WELCOME TO YOUR BANANA REPUBLIC
Somehow, we can do better than leave this to the banks to sort out, via the "free markets", even if the outcome is still foreclosure.
It's easy to blame people for "too much house". But, what were a lot of people supposed to do? Rent? There is no hedging of house price risk, so were they supposed to sell their house, when prices rose more than 30%, out of fear they could fall 50%? Stay in something smaller - the prices of those went up too, yes? Should you sell immediately, if your home price drops 15%, in case it drops 30%? With home price variation this high, the whole idea of "fixed-mortgage" has to be re-conceptualized, yes?
With a "default" on their record, some of these people may never own a home again (and perhaps much else, besides). Is that the "right" punishment for their "crime"?
Luckily, the most severe home price variations have been in select markets (Florida, L.A., Arizona, Nevada), with others much less.
n.b. contrary to the contractor, there is no evidence that any of these homes were on "subprime" underwriting, just an oft repeated assertion of the same. Maybe 11% of subprime loans were for new housing.
Friday, October 31, 2008
"They are depressed"
