Blodget – “fix” housing by letting prices fall

I agree. All the propping up efforts advocated by the NAR, home builders and banks won’t solve the underlying problem which, as Blodget points out, is the inability of some homeowners to pay their mortgage. Falling prices don’t cause foreclosures, no income does. If we “hold the line” on prices through massive subsidies paid by one group of taxpayers to another, what have we accomplished?

I don’t really foresee a wave of foreclosures coming to Greenwich – or I hope one doesn’t – but the philosophy is the same: if you want to sell your house, you’re better off adjusting to reality than clinging to a 2006 price and hoping it will return. That may well be a very long wait.

Update: And here’s exactly what we don’t need – Congress expected to authorize bankruptcy judges to cram down mortgages. That’s great news for deadbeats, pad news, in the form of higher interest rates, for those who pay their bills.

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4 responses to “Blodget – “fix” housing by letting prices fall

  1. Anonymous

    There will be foreclosures, no matter what, but we don’t want to “overshoot”. Some banks such as JP Morgan Chase, have stepped up to the plate and are willing to work out short sales with borrowers. They understand that it is in their shareholders best interest as well as the borrowers best interest to move on. Other banks and those in the securitization community have not yet realized that they have a lot to lose by waiting as prices decline. In a short sale, you might get seventy five cents on the dollar. In a foreclosure, you might get fifty cents on the dollar, and you destroy the value of nearby roperties, which could be collateral for properties remaining in your portfolio. Come January or February, Washington will force this issue to the forefront. See today’s WSJ for “Mortgage Cramdowns loom as forclosures mount” Bankrupcy judges may be allowed to modify mortgages, and/or Barney Frank may require the securitization industry to modify loans in their portfolios. No matter what, those who made loans that shouldn’t have been made should be forced to suffer the financial consequences of their lack of good judgement..

  2. kidding really?

    “overshooting” is another way of saying “I really did expect the market to come in but NOW I am losing money on my own house and I don’t like it”. House prices will drop in some cases to levels that haven’t been seen in 10 years. If stocks can give back this much (I doubt we have seen the bottom in stocks) why can’t real estate?

  3. RealtorOne

    We are well out of 2006 prices with real estate, wake up and smell the coffee folks, we are leaving the 2000′s in most Connecticut markets altogether.

  4. Pingback: What causes foreclosures « Sophismata