I’ll let you all make sense of this:
The foreclosure crisis has entered a new phase: The number of properties entering the foreclosure process has dropped, and now nearly matches the number of repossessions.
The number of homeowners falling enough behind on their loans to attract initial notices of default was down 30% in August, RealtyTrac said Thursday. Eventually, that should translate into fewer people losing their homes.
But lenders repossessed more than 95,000 homes — a record — and that was up from 76,000 a year ago.
RealtyTrac spokesman, Rick Sharga, said the initial default rate should be higher, given the numbers of borrowers who have missed one or two payments. Normally, when a third payment is missed, lenders take immediate action.
Calculated Risk had a piece on the Catch-22 we are currently in.
jon
Make sense of it? I’ll try:
There are many homes that can be foreclosed, but the lenders can’t do that with too many because they don’t have the employees to do that and also it undermines their bottom line to have to do that. As long as the lenders pretend that the excess homes that can be foreclosed upon are still going to be paid for, they don’t have to report that loss as anything other than some sort of accounting thing they can euphemistically call “Outstanding Assets” or something along those lines that wouldn’t make the investors freak out and take their money away.
Like speeders can’t all be caught, on a certain level the authorities don’t want to get them all because then they’ll undermine their own market. For police departments, if they caught all the speeders then speeding would stop and the ticket revenue would also. For housing lenders, if all those houses would be put up for sale the market would collapse because not enough Americans would or could pay the going rate for those homes. Selective enforcement is good business.
The reason there has been a jump in foreclosures right now is that the housing market is dipping and some lenders want to cut their losses where they can at a time when some homes will sell for a reasonable price. Or it could be that those lenders are finally getting into a rhythm where their employees are well-trained in taking people’s homes away. I’m betting on the first reason.
Odie Hugh Manatee
I agree with CR’s conclusion; we shouldn’t be propping up house prices. All that does is artificially prop up house values, making it more difficult to clear the backlog. A bunch of people were screwed over by the housing and finance markets, they lost and the crooks won. End of that story.
If I buy something valued at one price and it later falls in value, then I lost out. By propping up housing prices, our government is aiding and abetting the crooks in our market.
Alex S.
I wonder when big business will start supporting Obama. After all, they also need growth to exist. No growth = stocks tank. If there was some kind of national alliance to get unemployment down, more people could afford homes. I’d also propose amnesty for illegal immigrants, but I guess it’ll only happen after the midterms, with republican support.
LGRooney
Catch-22 or negative feedback loop? Of course, we know this song well, bankster proxies here in DC mean we the taxpayers must prop up asset values a/o spread the risk to all of our kids so the oligarchs don’t have to take a bath.
beltane
Big Business doesn’t seemed too concerned with growth in the US. They are at the point where they prefer tax breaks over earnings, and they see high unemployment as good thing as it helps keep labor costs down. Maybe when they’re done scrapping the economy for parts, big business will notice that there’s no engine to get the thing moving again, but we’re not there yet.
RalfW
Alex, business has drunk the tax cut cool aid for so long that it is embedded in their DNA to oppose Obama. Sure, there are a few sane businesspeople who understand that government has a role to play in making infrastructure investments.
But it has been sooooo long since we taxpayers invested in, for example, the Interstate system that made WalMart possible (via just in time inventory management, the free flow of containterized plastic crapola from China, etc) that no-one on the right remembers or sees that there’s a real linkage between the investments the public makes via Gov’t and what business gets from it.
They only see that line on their 1040 that says amount you owe and become enraged and use any means possible to starve the beast that clearly “hates” business.
When more 18 wheelers are careening off collapsing bridges again (hey, I live in Minneapolis, it happens), maybe they’ll see the error of their ways, but even then, don’t bet on it.
LGRooney
@jon: I’ve always wondered about the ticket revenue analogy. For the police to stop a speeder, get their information and check it, write out the ticket and, perhaps, have a discussion with the driver, takes about 20 minutes. Now, here in the city, that often involves more than one police officer as another usually sits behind in their car for backup purposes. Add on let’s say 5 minutes waiting time either side of the ticket to find an offender and we’re talking about 40 minutes of costs (20 minutes for officer 1, 10 for officer 2, and 10 for the shoulder periods). If the average ticket is, say, $75, how much revenue is the municipality actually making?
cleek
@beltane:
the engines have been moved to India and China, deliberately. and the drivers are sure India and China will never figure out how to drive.
beltane
@cleek: And the average American has been conned into thinking that if the government cuts taxes enough, they won’t need to drive because The Market will reward them with their own personal Lear Jets.
jon
@LGRooney: That revenue adds up to quite a bit, since motorcycle officers exist pretty much exclusively to do just that and not much else (escorting funerals and directing traffic through intersections without operational signals just isn’t going to fill up a shift.)
And if the average ticket is $75, you are living in a libertarian wonderland.
But my point was that there’s a large supply of something and the authorities who could crack down hard on the something have reasons not to do so. Maybe illegally downloading music would provide a better analogy than speeding, but whatever it is, housing lenders don’t want to have to deal with all of the able-to-be-foreclosed properties. At least not in the role of owner or real estate agent.
Punchy
Isn’t this also a case that lenders/banks would rather have someone–anyone–in the house, freeloading or not, so that repairs are made and vandals/hobo ninjas are denied access? Eventually banks will take the property, but right now they’re allowing peeps to stay in the house so that it does not fall into expensive disrepair.
Or so I’ve read.
Michael
Sharga is full of shit. It is more like 6-8 months before the declaration of defaults and institution of proceedings, as this is an expensive process.
peach flavored shampoo
@LGRooney: Here’s the racket in my neighborhood: Cop gives ticket(s), ticket cost is ~$120. Then, the state says, “If you pay double (plus court costs), we’ll keep this off your driving record”. Since everyone knows what State Farm or Geico will do to your insurance rates with a few marks on it, it becomes a no-brainer to pay double to keep the record clean. So the state collects 100% more, probably 75% of the time. The shakedown is almost mob-esque.
Steve in ATL
@LGRooney: I’m guessing you haven’t been pulled over lately. Tickets are at least $200, at least in Georgia, and there enough junk fees added to them to make the airlines jealous.
LGRooney
@peach flavored shampoo: Wow, show’s what I know. That’s all news to me. My wife does 90% of the driving since I have too little patience to sit behind the wheel and I haven’t had a ticket in more than 20 years except for one of the speed cams here in DC that cost me $25 while driving a friend’s car. Now that’s a revenue generator!
@jon, point taken. The banks want to be in the business of banking not actually managing properties so it behooves them to send out a signal but not undertake full enforcement.
Steeplejack
@LGRooney:
They’d be paying the officers anyway, regardless of what they specifically are doing, so the ticket money can be said to help defray that.
RobertB
@peach – I have to admire that much sheer ballsiness.
Alex S.
@RalfW:
I have to think of McMegan’s reason to oppose Obama’s $50 billion infrastructure/small business program that was recently passed in the Senate. She said that this program only exists to placate the small business lobby and doesn’t have any other benefits.
RSR
HAMP is like an airbag for the housing market.
The vehicle (homeowners/the economy) might be wrecked but at least the driver (lenders) got cushioned.
Might have been nice to prevent the collision though.
Mnemosyne
I’ve been talking to a friend of mine at work who’s pretty middle-of-the-road politically (and is a big Obama fan) and I’m a little surprised to hear from her that her husband and the people she knows (all of whom voted for Democrats) are pissed as hell at the thought of homeowners getting any mortgage assistance. As in, they would stop supporting Obama if homeowners get assistance on their mortgages or have their mortgages reduced.
It’s partly living in Southern California and watching the aftereffects of the bubble, but I really think a lot of the left blogosphere underestimates how deeply unpopular things like cramdown actually are. To a lot of people, if you were fool enough to pay $400,000 for a one-bedroom house in Watts, you’re just getting what you deserve when the bottom drops out of the market and the value plummets.
Poopyman
@peach flavored shampoo:
I think it would be a nice PSA to remind us where you live, so we can stay the hell away from there.
Odie Hugh Manatee
This is exactly why my wife and I have not bought a home yet, we saw the stupid and had enough sense to stay out of it. We believe that if you were stupid enough to pay out the nose for a house that in reality was not worth what it was selling for then you deserve what happens when the market tanks.
I really have no sympathy for anyone who is underwater now. I am no economic genius yet I saw the insanity and refused to participate. Now they want me to back the government in bailing out their asses and artificially propping up home prices?
Fuck that. We are willing to buy but not until sanity is restored to the housing and finance markets. Let supply and demand do its job, letting housing prices find their own levels without artificial stimulants. If homeowners who lose out are pissed then let them focus that anger where it belongs:
On the markets who shafted them and the politicians who enabled the shafting.
Brachiator
@Mnemosyne:
Your friends and a lot of other people should be livid, I guess. Not only is there mortgage assistance, there is also debt forgiveness at both the federal and state level for people who lose their homes through foreclosure. And California has long had debt forgiveness for people who buy homes and don’t do the re-finance dance. But the amount of debt forgiven, which can be as much as $2 million at the federal level and $500,000 for California, obviously reduces tax revenues since these amounts would usually have to be included in ordinary income if there is a cancellation of debt.
But of course, very few of the homes foreclosed on were in Watts. And so you have this outrage against phantom black folk and phantom Latinos being irresponsible home owners. And with investigations and some securities fraud prosecutions of the officers of financial institutions like Countrywide’s Angelo Mozilo, it amazes me that people still believe these facile caveat emptor fantasies about supposedly unwise home owners.
Luthe
Let me see if I can make sense of this:
1) There is excess housing supply on the market because prices are still too high (for existing households to buy)
2) Allowing prices to fall will negatively affect current homeowners by increasing negative equity, which pisses them and the banks off
3) The government is propping house prices up to placate homeowners and banks
4) More people would buy houses absorb the excess supply if they could afford to form households and buy houses
5)Reducing excess supply will cause house prices to rise (slightly) again
6) People would form households and buy houses IF THEY HAD FUCKING JOBS AND SUFFICIENT INCOME TO DO SO
Of course, the big boys and girls on Wall Street and in Washington think it is cheaper/easier to prop up the housing market and therefore slow down any rebound in the housing market than it is to give people jobs. Because jobs get in the way of the all-mighty TAX CUT and PROFIT.
Fuck them all sideways with a pineapple.
Mnemosyne
@Brachiator:
Actually, that was me with the worst-case scenario of Watts, and I shouldn’t have used one that was so distracting. They’re more pissed off at the people in Burbank who paid $600,000 for a one-bedroom and are in foreclosure when they were busily saving up for a down payment. I suppose you could argue that people in even an industrial part of Burbank might have a slightly more reasonable belief that home prices would keep going up indefinitely.
It’s partly because they see people they know who were irresponsible, and knowing that those people will get help pisses them off. Telling them, “Hey, don’t be pissed at your brother-in-law who listened to the mortgage broker and lied about his income on his application — be mad at Angelo Mozilo!” doesn’t do any good. They told their brother-in-law he was getting in over his head, he didn’t listen, and now they’re pissed that the government is going to swoop in and rescue him from his own stupidity.
These aren’t abstract black and brown people they’re pissed about the government helping. It’s people they actually know who they feel are being rewarded for making bad decisions while they held back and didn’t buy during the bubble.
Plus there’s also the fear that mortgage assistance will only prop the market up and continue to make it impossible for them to afford a house anywhere near where they work.
Mnemosyne
Not to mention that we have a huge amount of overpriced real estate around here. Who did they think was going to pay $600,000 for a condominium at the Americana? And that’s the reduced price after the crash.
Brachiator
@Mnemosyne:
Point taken.
It wasn’t just distracting. It was insulting. But in California, Nevada, Florida and other regions, when the bubble was still expanding all over the state, everybody was happy to dip in. Now that it has collapsed, I guess it’s easier to fingerpoint, but it oversimplifies a complex issue.
Also, realty companies track foreclosures by zip code, and they keep a special eye on the upscale areas. So, from a July 2010 report:
A lot of people were playing in the market, and now a lot of people are at risk.
But the mortgage companies threw out their own rules or convinced themselves that they had come up with fancy schemes to reduce their risk or flat out lied to home buyers, figuring correctly that they could make a profit on fees even if the mortgages went belly up. The lenders chortled over all the “liar loans” they were writing. And prospective homeowners were told that if home prices were rising forever, they could always refinance. I just don’t know many people who were as deliberately irresponsible as the conventional wisdom suggests.
I take your point here. But I find it funny that people complained that the big financial institutions were getting bailed out and the government didn’t care about the little guy, and other people complain when government tries to help the little guy. And I guess there’s no arguing with people’s 20-20 hindsight, which they use to single out exactly who was stupid, no one really knew when the bubble would burst or the extent of the damage it would cause.
But as I noted, mortgage assistance is a small part of the debt relief programs in effect which are trying to do damage control in the housing market. People are just flat out misinformed about the availability of assistance that is out there. And would people prefer to see neighborhoods fall into disrepair because too few people might be able to afford to buy homes anywhere and foreclosures are squeezing people out of their homes?
RobW
Yes, it makes perfect sense to prolong the recession into a depression because some people may get help they don’t deserve.
That is, to avoid the horrendous outcome of some small percentage of Americans getting undeserved aid to bail them out from their own stupidity, an unjust outcome to be sure, we should let everybody else, all of us, you, me, them, your kids, their teachers, everybody continue to suffer the effects of widespread underemployment and unemployment.
Because to do otherwise wouldn’t be fair. Got it. I see now; I deserve to live in a depressed economy now because some people overpaid for their homes five years ago.
Mnemosyne
@Brachiator:
But they don’t see the irresponsible borrowers as “the little guy.” They see them as part of the problem — if they hadn’t been so eager to buy at any price, the market might not have zoomed up the way it did. You live out here, so I know that you can also name at least three people you know personally who borrowed stupidly and got in over their heads. It’s hard to look at everyone else around you doing something stupid and not blame them for it. Why else did we spend 4 years pissed off about all of the idiots who voted for Bush in 2004?
RobW
Just to add to the anecdata: I know a family whose home’s value has fallen to a fraction of its peak in 2006- back down to somewhat less than they paid for it new in the mid-90s. They have a conventional 30 year mortgage, nothing exotic, with a reasonable interest rate, bought with a large down payment. They didn’t take out equity and made significant improvements to the house.
And they’re sweating bullets waiting for the bank to foreclose, since they’ve not been able to pay the mortgage for months. They’re not upside down; they’re fucking unemployed. The primary earner in the family was laid off two fucking years ago and hasn’t been able to find other work. Because the entire city’s economy is depressed. Because of all the underwater homes and no new construction.
But they don’t get any help, right? No assistance to forgive part of their debt so they can stay in their home? No reduction of the principle for them? Nope. Because helping out other people and getting the economy here running again, and my friend back to work, would not be fair.
Not that such aid would actually do you harm, no. It’s just not fair so we shouldn’t do it.
(And who the fuck told you people life was fair anyway?)
Fuck you. This country deserves to collapse if that’s really how we’re going to react to our neighbors’ problems, even if their problems become ours.
Mnemosyne
@RobW:
That’s the problem in Southern California and other bubble areas — it was not a small percentage. Everyone knows at least one person, and usually more, who did something really stupid and got in over their heads. I know a woman who was upside-down on her mortgage because she borrowed too much against it and ended up losing her business.
The median home price in most parts of Los Angeles county is still over $350,000, and that’s after all of the corrections of the last couple of years. At the height of the bubble, the median price was over $600,000. So, yes, people are blaming the people around them who bought into the bubble and blew it up even faster.
Mnemosyne
@RobW:
So all of the unemployed renters are supposed to feel sorry for your friends and shell out money to help them when (in their eyes) they could use that money to keep a roof over their own heads?
It’s not like the people resenting this are doing all that great themselves. Unemployment in CA is 11%. So, yes, people who are unemployed and never had a house resent that other unemployed people who do have a house might get assistance.
jl
It is easy to call people ‘really stupid’ in retrospect. It is also easy for people to get pissed because they see the value of their housing go down and thus reduce their estimated wealth, even though their perceived wealth before the housing bust was a bad estimate based on the boom, fueled by these ‘really stupid’ people to begin with.
But that is human psychology.
Both CR and Joseph Stiglitz, and others, have criticized the policy of trying to prop up housing prices. I think there was justification for that policy to begin with, on the theory that the financial crisis could be considered a liquidity problem. The economy would have time to catch up to housing prices, so the pain of a full fall in nominal prices to something that cleared the market could be avoided (and banks would avoid unpleasantness of massive sudden write downs).
Looks like that is not happening, or happening at a rate much too slow to be politically feasible.
I am not sure that people getting pissed at these supposedly really stupid people is a fundamental attitude that should shape policy. When the economy is stagnant, and looks to be stagnant for years, people find a lot of things to be pissed about, and a lot of people to blame. I don’t think such attitudes would be a big factor if the recovery was stronger, since making hay out of that would lessen the perception of unfairness.
But any help for borrowers that happen to be living in a home that has the main aim of propping up prices should be seen by now to be an ineffective policy, both economically and politically.
I think drastic action was called for, something similar to what was done in Great Depression, and 80s S&L crisis, something modeled on the Home Owners Loan Corporation. If the government had a program to simply buy out distressed mortgages at a discount to sell later, it would have been easier to set up a system that was fairer to ‘stupid’ borrowers versus i’nnocent’ homeowners, did not provide special favors to big finance, and would have eliminated a big drag on the economy.
But looks like that kind of government intervention would have been too overt and called s o s h u l i s t. Now we have hidden and backdoor government intervention that produces more economic distortion and most probably impedes recovery. So we have a lot pissed people and not much to show for it.
wengler
Consider the housing collapse another problem that has been dealt with by trying to brush it under the rug. The slow wind-down or “soft landing” theory that Obama’s economic “geniuses” have been pushing don’t make sense because the aggregate demand is not going to be there to buy those houses at their old market rates for years and years. And it’s not like inflation will wipe away the debts either, what with the manic austerity crowd demanding that our national debt be dealt with in a time of fiscal crisis.
So this is what we are left with. The change in accounting rules have let the banks run roughshod over their investors and regulators. It’s very hard to tell who has what or what the paper value of certain properties are. And so the shadow inventory grows and grows. Hell, I wouldn’t be surprised if the banks that hold the deeds to these properties are major tax frauds, not paying their property taxes and bankrupting localities through either ignorance or arrogance.
This obviously isn’t a problem that Obama created, but it is pretty clear that he dealt with this problem the worst out of any of the Bush leftovers(perhaps tied with his beliefs on Executive Authority),
Ruckus
@Mnemosyne:
You seem to be trying to blame anyone who overpaid for a house. But that was most people in CA. Buyers did not get to set the market price for homes. That was done by the banks and the real estate investors, the owners of the current inventory, the builders and probably some I’m sure I left out. So if you wanted to buy a house in CA, you purchased a house at the going rate, not what made long term housing sense, for houses were/are priced for the 5-7 year flip that a lot of people were doing, because they were told that prices would rise. Now a small child with a modicum of sense and understanding of basic math would know that prices can’t rise forever at a rate faster than inflation and wages, because no one could afford them. But that’s not the housing market we had. There was supposed to be money to be made in selling, financing, flipping, hell, just in owning. And all around you see the fat cats getting fatter and you just falling behind, farther and farther. What part of human nature takes over? The fat cats are greedy, grabbing whatever, whenever, tell me why everyone else shouldn’t play?
Yah, yah I know the answer, it’s OMG morally wrong. Once again, I give you the fat cats showing us the way.
Mnemosyne
@Ruckus:
No, I’m pointing out that the people who have been saving up for a house for a decade only to see prices go further and further beyond their grasp are pissed off at the people who are underwater. I never said it was rational, but it is something that will have to be acknowledged and dealt with before any major homeowner assistance program is put into place. Otherwise, you’re going to piss off more people than you help.
Directly helping homeowners is very unpopular with voters across the whole spectrum, left and right. You can yell at me all you want, but that’s not going to change their minds. The Democrats will lose votes from Democratic voters over this if they’re not careful — not independents, not Republicans, but people who have been voting Democrat for years.
Ruckus
@Mnemosyne:
I get your point but I was pointing out why that happened. People are always unhappy when someone gets something they don’t. That doesn’t always make it the fault of the people needing the help.
Notice up thread that someone quoted sources that it’s the better off people who are defaulting at a higher rate than the poorer homeowners. They are probably the people who have/had decent paying jobs, bought high because things will always go higher. IOW they bought into the american dream, but now it has turned into a nightmare. The poorer of us almost always knows that we are fucked no matter what we do, I’ll bet it is exactly the believers of the american dream who are now in the most trouble.
So the question is what is the best overall thing to do about all of this?
What we have been doing? That doesn’t seem to be working very well. We have a huge number of people without that they worked for, doing what they were supposed to do, because the american dream pissed on them. How much is their fault? My premise is based upon the my belief that most people are basically greedy and it is only a matter of degree how much that sets them apart.
Brachiator
@Mnemosyne:
RE: But I find it funny that people complained that the big financial institutions were getting bailed out and the government didn’t care about the little guy, and other people complain when government tries to help the little guy.
I’m in the tax industry, so I see a lot more than the average person, and so I don’t mark this stuff down to “stupidity” or some other type of personal or moral failure.
Tax professionals I know note that they have seen more foreclosures in the past two years than they saw in all their previous years in the business. And facts and circumstances matter.
The biggest thing, which even enlightened Balloon Juice posters don’t seem to understand, is the degree to which financial institutions created the problem, abetted by a deregulation happy GOP dominated Congress.
Every financial institution had accurate formulas which determined who were the best candidates for homeowners, based on years of experience and mountains of data on lending and repayment patterns.
The lenders deliberately ignored their own rules.
They figured that the housing boom would go on forever, that they had found ways to magically eliminate risk. And the worst of them figured, correctly, that they could screw over homebuyers and cry for a government bailout, making profits all along the way. There was nothing in place to prevent or even discourage the bad practice of lenders.
If a homeowner went to a lender and was told that he or she qualified, he wasn’t necessarily stupid. He was relying on the “expertise” of the lender, who was in the business of making loans. There was no regulatory practice that would punish lenders who lied. And no recourse for a homebuyer who was misled. On the other hand, everything around them, including the experts on the TEE VEE were exhorting people to buy, buy, buy!
It didn’t take much of a hard sell. Even people who think that they are reasonably intelligent or sophisticated were flimm flammed when a lender showed them a piece of paper showing how they qualified for a home loan and how they could make the payments. It obviously sounded good, especially to those who were hopeful or eager. But this is the art of the con, and it doesn’t even take a high pressure sale. And this doesn’t take into account those instances in California where prospective home buyers were told one thing in Spanish, but later presented with different documents in English, which they did not clearly understand. Yeah, some people should have read more carefully. Some should have looked for second opinions. Some should have had an attorney go over the documents and advise them. None should have trusted lenders.
But that is not how the world works. You can get the FCC to levy a fine on CBS for allowing a breast to be shown for a nanosecond, but conservatives will fight tooth and nail to allow deceptive practices to continue. So lenders can lie, deceive, hoodwink and defraud, but home buyers are just stupid if they fall for the con.
And then you had the thousands of people who could originally afford homes who lost their jobs or otherwise saw their incomes decline. Were these people “stupid” as well?
But consider this. No lender had to do a truth in lending document that said, “based on your income and other information you provided, here is your lending score. You can’t afford this house, but we are going to sell it to you
anyway.”
Because that minimal level of honesty would have been bad for the housing market.
Chuck Butcher
There has been a wealth of “conventional wisdom” masquerading as information about investment floating around for quite some time. Housing was one of those, along with stocks. Under normal circumstances a home owner can expect value to rise enough to cover property taxes and at least some of mortgage costs over real time, a decade or so.
There are a lot of reasons for this, at least one of which is population increase. None of this makes a house a money tree, it means that with a decent down owning a house makes more sense than renting if you’re going to stay in it for something approaching a decade. Once housing prices start exceeding that rate you are looking at a boom which won’t support the prices.
There are a whole lot of people who know this and some tried to sound a warning. That was buried by those who stood to gain, economically and politically. The Bush Admin had a lot of reasons to let this bullshit go forward as did those with money to be made.
What to do about it is way out of the reach of my economic wisdom. I think over time you’re looking at a couple corrections, this crash may drag housing prices low enough that a rebound will lead to larger than ordinary price recovery numbers and that makes me wonder if there isn’t another round of bullshit in the offing.
If people can’t get it through their heads that a house is really, economically speaking, a piggy bank – more trouble is coming. Piggy banks are not investment vehicles but there is economic sense in having a piggy bank in the right circumstances. That means some close figuring if you have a job that requires frequent moves.
RobW
That a lot of people made the same mistake is not an argument against mitigating the damage caused to us all. Seems an argument in favor, actually. You know, “there but for the grace of (whatever) go I.”
As an underemployed renter myself, yes, I do feel sorry for people, including myself, who are suffering the worst economy of our lifetimes through no fault of our own. And seeing as how I’m now paying the lowest rent for the most apartment I’ve seen in well over a decade, no I don’t have a problem with a bit of my taxes going to help boost the economy back up, if I HAD A FUCKING JOB THAT PAID ME A TAXABLE INCOME, that is.
Pardon me.
I live in NV. Our statewide unemployment is around 16%, in my city it’s closer to 20%. So don’t act like you’re the only one who knows how bad it is.
If you think housing prices in CA aren’t falling fast enough, that may be due to policies aimed at supporting those prices. Forcing reductions of the principles on upside-down mortgages would have the opposite effect: it both permits prices to fall naturally and people to stay in their homes. Whether you think that second part is fair or not, you can’t seriously argue that it would be good for anybody to see, what, 1 in 5 households tossed into the street? That helps the rest of us… how exactly? Increasing the glut of used homes on the market does what for the construction trade again?
Taxpayers are paying for propping up prices and that’s wrong, but it’s not for the homeowners’ benefit, it’s for the lenders’ benefit. Forcing reductions in principles is assisting homeowners, and would-be homeowners like us, AT THE EXPENSE of the banks. Propping up prices does the opposite. If the only aid offered is the second option- and it’s ONLY made available to those with grossly upside-down homes- then yeah, that’s bad policy. But it’s bad policy because it helps banks at the expense of everybody else, not because of the unfairness of people getting help who you think don’t deserve it.
If a mandatory reduction requires some partial subsidy of the banks’ losses from taxpayers, again, I think that it’s still the right thing to do. Get over the “unfairness” of helping the allegedly stupid (the people who followed the advice of every financial advisor at the time, btw) and realize that fair or not, what needs doing, needs doing. It’s a bigger problem than them or your butthurt feeling that it’s just so unfaaaaiiiir!
Ok, I’m getting carried away here, but I still don’t think you’re getting it. I mean, you and others can keep on characterizing any assistance to homeowners as rewarding stupidity and keep on whining about the unfairness of it all, and nothing gets done, period. And we ALL continue to suffer the stagnant and worsening economy.
Again, with feeling: Life Is Unfair. Is it fair that my friends who did everything right and responsibly should see their income drop to zero because Wall Street pushed a real estate bubble? Nope. Is it fair that while housing prices in Las Vegas have plummetted and continue to plummet, permitting me to pay a lot less for a lot more than just 4 years ago, while their housing cost remains exactly the same no matter how much further the market falls?
(Actually, you could argue yes. You could also argue that renters like us have benefitted a great deal from the collapse- lower rents and lower prices if we manage to save enough to buy- so what the hell are we even complaining about?)
Look, all I’m trying to clumsily say is, if a particular policy will actually help all of us, then the perceived unfairness of helping some who you think don’t deserve help is insufficient reason not to do it.
Morality (greatest good for most people) outweighs unfairness (some people get something they don’t deserve).
RobW
(Grrr. The second block quote above should include the next paragraph. The content of this site is great. Every fucking thing else about it blows. Slow loading, formatting errors, blank pages, occaisional crashes. No damned preview. Whoever built your webpage, fire hir ass.)
RobW
Oh yeah, one more thing: just because “everyone knows at least one person” doesn’t make those persons NOT a small percentage. (damn, that’s a clumsy sentence.) An example: in the 1960s and 70s everyone knew at least one person who went to Vietnam. This does not mean that more than a small percentage of people went to Vietnam.
And I gotta say also, for every person I know who got grossly underwater on a mortgage I know 2 more (besides myself) who never bought anything but are still hurting from un- or underemployment now.
Mnemosyne
@RobW:
You notice that I never said that I think this. I don’t actually agree with my friends, and I’ve been trying to argue them out of it.
I’m thinking about the election ahead, and I have staunch Democrats tell me that they will not vote for Democrats if they feel like homeowners (who, as Ruckus pointed out, are generally financially better-off than the rest of the unemployed) are getting special treatment. If they’re left to twist in the wind, they are going to be very pissed off.
I think there’s a way to sell the policy, but telling people they’re just jealous when they point out that they tried to buy a house the right way and now we’re bailing out the people who bought it the wrong way is not going to help.
It may be the right thing to do for the economy, but it’s a very unpopular policy. It’s funny to see people like Atrios talk about how it’s a surefire winner, because the people I talk to hate the very idea and are pissed off at the Democrats for even talking about homeowner rescue, and I’m in a very blue area of a very blue state.
Try talking to some non-homeowning friends IRL and see how they react if you talk about homeowners needing relief or having their mortgages reduced. I think you’re going to be very surprised to find out that they’re pissed off at the prospect.
RobW
I just can’t seem to leave this thread alone!
On “Stupidity:”
I’m not getting this at all. I was unable to save much during that time, so I wasn’t even considering jumping in the market. But if I’d had the money, I absolutely would have. In fact, I distinctly feeling a bit resentful about the ever-rising prices because I couldn’t get in on it! That’s why I can’t feel so pissed at them as you are; if I’d had the money at the time, I’d have been right there with them.
Point is, lay off the “stupid” talk, ok? You ain’t all that- you said yourself you were trying to save to buy but you were priced out just like I was. If you’d had more money at the time for a down payment, you wouldn’t have jumped in like everyone else? And you wouldn’t now be upside down like them? Yeah, right.
Now, all I can feel is gratitude that, no matter how low my circumstances may be now, at least I had the good luck (not wisdom, luck) to avoid that upside-down mortgage trap. And sympathy for the folks who simply had a bit more cash than I at the time and have since lost everything.
People I knew who fell into the trap included:
A) a midlevel corporate manager who had every reason to expect a promotion soon, not a pay cut
B) a small business owner who’d seen his business’ revenue triple in the previous two years and had every reason to expect at least stable if not increasing sales, instead of a complete collapse of sales
C) a tenure-track university professor who had no reason to expect massive higher-ed layoffs.
These weren’t stupid people. Please distinguish between people who were stupid and people who did exactly what was expected of them, according to all the alleged experts.
Echoing brachiator’s point: people quite naturally relied on lenders to tell them if they could afford a home or not. That’s their expertise, their job. It’s their money, so naturally they wouldn’t sell a mortgage that wouldn’t be repaid, right? That’s the logic; it’s been the norm forever. What changed, and what these borrowers did not realize had changed, was the NEW separation of a lender’s downside risk from the mortgage. Lenders no longer had a disincentive to sell mortgages buyers couldn’t afford, but buyers didn’t know that. It wasn’t exactly widely publicized.
Ignorance at worst, but not stupidity. Especially when every “expert” source says “Buy! Buy now!” and the handful of experts who say otherwise are routinely dismissed.
(anyway, sorry to pick on you Mnemosyne, I guess I’m just bored and you pushed a button. Absence of empathy has been a touchy button for me lately. Not really trying to pick a fight, sorry for earlier harsh tone. Always enjoy your comments at Pandagon. Respect.)
RobW
Ok, I wrote all that without seeing your reply. So, you’re really talking politics and perceptions rather than morality and ethics?
Fair enough. Agreed, it’s a problem, but I don’t think it’s as bad a problem as you think. For non-homeowners who’ll be pissed off, there’s homeowners who’ll be relieved. And if the net result is a substantial drop in unemployment, I doubt many will much care about the fairness issue. Compared to employment problem here, it’s really kind of a minor issue, not worth worrying about, and smells of sour grapes. IMHO.
Perhaps the fact that housing prices here in LV have in fact dropped dramatically, while unemployment has risen rapidly, more so than SoCal (and way more dependent on construction which is NOT coming back anytime soon), makes that unfairness issue seem like a tempest in a teapot over on this side of the Mojave.
Brachiator
@Mnemosyne:
Good points. Thanks for the clarification. The weird thing is this breeze of Galtian nonsense that has affected some Democrats. It seems sometimes everyone is looking to feed resentment, or looking to see who has apparently got a better deal from the government than they do.
Also, I don’t know where Ruckus is getting this stuff that homeowners are generally financially better off than the rest of the unemployed.
But it seems that it used to be that Democrats and most other folks were for helping people get a leg up. Now, it seems that some people think that the point of government is to make sure that everyone is drowning in the same stew.
Mnemosyne
@RobW:
I’m very nervous that it’s going to be, because I’m hearing people I never thought would say they’d never vote for a Democrat again saying it, and it’s because of the possibility of bailing out homeowners. Maybe it’s because California is fucked as a state and people are pointing fingers wherever they can, but I honestly don’t think that homeowner bailouts are nearly as popular as some people seem to think. It’s certainly not going to win any elections, and running on it may well lose some elections.
Homeowners are just as prone to failure of empathy as everyone else, so I can definitely see underwater homeowners being pissed off at assistance that goes to other people. After all, their problems are unique and they deserve help, unlike those people down the street.
Mnemosyne
Shorter me: Just because people like Atrios think it’s a good idea economically to bail out homeowners doesn’t mean it’s going to be politically popular. Good ideas are not always politically popular.
Brachiator
@Mnemosyne:
Yep. Like Social Security or health care reform.
Ruckus
@Brachiator:
Bad writing on my part.
Wasn’t meaning poor homeowners were better off than the rest of us. I don’t think a lot of us are in good shape, owning a home or not. I was trying to point out that as you pointed out @ 27 that more expensive mortgages (over 800k ?) are defaulting at a higher rate than those with less expensive mortgages. And that those are probably the people who had the best chance to be living the american dream of buying as much home as possible, and moving on up as time goes on, rather than just living there and trying to get by.
But maybe IAFOS. It wouldn’t be the first time.
Starfish
One thing that I have not seen mentioned at all in this thread is the effect on taxes. Since state governments have not cut back their spending, places where property taxes are a percentage of property value will either a) take a huge hit on income if property values come down or b) raise taxes.
This will not be so much of an issue in those high sales tax, low property tax areas, but it will be a big issue in places where the property tax is high. But I think Brachiator probably knows much more about this than I do.