SubPrime Mess: Triangulating the villains and victims

George Will in the WaPo

On Clinton's proposed '7 year freeze' on mortgage borrowing rates:

So the question still is 'who is the villain and who is the victim'. And who gets hurt if nothing is done.

The answer is Everyone.

Even those who took out mortgages with reasonable terms, ten percent down and had some market equity, are getting hit because neighborhood property values go down when there's just a few foreclosures in a given street.

But the answer is NEVER to freeze the market influence, it only drags out the problems... we've seen that time and again with 'price and wage' freezes.

Most optimism in real estate is now centered on 'fat cats' having disposable capital forming syndicates to buy and hold foreclosed properties to bet on the market stabilizing. And they wont start buying until they are pretty certain the market is near bottom.

And there's signs of that, already.
Remember... once you see infomercials on those 'syndicates' on tv, it's already too late. It's like MLM in that regard.

No, I'm NOT talking the same charlatans pushing 'how-to buy foreclosures' seminar programs, who've been at it for years.

 

Any idea how long the market will remain a buyers market? Will it last another year with prices dropping and such?

 

I think that depends on where you are... My area on Long Island (not in it), is one of the hardest hit with the market crash, but I dont think its hit absolute bottom out here yet.

I spoke to people about the market recently and people think everyday is the bottom. They are nuts. I dont think enough of the "precautionary" measures from the Federal Reserve have found there way all the way too the bottom.

Our currency has been devalued a bit, and inflation is starting to rear its head a little too.... As soon as the middle class starts losing jobs then there will be, yes, more foreclosures, and even if they are responsible borrowers, might have to put their house on the market, further saturating the market with homes for sale. The thing that resonates in my mind is the number of 2nd and 3rd homes, or flip properties, or rental investments, there are a ton.

I really dont think anyone can tell right now... well I'm sure some know better than others.

I do agree with Petty about freezing things... its bad practice. It will just push the cost off to the next generation and wont teach people not to trust lenders again.

He is also right that its everyones fault. I make 60k a year.... friends of mine were buying houses for no money down at 450k... they made 20% then I did and have worse credit... I think the burden is on them to make the wise decision not to get involved. Granted people got rich, but more people are going to get more poor because of it.

My view... if you havent seen a Lowe's or a Home Depot closing down in your area... then it hasnt hit bottom yet.

 

When this started breaking I wondered why the industry itself didnt take action as this is NOT good for them. The problem being, of course that most of the mortgages were financed by bonds issues to global banking concerns.

I heard that 'Countrywide' was doing something but it wasnt clear how they were going about it.

well, here's one way:

http://www.995hope.org/

 

http://biz.yahoo.com/ap/071218/economy.html?.v=11

This basically says the industry has no choice. With credit issues and the lowering the demand, the word has to be recession and soon enough depression.

The number in the NorthEast is tricky... Its skewed by the fact that the previously most dense part of the country is almost full.

I think the word crisis will be one we here more often in the future.

 

My post got booted... so instead of writing it all... enjoy this informative article on how it got this way.... and what may happen:

http://news.bbc.co.uk/2/hi/business/7073131.stm?src=rss

 

That's a pretty good, if somewhat gloomy article on the current situation.

But let's step back and see how all this came about... So, class, who can tell us about the term: Redlining?

How does this current event relate to it, how does it reflect on similar legislated remedies and how the unscrupulous (or just plain capital investors) take advantage of them.

{File under:
1. No good deed goes unpunished
2. If some is good, more is better
end}