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Why Are Home Sales Plummeting?
Why are home sales plummeting?
On the surface, it is because the government's tax-credit for first-time home buyers lapsed in April.
It takes a couple of months lag-time between buyer purchase decisions
and the actual close of escrow, and so the expiration of the tax-credit
is just now hammering the market.
And there is a huge backlog of housing stock.
And sellers are holding out hope that they can get close to peak prices
for their homes, while buyers believe that prices will fall further -
and so are waiting until prices decline further.
But there is a more fundamental reason that home sales are plummeting.
Specifically, when housing crashed in 2007 and 2008, the government had two choices. It could have:
(1) Tried to artificially prop up housing prices;
or
(2)
Created sustainable jobs, broken up the big banks so that they stop driving our economy into a ditch, and restored honesty and trustworthiness
to the economy and the financial system. All this would have meant
that the economy would recover, and people would have enough money to
afford to buy a new house. (See this).
The government opted to try to prop up prices.
Indeed,
as I have repeatedly pointed out, the government's entire strategy has
been to try to artificially prop up the prices of all types of assets.
For example, I noted in March:
The leading monetary economist told the Wall Street Journal that this was not a liquidity crisis, but an insolvency crisis. She said that Bernanke is fighting the last war, and is taking the wrong approach. Nobel economist Paul Krugman and leading economist James Galbraith agree. They say that the government's attempts to prop up the price of toxic assets no one wants is not helpful.
The Bank for International Settlements – often described as a central bank for central banks (BIS) – slammed
the easy credit policy of the Fed and other central banks, the failure
to regulate the shadow banking system, "the use of gimmicks and
palliatives", and said that anything other than (1) letting asset prices
fall to their true market value, (2) increasing savings rates, and (3)
forcing companies to write off bad debts "will only make things
worse".
***
David Rosenberg [former chief economist for Merrill Lynch] writes:
Our
advice to the Obama team would be to create and nurture a fiscal
backdrop that tackles this jobs crisis with some permanent solutions
rather than recurring populist short-term fiscal goodies that are only
inducing households to add to their burdensome debt loads with no
long-term multiplier impacts. The problem is not that we have an insufficient number of vehicles on the road or homes on the market; the problem is that we have insufficient labour demand.
Indeed, as I pointed out
in April, unemployment is so bad that 1.2 million households have
"disappeared", as people move out of their own houses and move in with
friends or family.
BIS wrote in 2007:
Should
governments feel it necessary to take direct actions to alleviate debt
burdens, it is crucial that they understand one thing beforehand. If asset prices are unrealistically high, they must fall. If savings rates are unrealistically low, they must rise. If debts cannot be serviced, they must be written off.
I pointed out in March 2009:
Paul Krugman wrote a couple of weeks ago:
The
truth is that the Bernanke-Geithner plan — the plan the administration
keeps floating, in slightly different versions — isn’t going to fly
....Why won't it fly?
One reason is that
economic psychologists tells us that consumer psychology has shifted
for many years to come, and Americans are hunkering down and not buying
anything other than the bare necessities. The Fed can try to play the part of all of the actors in the economy, but it won't work.
Today, Edward Harrison's must-read post
explains provides additional reasons why the Geithner-Summers-Bernanke
plan to prop up asset prices cannot succeed (if you don't read the
whole post, at least read the following excerpts):The U.S. government's efforts point in [only one direction]:
Increase asset prices. If
the assets on the balance sheets of banks are falling, then why not buy
them at higher prices and stop the bloodletting? This is the purpose
of the TALF, Obama's mortgage relief program and the original purpose
of the TARP.***
There is only one direction
the government is headed: increase asset prices (or, at least keep them
from falling). Read White House Economic Advisor Larry Summers'
recent prepared remarks to see what I mean. (Summers on How to Deal With a ‘Rarer Kind of Recession’ - WSJ) ....These plans are not going to work
As
aggressive as this campaign by the U.S. government is, it will have
limited effectiveness because the extent of the writedowns of assets
already on the books is going to be too massive. ...
And Ryan Grim pointed out in April 2009:
Critics
of Geithner, including Nobel Prize winning economist Paul Krugman,
insist that the real problem is an asset collapse that led to a crisis
of solvency in the banking system. In other words, Krugman
argues that home values have come back to Earth, while Geithner hopes
to solve the problem by pushing home values back to where they were. The conflict is a serious one because it dictates what response is appropriate.***
At
a closed-door meeting with House Democrats on Monday night, according
two members of Congress who were in the meeting, Geithner repeated that
he believed the problem with the financial system was a lack of
liquidity and that if he could get credit flowing again, the problem
would right itself. Key to this
analysis is the question of whether one thinks the rise of housing
prices was an artificial bubble or if the collapse is reversible and we
can return to those highs. Policymakers have resisted labeling
it as a bubble. [head of the president's Council of Economic Advisers
Christina] Romer, on Monday, came close, referring to a "run-up in
housing prices that sure looks like a bubble."...
If the crisis
is understood as one of liquidity, then the appropriate response is to
continue injecting capital into the banking system and fiscal stimulus
into the general economy until asset prices return toward previous
highs. Japanese policymakers initially understood their crisis to be
one of liquidity and injected hundreds of billions during the 1990s, to
little effect. But if the problem is something different -- a solvency
crisis brought on by essentially permanent asset-price declines --
then the policy response needed is different.
So were housing prices in a bubble or not? And - if so - have housing prices now come back to earth?
Well, as liberal PhD economist Dean Baker points out:
Real [i.e. inflation-adjusted] house prices are still 15-20 percent above long-term trend.
In other words, housing was in a bubble, and still has a ways to go before it is back to normal.
As the Wall Street Journal wrote in January:
Housing
economist Dean Baker, the co-director of the Center for Economic and
Policy Research, laid out his case at a risk conference last week for
why we still have a housing bubble. Adjusted for inflation, home prices
are still 15-20% higher than they were in the mid-1990s. “There’s no
plausible fundamental explanation for that,” he says.
Why?
Simple, he says: Economic fundamentals are all going in the other
direction. Rental apartment vacancies are reaching record highs. Many
segments of the housing market are still oversupplied. And the core
demographic in the country—the baby boomers—are reaching the age where
they’re more likely to downsize, buying less house in the years to come.
Far
from some rosy estimates that housing is going through a temporary,
once in a lifetime downturn, and that once the market bottoms, homes
will again appreciate well beyond the rate of inflation, Mr. Baker
argues that home prices are far more likely to increase annually at the
rate of inflation, at best.
“If anything, I expect housing to be
weaker than normal rather than stronger over the next decade,” he
says. “People who say this is a temporary story, there’s no real reason
to believe anything like that.”
The recent burst of good housing news has been fueled by government stimulus, including the tax credit, low mortgage rates and easy financing
from the Federal Housing Administration. Mr. Baker, who had been a
skeptic of the tax credit, concedes that it has worked. So, too, he
says, has the FHA effectively supplied credit to goose sales.
But that’s likely for the worse, he argues, taking the opposite view of policymakers at the FHA.
“As
a matter of policy I can’t see that we want people to buy a house in
2009 that’s 10-20% higher than it would sell for in 2011,” he says. “In
so far as the FHA was encouraging people to buy homes in bubble
markets that were not deflated, that’s not good for the FHA and you
didn’t help the homeowner. We didn’t do those people a favor.”
Indeed, Baker said last November that the government's hasn't really helped homeowners, but has really been helping out the big banks instead:
The
big talk in Washington these days is "helping homeowners".
Unfortunately, what passes for help to homeowners in the capitol might
look more like handing out money to banks anywhere else.***
So,
who benefits from "helping homeowners" in this story? Naturally the
big beneficiaries are the banks. If the government pays for a mortgage
modification where the homeowner is still paying more for the mortgage
than they would for rent, then the bank gets a big gift from the
government, but the homeowner is still coming out behind.
***
There
are simple, low-cost ways to help homeowners who were victims of the
housing bubble and lending sharks.... But this would mean hurting the
banks rather than giving them taxpayer dollars, and we still don't talk
about hurting banks in Washington DC.
Similarly, Zack Carter wrote yesterday:
The
Treasury Dept.'s mortgage relief program isn't just failing, it's
actively funneling money from homeowners to bankers, and Treasury likes
it that way.***
Economics whiz Steve Waldman [writes]:
The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks.
Policymakers openly judged HAMP to be a qualified success because it
helped banks muddle through what might have been a fatal shock. I
believe these policymakers conflate, in full sincerity, incumbent
financial institutions with "the system," "the economy," and "ordinary
Americans."
Baker has also said in numerous interviews this week that the only
thing the temporary tax break for first-time buyers has done is moved
home purchases up by a couple of months. In other words, the credit
didn't motivate people who weren't planning on buying a house in the
near future to buy. All it did was motivate people who were already
planning on buying this year to buy before the credit expired, thus
creating no real boost to the housing market.
The bottom line is that home sales are plummeting because housing was in a bubble.
While most assuming that Americans are being more frugal and
deleveraging - so that we will soon "get thorough this" and home sales
will finally bottom - that assumption might not be true.
And there are huge waves of foreclosures coming down the pike. See this, this and this.
Indeed, it is possible that housing prices may never return to their peak bubble levels. See this, this and this.
Instead of fixing the real problems
with our economy or genuinely helping struggling homeowners, the
government has made everything worse by trying to artificially prop up
asset prices in a way that only helps the big banks.
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Good post. Banks not lending or window dressing lending growth another huge problem.
There still are incredible deals out there if you have a smart real estate agent.
I know a mid-forties couple who just bought their first home in a quick sale (?). The home was built in 1995 and sold for around $600,000 to someone who thought they could hold it awhile and then flip it. He got caught in the downdraft and then to add insult to injury, rented it to a crackhead who didn't pay rent for a year and only used the living room and kitchen (which he trashed). The bank foreclosed and made my friends wait 8 months but finally had to sell it for the $305,000 they had pre-approved 8 months ago. The smart real estate agent knew the bank blew it by signing off on that pre-approval. Legally the bank had to sell it at that price.
The bank wanted to auction the house now for a starting price of 350,000 but because they had signed the contract (by mistake?) they had to give the house to my friends.
The house is one of many new luxury homes in a gated community in a lower-middle class suburb of Los Angeles. During the boom these places were popping up all over in impoverished areas that usually wouldn't have seen any development.
---"The boomer die off and sell off is going to be 30 years of declining home prices nationwide prices driven entirely by inevitable death demographics"----
In yesteryears when mom and pops died, people would sell off the little old house. Today, family may live in the little old house that is paid for and be happy to have a home. Those young grads will be happy to get into a house.
One of the primary motivations for going the "bubble route" was the state levereged its bloated home price future property tax revenue for instant bond gratification-and then spent the money buying votes. (they spent projected future fraud revenue today)
Bell CA is exhibit A, average peak home price about $500,000.00, current crater price far less than $400,000 with plenty of space to drop to say $100,000
Per-capita income $24,000. (average family size 7)
Ultimately Bell will default on all its bonds, and as home prices fall those solvent homeowners will get hit with ever-escalating tax assessments increases from idiot exits.
When your neighbor gets forclosed and the city loses half its tax revenue and hasn't made any cuts the city has to make up the difference on the folks that didn't have their taxes cut, that means huge involuntary tax increases and forced sales further depressing prices.
So far there is no Bell tax liability housing price discount (buyers aren't accounting for increased tax costs in home prices) this will soon become a major factor affecting prices as home prices re-adjust and tax levies get shifted.
The Bell bond leverging basically obliterated prop 13 property tax limitations, when people voted for a $8 library tax they didn't know next year that $8 tax can be unilaterally raised to $800 or $8000 dollars-depending on how much property tax revenue the city lost to foreclosed or short sale homes.
I'm sure Bell is looking for more credit too.
And then there's the 60 million strong Baby Boomer home ownership bubble many of whom own their home outright and can sell their homes for nothing if costs get too high, those same boomers have had their savings gutted by sub-prime lenders and their SS is non-existant, their trust fund a fiction.
The boomer die off and sell off is going to be 30 years of declining home prices nationwide prices driven entirely by inevitable death demographics exacerbated by bad economic demographics and bad immigration demographics (we're replacing educated healthy Americans will far less educated less healthy aliens=lower wages=lower home prices and a higher tax burden).
GW: It all leads back to BP.
As first suggested on Thurs 26th, further upside for DOW/SP500 is expected.
http://stockmarket618.wordpress.com
Why?....there are fewer buyers than there are sellers.
George I enjoy your Blog and I usually agree with you but this time I do not.
The problem with declining Home Prices also is directly related to the Banks and their actions. The Banks are so anxious to unload the Houses that they are will ing to take anywhere between 25 to 30% less on the Market Value of the property. So, they underprice the Homes they are selling to move them quickly. This then lowers the value of every other property in the Community. The price the Bank sold the Property will now be used in Appraisals for any new sales. The Banks will then not loan money to a new Buyer even if they will pay more because the comperables do not support a price higher than the Short Sale or the Forclosure. I will you two local examples.
One property is a High Rise Condo. One bedrooms were selling for $400,000. to $425,000.at the peak. The prices have come down to around $300,000. to $325,000. There was a listing receintly put on the Market for $225,000. as a Short Sale. The people that Own the Property paid $407,000. for the Property. So, the Bank is willing to sell for $175,000. less than the prior high and $75,000. less that the current Price.
The next example is a street with Duplexes, most split into two apartments.Houses at the peak were selling around $185,000. A Bank put a Forclosure property on the Market for $125,000. and sold it. The Next Bank Auctioned 2 Properties for $109,000. Now anyone that wants to sell has to sell between $109,900. to $125,000. as the Bank Forclosures will be the comperables for any future sale.
Sales count as Comperables for at least 6 months. After 6 months they become stale. So it will take probably a year before you see incremental price increases. This is why it will take years for prices to return to normal levels.
The other problem is that they have changed the Appraisal process. Now the Appraisals go thru a large institution and are doled out to the Appraiser by the 3rd party. Most of the Appraisals are comming in below the purchase price and many Buyers have to pay for at least 3 Appraisals to get an amount equal to the purchase price.
When a property under Appraises there are two options. One the Seller reduce the price to the Appraisal or the Buyer come up with the Cash difference between the Sale price and the Appraised price. Both options are usually not workable and the sale falls thru. The Sellers do not want to accept less than agreeded upon and the Buyers just do not have the Cash to make up the difference.
In summary the reason prices are falling is because of the Banks actions. A normal Seller would not sell a property for substancially below Market Value. Most Sellers would have to come to the Table with Cash to make up the difference between loan amount and the sale price. With the Banks just Dumping Properties on the Market for substancially lower prices they are hurting every one, incluing themselves. Maybe if they were subject to Mark to Market they would not be so eager to Dump Propertys on the Market for so much less than they are worth.
Just another way the Banks are huring the average American.
You have no idea what is going on around you.
Please, either stop reading blog and stay in your current state,
or buck up and read http://theautomaticearth.blogspot.com/ daily until you catch on to the underlying collapse in RRE pricing.
Folks, if you read the stuff krugman is saying now on his blog the solutions aren't any better. he is in the camp of just throwing money down the asset price sink hole. I know i read the blog every day and have an ongoing fight saying almost exactly what this post says.
So everyone do me a favor and send George's post to krugman
letters@nytimes.com
I guess you have to cc him or post it on his blog which you can find on the ny times web side. in the opinion section, under collumnists, hit krugmans name nad it gets you there.
Krugman is a sociopath, Pinch is a sociopath, the societal value of the NYTimes on the national debate is rapidly approaching zero value.
Hopefully they return Krugman to behind a paywall... so bloggers will stop linking to his raving Napoleon complex rants.
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Well, take you're pick - deflationary great depression of hyperinflationary great depression...
The problem as usual has many aspects. I see the most important as follows: The public (house buyers) see their wages plummet and at the same time see their retirement savings (if Any) disappear.
At the same time people realize they can live comfortably for less, in a smaller house or conversely they can have more people (or family) contributing to paying their existing mortgage by moving them into their homes.
As long as companies squeeze wages, they profit immediately from the savings in labor costs and get their bonuses and stock options or other perks, because it shows up on the companies bottom line. The overall effect will go up their ass later, as their own home prices (and other assets) fall to the equilibrium level where the wage earners are.
You can't have it all ways in your favor.
Make a decision to pay wage earners more, or face their wrath later, and lower the market value of everything you own in the meantime.
Squeezing every last cent from workers and expecting to have your own assets maintain their value is ridiculous.
Simple.
It is now, yes. That rearview mirror sure makes geniuses out of us all.
It's not that complicated. First, no one wants to buy anything when they fear it will drop in value...with all the bad news, foreclosures, increases in supply and forecasts for continued drops in prices, why would anyone buy a house right now? Second, the number of buyers are determined by the amount they can afford to pay per month, downpayment requirements and availability of capital. Prices are down 35% to 40% and going downward. Interest rates are at all time lows. However the days of zero down ez credit which created artificially high demand are done. Supply is at a peak and demand is artificially low. In a nutshell, that is why we are where we are. Until banks get real about workouts the cycle of price drop-foreclosure-price drop will continue. As soon as banks take the hit and get real about workouts, the market will level off and the buyers who are waiting on the sidelines will see the bottom and get back in the market. This will reduce supply, create a firming (and dare say increase) in prices and start the cycle of selling-reduction in inventory-price increases-more sales. But, it only happens when someone (banks) get real and bite the bullet...thinking longterm goes against their grain. BTW, goverment bailouts perpetuate the bad market.
Not now, no. That rearview mirror sure makes geniuses out of us all.
If there's any good that ever comes from the shenanigans of the recent housing debacle, it will be that PERHAPS people will stop looking at their houses like a fucking ATM and realize that the real value of property is shelter and quiet enjoyment of your parcel. "Flip This House" is a summary anathema to the very idea of owning property, as it was envisioned in the fetal days of this country.
Why is it that everything that we're experiencing today seems to be the result of taking the Constitution and turning it completely upside down?
I think that Geithner and the rest of the controllers do not know when the game is up. They only know that it will be up some time. Geithners actions allow the insiders to liquidate the remainder of their holdings while he blows warm air up everybody's asses. Its a charade. An organized withdrawl or a rear guard action. Geithner isn't doing the wrong thing. I think he knows preceisly what the outcome of his action are. Damn everyone else. There are few options for the rest of us beyond gold and those remaining choices require dicipline and courage.
Geithner does not see us at the local lunch spots, pass by us in the halls, see us at the cocktail parties, get calls from us on his direct line. We do not exist.
drchris-
I guess if you can't find a seller at the price you want to pay, then you are offering too little. Isn't that how markets are made? Maybe if you are patient, someone will have to sell and take the loss, then again, maybe not.
The homes I made offers on had 0 offers made (other than mine) in the 6-12 months they were listed. I'm completely confident that my offers were fair market value based on comps. If these dummies paid down their home like a sane person would, they'd walk away with some cash and avoid further pain. Instead, they took out home equity loans. They're screwed and I have no sympathy when they consistently make bad decisions. Eventually I'll get my home. It just doesn't make any sense to overpay in a falling market. If you do you risk becoming screwed just like one of these dummies.
For friends who are at that point where they are marrying and nesting, we've been putting out shotgun lowball bids for the last 2 years. we are 5 for 5 getting people a home at 'below foreclosure' prices.
In NorthNJ and Rockland/Orange counties NY, it has worked out 100% of the time. The EASIEST so far ... It took 30 or 35 offers, 5 failed negotiations, and over a year... but we got a house at a real deal...
Personally believe that for well over 70% of current renters or potential new householders, it will not pay to buy a home for at least the next 7 years in areas where employment situation stabilizes... and possibly 15 years for areas of Nevada, California, Florida, Georgia etc.
I'm in the nesting phase too or else I wouldn't buy now. In Dutchess County, so not far from Orange. Your timeframe sounds reasonable to me. In fact, I expect prices to continue to fall until we break some threshold unemployment number (~7.5%).
I've noticed an interesting trend up here. Virtually all the homes I see go into contract come back on the market eventually. The lenders are reducing the appraisals so that putting 20% down requires you to put more like 30% down. For example, you agree on 500k for a home. The lender appraises at 460k. To get to 20% you have to put down 92k plus the 40k difference. That's enough to break the deal.
For some reason everyone thought it was a good idea to keep taking equity out of their home for some quick cash. Guess what, now you're f-ed. I've been trying to buy a home for 6 months, but sellers can't (won't) sell at market value because they owe more than they would get.
When I see an article that I agree with so completely, I can only say, "Great article!" Yes. I wish more people with true influence finally understood this.
I wrote a heart-felt article in the form a "Letter to Obama" back in March 2009 with a very similar message. Please have a look.
http://economicdarwinism.wordpress.com/2009/03/28/letter-to-obama-our-vo...
Here are some quotes:
Well what the hey do you want ?? I passed the reading a teleprompter course while looking sincere, didn't I. Now you want me to think too ???
I guess they missed your article...
Good stuff - but I expect a further 40% drop in home prices...it really sucks out there.
As do I. I don't think the prices of the 90's are sustainable either. We're probably going to see a return to the (inflation adjusted) prices of the 70's... the prices that existed before the pig-in-the-python baby boomer generation drove housing up through their sheer numbers. Housing demand is gonna return to historical norms.
from what i can gather, real estate prices 1929 to 1942 dropped between 65% and 95%. bear markets tend to overshoot norms as bull ones do. real estate didn't decline nationally from ww2 to 2008 (or close to it). sixty years is a lot of outperformance to balance out.
reliving this history makes me want to throw up but also makes me extremely confident in my already confident position of shorting this mkt back to the triple digits.
"leading economist James Galbraith"
What makes an economist a 'leading economist'? (because Dad was on too?) Did his economic predictions have a higher rate of accuracy or what? Also, who cares about PhD economist blah blah. PhD my ass. It's not like physics, where you can actually make calculations about the real world and predict the positions of heavenly bodies or projectiles, or when a column will buckle. Economists are useless, they can predict nothing with accuracy better than luck.
Don't get me wrong, Washington, because I generally like your blog, but if an idiot like me can see the fucked-up-ed-ness of the policies of business as usual, what makes you think that the Ivy leaguers who run the show can't? Since they obviously can, the only rational conclusion is that things are playing out exactly as planned. Just sayin'...
Agreed. Too much consensus that they will pump up to the election. To take this thought one step further, how about this idea:
- crash before election
- dems out, GOP in
- then, they're all in a big mess together and actually have to work on the problem together
- if it fails, dems won't take the blame
The first two parts of your scenario play out nicely, but the third? Not a chance, these days...it will just be more hemming and hawing from the other side of the aisle. Politicians are either subservient or equivocal to the financial architects that run the bizarro system. The only consensus that they achieve is to further divide us on issues of complete non-importance, while the coffers are looted. Jefferson is doing about 4k RPM's in his grave right now.
Never forget: people in power generally want to stay in power or go down with the ship (or at least hop off of the ship at the last possible moment and run away with the gold).
We ivy-leaguers also suffer from a set of superiority complexes, believing we can right all the world's wrongs. It's only when we have that last-moment chance to ditch the sinking ship that we realize we were wrong ;)
. . . and proceed to blame it on the morlocks who weren't worthy of your brilliant leadership.
MORLOCKS BITCHEEZZ!!
Imagine a program, and many people have been hitting all around this for a couple of years now, called the Primary Residence Program (PRP). A government initiative to help individuals directly, yet hold them ultimately responsible for their individual actions.
Higher education, auto purchases and home ownership are the big ticket essentials many people borrow to acquire. Higher education being the most "vital" as the alternatives are not as practical as they are for autos and housing. An auto purchase could reasonably be done without financing (save first and then buy) with a six year delay in the start of the purchasing cycle. (Given the current conditions a Primary Auto Program might also be implemented, completing the big ticket debt trifecta). Housing can be attained by renting. Higher education loans are completing their move to government direct. K-12 moves to K-16, probably a good thing. That, and a lot of other refinements aside, look at what happens when the PRP gets implemented.
The PRP lends money directly to individuals. The loan is secured by the person's future earnings (human capital) not the house. The IRS is tied into the loan processing and servicing to insure ratios and payments.
A loan will be issued up to say 38% of your AGI so a simple table will layout how much house you can afford given your AGI.
Should a person need to sell and be underwater they take the hit and are issued a gap loan for the difference. That gap loan reduces the ratio available to them and they will need to find a lower priced home on their move, rent or increase their AGI. Yup no jingle mail, no buy and bail, no NINJ loans.
Without going any further into the terms for the individuals and the PRP's detailed implementation you probably get the idea of the general change in the landscape for the individual: A government direct loan for a percentage of their AGI to be used to purchase a home.
Now the financial markets side.
The government issues lets say $xT of loans. Thirty year bonds with a 4.00% coupon. (They may even sell pretty well in today's market.) Individuals get a 30 year mortgage for 4.25%. The quarter point pays for running the system and then some. The mortgage interest deduction goes away for those who participate so as to add to the country's ability to be fiscally responsible.
Most of the bank primary mortgage programs and the RMBS market disappears along with the associated securitization and derivatives markets. Managing creative destruction will likely be a core competency during the great deleveraging.
Or we could let the free market work as it it should, based on the laws of economics, supply & demand. idiot
free market, what a novel idea, wish it were so!!!
The laws of economics are to a large extent based on the fallacy of scarcity that is heavily promoted by elitists and the TPTB.
Truly amazing. By the time I had stopped reading my jaw had dropped completely.
What bothers me is that this proposal would be accepted by a huge number of citizens.
Even worse, these people vote.
The general idea: You borrow only what you can afford AND you can't easily escape debts because you acted stupid is good.
It would also restore prices so people could buy a little something without a 35 year mortgage
If this was a satire troll, kudos.
If not, realize your plan is Unconstitutional as per a few US Supreme Court rulings.
Brave New World had a similar scheme, where the quality of housing was determined by your genetic class. So I guess you're just babbling about a decent implementation policy for Huxley's satire.
I think you're on the wrong blog.
Did you forget to type "sarcasm"? You're kidding, right? If you aren't, then Jesus fucking Christ what an evil plan that would be. You would make essentially everyone into a debt slave and there would be every incentive to make college, cars, and homes as expensive as possible. Your plan would achieve a perfect union of fascism and communism.