Another comment on the housing crisis

[barbarienne]

I have a lot of sympathy for people who purchased a house they could reasonably afford, but who can't pay for it anymore because the economic collapse has cost them their income. These people should be bailed out

Comments

[purdypiedad]

I don't disagree with your sentiment at all.

However, any homeowner who bought in the last 5 years in CA has lost at least $150K in equity. Same with AZ. My parents have lost over a mil.

[barbarienne]

Not for nothing, but presumably all those homeowners in CA, AZ and FLA (which you didn't mention, but which is the other hardest-hit state) have been enjoying larger, more luxurious living spaces than I got for my $150K.

Your point still has merit, of course. I was thinking about the best way to say "I'm sure the hardest hit areas have lost more" and likewise houses that were very high-priced to begin with (since a million dollar home would lose 150K if it loses 15% of its value, which is common enough in the market right now).

On the other hand, people who bought their homes between 2002-2006 were buying homes of artificially inflated price. I don't think we do the economy any good to continue artificially inflating those prices (by bailing out the people who bought more house then they could ever possibly have afforded). I think a more equitable approach might be to give bailouts or tax credits to people who continue to own their homes which are underwater. Give them an incentive to hang on through the loss and wait for the market

[purdypiedad]

The losses I'm seeing are more like 50% of its value at purchase, not 15%. My parents' 20-acre property was worth $750K 5 years ago. Now, they have built a home on it, and it was just appraised at $400K... which is what they paid for it... before they built the house

[kaiweilau]

(Hi E! I met you a while ago at some NY SF author thing). You would be surprised. I'm in the process of buying a short sale house in Queens. The owner paid $800k for it 3 years ago. I pulled up his mortgage online (because in NYC all mortgages are public record) and found out he took out not one but 2 ARMs with balloon riders on each. It's ridiculous.

I'm waiting for the bank to approve our offer which is about 30% less. We'll see if it works.

[wuwt]

No one bailed us out when we had to sell our house in upstate New York when we were selling our house in a down market about a decade ago - we had to bring money to closing.

We've rented ever since.

Don't get me started...

[barbarienne]

Well, buying is generally a good thing if you're planning to stay in one place for at least seven years. I don't think you and M were in one place for that long ever since you left Upstate.

[wuwt]

Definitely the upside of renting is to be able to say, "Let's live in Europe for a year! Then after a year, say, "Let's live in Europe for 2 years" and not have to worry about making a mortgage payment and finding renters for property...

[secritcrush]

I want the prices to stay crashed, so I can afford to buy a place. (I am generally empathetic, but as long as people keep living in their homes then they have lost NOTHING.)

[barbarienne]

Exactly my point!

If the privilege of living in that house in that neighborhood was worth $600,000 to you three years ago, it should still be worth $600,000 to you now. Otherwise why did you buy it?

People who bought as a short-term investment are simply discovering the vicissitudes of the market. I'm not getting any bailout for my crashed 401(k)!

[drlaurac]

No one ever promised anyone their property values would stay the same. And if they did, they were lying. We all knew we were in a housing bubble.