As a part time real estate attorney, I have been concerned for the past three years that the housing ” market” and that is the operative word was out of control. Purchaser’s disregarded the advice of Attorney’s and opted to heed the call on non professional Realtors and mortgage sales persons. People take advice now from a bunch of non professionals, the Internet permits pseudo-quasi-babble to substitute for learned behavior and years of schooling. Not to say that education is a sine qua non for professional behavior.
Now my worst fears have been confirmed. Nationally if you purchased a home in the last five years it’s worth almost 30% less than your purchase price and falling. Americans must re think non recourse http://www.portfolio.com/views/blogs/market-movers/2007/08/01/how-non-recourse-mortgages-can-drive-default-rates-up mortgages , in which they can walk away and the bank is stuck with the property. See Professor Piggingtons post ” Not everyone should own a home”http://piggington.com/not_everyone_should_own_a_home.
As alturistic as ” the shibbolth’s of ” affordable housing for all ” appeal to our moral compasses if the cost of housing alone exceeds 30% of ones income, it is in fact burdensome and non sustainable both emotionally to the health of a family and economically. Many have hailed Congressman Frank as a champion of affordable housing. In my opinion he he, Bush and Congress have in fact created our economic tusnami. Back in the 1970″s Steve Winwood sang the song ” Low Spark of the High Heeled Boys” it sums up the present market.
“The percentage you’re paying is too high priced
While you’re living beyond all your means
And the man in the suit has just bought a new car
From the profit he’s made on your dreams” Here is a nice collage of Winwood and Traffic
In our currnet housing and financial collapse If you go to research the Great Depression http://en.wikipedia.org/wiki/Great_Depression, you realize that several factors caused the event and we are repeating the cycle. They cite, cheap money ( over liquidity) with a housing bubble and than bank failure. The negative secondary effect included ; decreased lumber ( housing) and a decrease in the price of coal ( fuel). Today these same indicators are present an unprecedented decrease in housing and a drop in the price of oil, all because the Marco economic picture is bleak. Today the Wall Street Journal reports that one out of 6 home owners owe more on their mortgage than the home is worth.http://www.usnews.com/blogs/the-home-front/2008/10/9/almost-1-in-6-homeowners-under-water.html. The article presents statistics that are scary ” if you purcased a home in the last 5 years 29% are worth less than the mortgage.
Economist have stated that the governments failure to intervened exacerbated the longevity of the depressive economic cycle. Today what is scary is that there is a concerted world effort by governments to assist the market, and the efforts are failing. As such we are in uncharted waters, with the masts broken, sails down and no one knows when the storm will end. The future President Obama has been dealt a bad deck of cards. In America , our mortgaes are non- recourse, which means that you can walk away if you default. Than the bank forecloses the property and puts it back on the market.
The sum and substance of our economic collapse: Banks now own falling property, which cannot be valued or sold. The amount exceeds the reserves they are required to hold. No one knows how low this is going, all economists were wrong, the governmental watch dogs failied, Congress failed all we have is each other. I hope Obama has a magic carpet and supermans cape because he will need one