Monday, April 06, 2009

How it is

The Washington Post is running a piece talking about how aid to lenders isn't helping reduce or prevent foreclosures. I find the theme of the article misplaced, but in lock step with our government.

It’s of course unfortunate when someone loses their home. I feel for the people who have done things the right way and because of the economic downturn are facing foreclosure due to unemployment or illness. However, in every downturn, there are casualties. You hope that you can avoid the bullet, but it is a fairly indiscriminate executioner.

I feel for the people who bought homes they could afford with traditional mortgages they could afford. They typically made sacrifices with respect to size, amenities and location. Now, those people are stuck in homes which have lost a lot of value and are perhaps even under water on their loans. I feel for them, because they did things the right way and their plans of upsizing in a normal progression are severely impacted. Their only mistake was allowing themselves to be over sold on the American dream by our media, realtors and the general hardwiring that makes us Americans.

I feel for the renters who were priced out of the market. Perhaps they wouldn't or couldn't sacrifice on location and couldn't stomach the reality of buying in close to the city. Renters are essentially having their tax dollars used against by any plan to bail out troubled debtors.

The people I do not feel for are the ones who over bought and are now being squeezed by a recasting ARM. Those people took a gamble, they have lost. I do not see how saving that <10% slice of the population is equitible, smart or a good idea, especially when such a high number of reworked loans are still defaulting. Its the bottom that needs to be found, not a false top or even middle that should be preserved.

There was no bailout for millions of tech workers when Bill Clinton's dot com bubble burst. Billions of dollars in unrealized equity gains were wiped out. People's lives, plans and aspirations were wiped out and there was no grand call to prop them up. There should not have been then, nor should there be today.

A little under a third of this country rents. Another 30% owns within their means and a similar number owns their home outright, without a loan. If the 10% are displaced, so be it, there are plenty of willing an able potential owners among the third who rent, provided the market is properly corrected.


Markus Arelius said...

Excellent post and right on the money.

We are witnessing politicians in Washington completely misunderstanding their constituents on a wholesale level.

Those that "are hurting" don't necessarily need to be helped out by my tax dollars or yours.

The problem with Americans is that they will never acknowledge how badly we needed this forest fire of destruction to take place. It had to happen. It was unavoidable. The US housing market was built with straw.

Now that it's smoldering away, perhaps some new opportunities, markets and innovations can emerge so that we are all better off?

Dead End said...

Markus, a forrest fire is an exceptional analogy for what is going on here. I'll have to use that some time.