a pretty impressive and growing hold over the U.S. commerce, treasury and State Departments. Not to mention the White House. And let us not laugh over W's lame efforts to scold Beijing over its communist destruction of individual liberty which W lamely and only calls "human rights."

Their government got W to go to a tame Communist-controlled fake church, instead of a real one. Got him to go to China for the Olympics. Got him to limit defense sales, and to accomodate the Chinese description of Taiwan. Got him to let Kim Il Jung to keep getting food, etc. when he was on the verge of losing power.

Look at who apologises all the time...