How Bad Will it Get Before they Decide Helping the Homeowners is a Good Idea?

[laughingliberal]

EDITORIAL
This Year’s Housing Crisis


Published: January 4, 2010

The financial crisis and Great Recession have their roots in the housing bust. When it comes, a lasting recovery will be evident in a housing rebound. Unfortunately, housing appears to be weakening anew.

Figures released last week show that after four months of gains, home prices flattened in October. At that time, low mortgage rates (courtesy of the Federal Reserve) and a home buyer’s tax credit (courtesy of Congress) were fueling sales. That should have propped up prices. But it was not enough to overcome the drag created by a glut of 3.2 million new and existing unsold single-family homes — about a seven-month supply.

The situation, we fear, will only get worse in months to come. Rates already are starting to rise as lenders brace for the Fed to curtail support for mortgage lending as early as the end of March. The home buyer’s tax credit is scheduled to expire at the end of April. And a new flood of foreclosed homes is ready to hit the market. <snip>

<snip> The administration decided not to press lenders to grant principal reductions in the flawed belief that simply making payments more affordable would be enough to forestall foreclosures. It hasn’t. The administration also didn’t fight for the bankruptcy fix when it was before Congress last year despite President Obama’s campaign promise to do so.

The economy is hard pressed to function, let alone thrive, when house prices are falling. As home equity erodes, consumer spending falls and foreclosures increase. Lenders lose the ability and willingness to extend credit and employers are disinclined to hire. True economic recovery is all but impossible. <snip>

on edit: http://www.nytimes.com/2010/01/05/opinion/05tue1.html?hp

How many more times will we read, "despite President Obama's campaign promise" before it's over?

[JDPriestly]

1. Nonsense. What came first? The chicken or the egg?

It wasn't simply the subprime mortgages that caused the crisis. There were several factors: There was, on the one hand, the excessive gambling -- the out-of-control derivatives -- on whether the sub-prime mortgages would or would not be paid.

The egg that made the gambling -- the derivatives -- possible was the repeal of Glass-Steagall. (Of course, blatant dishonesty by mortgage sales companies and assessors at various levels played their parts.) It was thanks to the blindingly large profits being made on the gambling that sub-prime mortgages became so popular.

But beneath the layers of subprime mortgages and derivatives was the fundamental crack in our economy and culture: the lowering of wages and the loss of high-paying jobs due to world trade, outsourcing of jobs and our dependence on foreign oil.

This is an oversimplification. But, when you get down to the bare truth about our economy, the housing industry, the stock market and ordinary American families cannot recover until we achieve energy independence and return to a rational trade policy that allows American workers to work and earn wages that buy a decent standard of living.

We enjoyed far more freedom and independence before we started buying foreign oil and outsourcing jobs.

Yes, we need world trade -- but we also need domestic industry. There has to be a balance. And at this point, there is no balance. Mostly we export weapons. To maintain our level of exports, we have to have wars. Wars destroy, and the wars we fight will eventually destroy us.

We have to get a sane trade policy if we do not want to be destroyed by war.

[laughingliberal]

4. We call that history. The point is not what caused the crisis

The point now is how do we stop the bleeding. Roosevelt did it by buying the toxic mortgages and having the homeowners pay the government back. And it turned a profit. Yeah, we need to fix all that other stuff, too, but we could have some immediate results of slowing down or preventing the next wave about to hit.

[JDPriestly]

12. The problem is that our society has changed.

Back in the 1920s and early 1930s, many more Americans still lived on farms. Now we live mostly in urban areas and towns. We can't raise our own food. We have to buy it -- with money. Even though many farmers lost their farms and drought and dust destroyed many areas, people were still close enough to the land to get food at low prices.

In addition, when the depression of the 1930s began, we were a creditor nation and had a large manufacturing base. The potential for jobs, for re-starting the factories was still there. We saw how quickly production ramped up in WWII. Because men were serving in the military, in the early 1940s, women swarmed into the factories. There is no manufacturing base to re-start at this time.

So, how in the world can the jobs, jobs that pay well enough to allow people to pay off their mortgages, be created in a country in which the factories are simply gone, rusted out, empty of machinery?

It is folly to think that enough Americans will get jobs in technology to make a real recovery that benefits most Americans possible. Homeowners will not be able to repay mortgages under any scheme unless they have jobs. So, the real question is: How can we, as a nation, government and private industry working together, rebuild our manufacturing base. How can we become once again a creditor nation, or at least not such a heavily indebted one?

I am aware of how things were in the 1930s because my mother who finished high school and college during those years remembers them very clearly.

[JDPriestly]

13. The problem is that our society has changed.

Back in the 1920s and early 1930s, many more Americans still lived on farms. Now we live mostly in urban areas and towns. We can't raise our own food. We have to buy it -- with money. Even though many farmers lost their farms and drought and dust destroyed many areas, people were still close enough to the land to get food at low prices.

In addition, when the depression of the 1930s began, we were a creditor nation and had a large manufacturing base. The potential for jobs, for re-starting the factories was still there. We saw how quickly production ramped up in WWII. Because men were serving in the military, in the early 1940s, women swarmed into the factories. There is no manufacturing base to re-start at this time.

So, how in the world can the jobs, jobs that pay well enough to allow people to pay off their mortgages, be created in a country in which the factories are simply gone, rusted out, empty of machinery?

It is folly to think that enough Americans will get jobs in technology to make a real recovery that benefits most Americans possible. Homeowners will not be able to repay mortgages under any scheme unless they have jobs. So, the real question is: How can we, as a nation, government and private industry working together, rebuild our manufacturing base. How can we become once again a creditor nation, or at least not such a heavily indebted one?

[MNDemNY]

2. Not until it cuts into the banks bottom line.

Oh, you mean help for the PEOPLE?? Why, never, of course.Silly you!

[laughingliberal]

5. Lol! Yes, silly me. I also had some thought that bringing the economy back might be of value.

But the ruling class isn't hurting so, why bother? Is there any point at which main street's pain causes them any inconvenience or is everything that hits working and middle class Americans good for the elite?

[laughingliberal]

7. Is there any point at which this hurts the banks? Or is it just endless bailout to keep them from

enduring any consequences?

[MNDemNY]

9. The later.

[rzemanfl]

3. Never. "They" would be perfectly happy to live in gated

compounds surrounded by tar paper shacks.

[FiveGoodMen]

6. I've got one response to that: SIEGE

[branders seine]

8. the entire world will melt before a single one of the power elites

exercises the feeblest urge to help an actual human being who is not part of their ruling monkey club

[Kablooie]

10. How bad did it get before the French Aristocracy helped the general population?

Everyone is dealing from a position of total selfishness.

The only thing that will get someone to help someone else is if it is in his own selfish interest.

Until then, you are on your own.

[OnceUponTimeOnTheNet]

11. FRSP?

Need a pic of a guillotine here.
Market wrap up folks would get this.

[Greyhound]

14. We're desperately trying to ignore the basic economic facts.

The price of housing was artificially inflated through fraud on a scale never before imagined. Then those artificially inflated numbers were used as leverage to create a web of paper hundreds of times greater than the already false valuations.

Bottom line is that the only way to sustain housing prices is to significantly increase wages. If this doesn't occur, and it seems very unlikely in view of the dominant beliefs in U.S. businesses, the price/value of houses must continue to fall.

[dkf]

15. Honolulu's property assessments came in and they are LOW LOW LOW.

I've been following the housing market and I haven't seen anything selling at those prices. I have no idea where the numbers came from. My friend thinks they are from the bank assessments. I dunno.

In any case, the listing prices that came out since the property tax values were delivered are significantly lower than the last batch just before the end of the year.

I have to admit it shook me up to see those big drops. I can't imagine how home owners and investors are feeling. They must be ill.