I downloaded the podcast of this show and listened minute after minute as the host’s panic at the declining home values rose and rose, and I was disgusted. I thought, I have got to get to a computer to express my outrage. (Of course, right?) But thank goodness someone else was already there to represent.

All this talk about recovering declining home values seems to miss the point – for a while, homes were OVERVALUED. To hope for those go go days of high value homes is to hope to exclude a large chunk of the population from ever being able to afford a home. A one BR condo in many cities averages something like $200-$300 K at a MINIMUM. Who but the wealthy can afford this? If I want my home to increase and increase in value, then I am hoping to be able to exclude people like me from ever owning a home again.

In today’s New York Times (8/7/08) this was the headline
“Housing Lenders Fear Bigger Wave of Loan Defaults”
The so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier.

This is only the beginning. This is what 30 years of Republican deregulation of all the financial markets has brought us, to our knees.

Se you on the bread line, brother can you spare me $10 for a cup of latte?

From the market perspective, what is the point of trying to keep them in those unaffordable to them homes? All their disposable income is going to go to pay housing costs, so they can’t spend money into the economy, hence consumer spending is low. Meanwhile the houses will be artifically kept off the market to preserve the current price levels (also artifically), which reduces the volume of market activity, which is exactly what the market needs right now. People need to be able to go back to work in the housing sector. Market does not care whether a house will sell at $500 K or $350K. Market needs volume. Hence, the prices need to fall. But then, I grew up in the former USSR and perhaps don’t fully understand the way “free market” is supposed work. And where did all those world famous “rugged individualists” go? All I hear and see around is victims. If this continues, Russia, China and India will eat the US for breakfast.

Well, that’s what the “good book” says, anyhow:

1 Timothy 6:10
http://en.wikisource.org/wiki/Bible_(King_James)/1_Timothy#6

But in the world of Ayn Rand and Wall Street, “Greed is good.”

Most of the people who bought mortgages beyond their means bear some responsibility, but there’s little question that they were targeted, lied to, and sold down the river by indifferent, unregulated and greedy salesmen. “Oh, when the interest rates balloon, you just refinance to make the payments.” “You can afford this because its value keeps appreciating” or some BS like that.

The formula to buy any kind of property is 3 times your salary. Which means this librarian should not have received a loan for more than $150,00.

The librarian was acting out of greed, she saw an opportunity to live beyond her means. The bank should have told her sorry but with this kind of income you can barley afford the down payment.

Let’s do the math for a normal purchase of this house.
It is priced at $560,000. If you have to put down 20% which is a standard amount for any house she would have had to put up $112,000.

OK lets do 15% which brings you an $84,000 down payment. Now you add legal fees and taxes and the amount of this sale will go up before the mortgage is even added to the cost.

Now remember if she only has income of $50,000 before deductions.

The difference after a 20% down payment would be $448,000. So lets say she was able to get a 30 year mortgage on this amount at 6.5% interest. That’s about $2500 per month which is $30,000 per year.

At $50,000 per year the numbers don’t add up.

Bottom line is the system failed, it failed because what used to be a sound banking transaction has been turned into a kind of ponzi scam.

What’s disturbing is the apparent public opinion, NPR and Congress all seem to be on the side of people like that. But what is she really losing in the end? She put little or nothing in. Small or no down payment, small or no monthly payments. I say she is the sophisticated concumer out there. I, with all my law degrees from two different countries, did not even think that I could get a nice house with practically no payments. Pure betting. Only in America.

I fell for it myself, I was trying to move up the housing latter from small condo to small house.

I got burned. I agree that houses should be a place to live and the investment should pay off in years, say 10 or more.

What’s happening now is the worse thing to housing since the Great Depression. This is not a joke. NPR tries as this show was to show some side to this.

You want a real awakening go to Cleveland where 40% of the public school children are now homeless due to this crisis. Whole neighborhoods are going under. I will repeat, 40% of the public school kids are homeless.

That’s Great Depression statistics if you ask me.
I think what is needed is a prudent ethic of borrowing and good affordable housing, both rental and buying stock. Look a Germany, a lot of people rent most of their lives, getting into debt is frowned upon.

We could use a little of that here.

I didn’t understand who he is mad at or how flippers and bad borrowers hurt him. If he bought for under 200,000 that seems like a reasonable price for a house in a regular market.

I bought it when the market was high, dumb, but my condo was sold at a high price as well.

I have lost all my equity that I had from the condo which was bought 10 years ago for cash.

I am now sitting in a house that I have over paid for which was sold by a real estate agent who was kind of shady. Message to you real estate agents, you are all crooks in my book and the state should come down on you people like a ton of bricks, this is an area that needs a lot of regulation and they need to be held accountable for all the BS they put out. This goes to the sellers who lie as well. Also the some of the lawyers are pretty bad as well.

There were problems with this house that the inspector missed, and the sellers lied about. In short they committed fraud. My only recourse was to spend huge amounts of money trying to sue everyone.
My real estate agent was more interested in making her commission than in dealing with my concerns. I was a deer in the head lights.

I made mistakes that I am owning up to, I will never use any person recommended by the real estate agent again.
Any real estate agent who says they can’t wait a day or a few hours for me to get my lawyer will be shown the door. If every other sentence out of there mouths is “you should put your condo on the market even if you can’t find your hose yet, no problems” I will show you the door.

The issue for me is that the business is not regulated at all. The housing inspectors are in with the agents, everyone wants to make a buck from the sellers and buyers.

It was all about them.

In my case I am stuck with a house that is now worth less than the small two bedroom 850 square foot condo I sold.

I am sitting on a cash cow, I wont go under as all the equity went into this dump and the mortgage is low.

However I wont be able to sell this place for years to come and doing anything, like updating the kitchen is not going to happen.

In short I am screwed.

The main problem in housing is restrictive zoning that puts an artificial limit on supply and that makes people bid up prices for the limited supply of homes.