A Place Called Home
Aug 12th, 2007 at 10:54 am by Susie
It’s so surreal, to see all these suits on TV talking about how fine it all is:
Major lenders are repossessing homes in Southern California much faster than they can sell them, a development that could set off a downward spiral of price cuts and more foreclosures.
At some point — maybe this fall, maybe in 2008 — the lenders’ inventories will grow so large that they will have no choice but to start aggressively cutting prices, many agents and analysts predict.
That, in turn, will put more pressure on individual sellers, who will have to reduce their own prices if they want to find a buyer.
As values fall, more people could lose their homes, which would swell the lenders’ inventories anew.
I will say, though, that I’ve thought for a long time that this rapid inflation in home prices is a very, very bad thing for the economy and as ugly as it will be, maybe there’s a silver lining. The average worker’s housing costs are now a much larger percentage of take-home pay, which doesn’t leave money for anything else.
Houses used to be, you know, shelter. It was in the go-go Seventies when we first started to see them become investments, and in far too many cases, speculative investments. Anything that makes affordable housing impossible for this many people is a bad thing, leading to the kind of abuses of the mortgage system that’s collapsing now.
Here’s just one small example. Right now, spurred by a ten-year tax abatement, the downtown section of Philadelphia has seen a growth spurt with huge blocks of new condos that start at $300K. Many of these condos have been purchased as investments by New Yorkers who, used to Manhattan’s astronomical rents, thought they could make a lot of money renting them out.
They didn’t know that any Philadelphian who can afford to pay $3000 a month in rent is going to buy a house. So these condos are being rented at the going rate - and in many cases, the rent doesn’t even cover the owner’s mortgage payment. What do you suppose is going to happen to those condos? I’m expecting sheriff’s sales in the not-too-distant future, and entire sections of depressed housing.
And I expect that scenario to repeat itself all over the country. Thanks, greedy Republicans - and all your many enablers.
Blog Trawl…
Here’s a set of picture diaries from YearlyKos. Not exactly newsworthy, except in the, ‘Bill O’Reilly is a punk if he thinks these people are part of a hate movement,’ sort of way: hekebolos, SundayHighway, Eddie C and dmsilev. Zimbabwe……
Only 300K? Condos in our little Downtown development are (not) selling for an even mil. The Brownstones that just went up here in the Hippie District are (not) selling for a reduced price of 825.
On the otherhand, it’s a renter’s market. Dawn and I have a sweet little beachfront pad with mom, pop and a juvenile Osprey nesting sixty yards off the deck for about twenty percent, apparently, of what ‘yawl out there are paying.
Did I mention there’s no jobs?
The mortgages that are tanking are the ones that brought us this problem.
The interest only 110% (Yes 110%) Interest only ARMs. The lenders, who couldn’t find people with down payments for houses, sucked people into getting into situations that will kill their credit for years to come. Did I mention that the bankruptcy laws were changed to screw the poor?
As Curly would say “Don’t get me started!!”
I know it’s normal here to blame the republicans but the boom in the housing market started in the late 90’s and I don’t think a republican was in charge then.
Yes, John, but the subprime lending scams began with 9/11.
Actually, the boom in the housing market began during Reagan’s administration. During the ’80s recession, people began to mistrust the stock market (smart move) but decided to park their money instead in real estate, which was always believed to be the most secure (hence the expression “safe as houses”).
However, that made home prices artificially high. Adding to the whole mess was the rapid decline of the inner cities. When Reagan killed federal revenue-sharing with local governments, poverty rose again and the tax base declined. Federal block grants used to fund all kinds of effective anti-poverty programs.
That’s when virtually everyone who could afford it packed up and moved to the burbs - they didn’t want their kids going to city schools. But they had to extend themselves to do it, and that’s when women really began flooding into the full-time workplace - to pay the typical suburban mortgage, you needed two paychecks. Thus, we gained the illusion of economic good times, but the dollar actually declined in actual purchasing power until the Clinton era.
I’m sure there are other factors, but those are the big ones.
So while I can’t point to a specific smoking gun and say, “Oo, the Republicans did it,” I can say from the Reagan era on, public policy certainly favored home inflation.