Posted on 01/20/2009 2:17:38 PM PST by arthurus
The Treasury, the Federal Reserve Bank, and the new administration are making two fundamental mistakes. They are failing to concentrate their minds on the value of our homes. And they are dumbly underestimating the size of the correct response. The first error leads to the second. How could you know what weapon to use when you don’t know what war you are fighting?
(Excerpt) Read more at seekingalpha.com ...
Or, they've dumbly overestimated the size of the correct (government)response.
Look at the duration of Japan's downturn — 17 years and counting. Japan propped up the banks (and industries linked through the various keiretsu) & have thereby probably greatly prolonged the downturn.
Keep in mind that this solution was proposed by a government that never balances the books. They cannot even predict what revenue streams will produce. Most often the same government spends money freely with the sole purpose of gathering votes for the incumbents. With the same people that created the depression still running the government why does anyone believe that can possibly fix it?
Mr. White seems on the first glance to believe that the government maybe should pump in $4 tril but by the end of it I don’t think he is saying that.He says that the government response is utterly inadequate. He is not addressing the question of whether a government bailout is appropriate at all or whether or not it would be harmful. I put it up for his analysis of the housing collapse in relation to other declines.
If property values fall another 40% as the author opines, it will create another huge wave of personal bankruptcies and forclosures.
Any nominal equity in your home it will be wiped out by the above decline. Your bank will then notify you that you are under water and jack up your mortgage payment or perhaps even demand a lump sum to bring you back up to par.
I don’t think we’ve even begun to see all the disruption that will hit us in the next few (mebbe more) years.
Sheez. The party is over people! Freaking DEAL with it and stop trying to grasp at the ersatz prosperity we borrowed ourselves into and that some think we can now tax our way back to.
Remember the lessons our grandparents taught us and get back to paying cash.
In any case, property values are not yet done coming down. DEAL with it.
I’m losing my own job on March 13th (got my layoff notice last week) and I STILL see this whole thing as being GOOD for America. It’s good that we’ll stop buying crap from overseas, it’s good that a lot of Americans will be out in the fields picking vegetables and fruits this fall instead of illegal aliens doing it and it’s good to see the illegals go home because they can’t fleece us anymore. It’s also good to see people start to again appreciate the importance of church and family again as our REAL social safety net.
A personal example. In a large western city two years ago someone bought a house for $220K. He owes about $170K. The house is presently valued at $82K. What can he do?
better have your flame proof drawers on - I haapen to agree, propery is so insanely overvalued, it has to come down (crash) to recover.
Otherwise we have priced our children and grandkids out of the market for their lifetimes.
Just like Calif in the 70s and 80s, homes cost so much in some areas, the children had to inherit the home to live in the area (example, Goleta/SB area)
I’m lucky, we saw this coming and got ours paid off - and we’re debt free - many were not able or didn’t see it coming.
Buy a "second" rental property in the same neighborhood at the new price 82K. Maybe even the same model, move into it. With good credit and a phoney rental contract(use a hispanic fake name)he'll get the loan. Then walk away from house one.
We’re paid off, too, praise God. We bought at the-then “insane” 1991 price of $175,500 for a 3/2.5 and paid it off last year after a lot of scrimping and saving. We were offered $650,000 for it in 2007 and that just blew our minds. We stayed put, of course, and now we’re watching values come down almost to where they were in 1991 again. At the same time, we’re seeing tons of foreclosures in the area. The upside of this is that people who save for a down payment and who actually qualify for a good loan will be able to buy homes again and be able to eventually pay them off. How some young couple would ever pay off $650,000 for my house escpaes me.
Read the article down to the last line and then click on the link to Plan Orange.
Work hard. Pray for good things for your family and your country and the world. Pray that zombies may be enlightened. We do have a way out. It’s expensive, but smart. You will know the zombies are enlightened when they enact Plan Orange.
Let me know what you tink of that!
That’s right. The only way the government can “get us out” of this depression is to drastically cut Federal spending and not bail anybody out any way at all. And deregulate. And deregulate some more.
Right on
Folks tell that I’m “lucky”
I tell them that if driving a 15 yo car, not taking vacations and doing without is luck, I’m satying out of LAs Vegas....
OTOH, I can sleep well tonight and not sweat a lot of the big things.
Yeah, it’s ironic that the only way for the economy to go up is to let it go down.
If you had taken the $650k would you have then used it as a down payment on another bigger house? Many would have and wound up in the Marianas Trench.
It amazes me how many people call us "lucky" as if it was luck that we never bought a boat and a pickup truck to pull it with, it was luck that we never got stupid and bought a $1 million dollar house even though we could have, it was luck that we saved our money instead of spending it like fools. It honestly pisses me off to have someone call us "lucky" when I think we were making $1100 a month between us when we got married and were both in school and eating mac and cheese so we could still save money to buy a house. At our worst we still had our bills paid on time. And it was just "luck". AaaarargggHHH!!!!
The only thing we did consider was taking the $650k and moving to Oregon and paying cash for something humble along the coast and then banking the balance. No way would we have bought up even though we could have. The guy at BofA “prequalified” us for a $1mil + loan and we just about wet ourselves at the thought of diving back into debt right as we were about to get out of it. And right now I’m damned glad we didn’t.
Purchase price of my house, 2003: $79K @ 6%
Average monthly mortgage payment (principal + interest): $800
Yearly taxes (paid along with mortgage): $2K
Current assessed value of property: $100K+
LIFE IS GOOD
I disagree. You, my FRiend, are wise and you have made good with your life. (-:
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