We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
Bloomberg on Merced, CA. I don't know what the big deal is about one's house being underwater. Heck, when you take out a car loan on a new car you are immediately underwater too, paying off a now-used car at a new car price. Nobody promised that housing prices can only go up. The extent of subprime lending still amazes me though, and the willingness of supposedly prudent fiduciary institutions to buy that crap amazes me too. One quote:
U.S. homeowners lost an estimated $3.3 trillion in house value last year, real estate valuation service Zillow said. In California, the state with the most foreclosure filings, the share of underwater owners will rise to a third of all mortgage holders by the end of the year, according to data provider First American LoanPerformance of Santa Ana, California.
Merced, located about 110 miles southeast of San Francisco in Californiaís agricultural Central Valley, became a housing boom town in the early part of the decade as buyers with subprime loans sought affordable property within commuting distance of Bay Area job centers, said Jeff Michael of the University of the Pacificís Eberhardt School of Business in Stockton.
Median home prices in Merced rose from $150,000 in January 2002 to a peak $382,750 in December 2005, according to MDA DataQuick, a San Diego-based property research firm. In December 2008, the median stood at $120,500, down 52 percent from a year earlier, as four out of five resales involved properties that had been foreclosed on in the prior 12 months.
I suspect that the "big deal" in the case of places like Merced is that the house sale prices were so out of line with income that the only deal to be had was a low-payment non-traditional mortgage and the implicit assumption that the owner could refinance in a few years when the home equity would make a more conventional mortgage possible.
And the very willingness of the banks to make such deals is part of what caused the value of the homes to (briefly) go up so high.
California Real Estate has been boom and bust for decades. Hell it probably goes back to the gold rush days. An entire industry of Realtors, Lenders, brokers, appraisers and escrow companies are or were vested in the "pump and dump" schemes that became the norm. I owned a home in Orange county, CA in the late eighties and saw for myself a boom cycle in which I happened to own a home. Back then the mantra was that Orange county home prices would average a million bucks by the year two thousand. As well, creative financing methods were taking root as prices were already out of reach of most first time buyers who hadn't caught an equity wave yet and lacked a downpayment. I sold out after desert storm and the Marine Corps moved me to Texas. It got real ugly for friends and squadron-mates who bought late in the cycle however. It seems, that the those in the biz kept at it until the concepts swept the nation as witnessed this decade with horrific results. Furthermore, the clowns at Indimac, Wamu, Countrywide, and the legions of brokers and scumbag realtors who brought this to Merced and thereby the nation should all be flogged to death...Instead, they'll probably get them some stimulus money to continue wrecking the market for the rest of us. And finally, no-one stepped in to help those in the late nineties who bought at the top of the CA market. Many lost their homes or at least their downpayments. Why is our government in an all out sprint to do something this time? Let the poison bleed out of the system and life will go on. It's all been seen and done before...
Obama and the Democrats are so economically clueless that his reckless interference in markets will have lasting negative repercussions.
Today, it is $275 billion to bail out homeowners. What has not been connected is that the government is also going to put another $200 billion into each of Fannie and Freddie. That is another $675 billion.
Banks have stopped with foreclosure proceedings because they no longer know the rules. As a result of this interference, the government is violating contract law.
The bottom line is that mortgages will become more and more scare and the price for what is available will be higher.
What a great way to "help" home prices recover and bring stability to the housing market! NOT!!!