Comments on: One Reader’s Response to “Let ‘Em Fail” Post

By: Anonymous

Anonymous — Fri, 01 Aug 2008 06:33:13 +0000

Let me expand on why I feel the government shares some of the blame. In Greenspan’s book, he tells how the government(around 2000) wanted to expand home ownership among all citizens.He thought it was a good idea. The banks cooperated. According to a Kiplinger”s article,”Mortgage Standards became lax starting in 2000 but really fell off the cliff in early 2005,led by the unprecedented writing of subprime loans with two years “teaser” rates”. Where was the oversight?

By: Super Saver

Super Saver — Fri, 01 Aug 2008 01:13:48 +0000

I’d like think with all the constituent opposition to the housing bill that the members of Congress who voted for the bill would lose their seats in upcoming elections. Unfortnately, mostly the same Congress will be in office after the 2008 election.

I think it’s time we booted out the current legislators and put in people with financial common sense. It would be great if financial bloggers could become a political force

By: Nathan

Nathan — Thu, 31 Jul 2008 15:43:00 +0000

@Irina
“When I purchased the house my intent was to move 3-4 years later. That is why I took out a 3 year ARM. Remember, I put down 20 % equity.”… “So, I have no choice but to wait it out. You probably are asking if I knew I was going to sell my house 3 years later, why bother buying. Well, I have always been a homeowner.”

You gambled by taking the ARM instead of a fixed. You lost that gamble and now you get to pay the consequences. Why should others who were more conservative subsidize you for taking that gamble?

You also gambled by buying a house when you knew you’d be selling just 3 yrs later. I’ve been in that situation many times and didn’t buy because I knew I’d have to get significant appreciation just to break even, not to mention the real possibility of a downturn that would create a big loss. You gambled. Too bad. I don’t want to pay for that. You (and others who did the same) wouldn’t be sending me a check if you had had gotten a big gain, now would you?

The market was overheated and needs to fall to a level where incomes can support the price without government propping them up.

By: Velvet Jones

Velvet Jones — Thu, 31 Jul 2008 01:20:57 +0000

I agree with other posters who mentioned that if we are going to rail the homeowner, we MUST hold the feet of these banks and brokers to the fire. Don’t even get me started on the developer fraud that was rampant in Chicago and in other major cities. I’m really troubled by the ire I see for homeowners when this bailout is really for the banks. Where’s the fire, brimstone, and angry emails to lawmakers about that?

Anyway, Irina? The reason why I can’t buy a home is because homeowners who overspent in 2005 for their home believe they are entitled to sell that home for that price PLUS 10% added on to that. Sorry sellers, but this is not the market you bought into. The price you paid was artificially inflated and is not worth what you paid for it and the extra you’re trying to make on it. There are buyers out there ready to close. But a great deal of sellers are in denial.

By: Irina

Irina — Wed, 30 Jul 2008 20:59:43 +0000

It is interesting reading all the posts so far about my situation. I feel like clarifing a few things.
Firstly, JLP mentions somehow there is something wrong with government help. What did you do with your rebate check the government sent you?
How about financial aid for school, that comes from the government.
Tax rebates also come from the government.
I can go on and on from here.
In some way we all as tax payers receive our tax dollars back from the government.
So, in other words, not all government assistance is in the form of Social Welfare, which we all dislike.
JLP responds with “to right the situation …it means losing her house”. I am no where near foreclosure. What I have been trying to do is refinance. When I purchased the house my intent was to move 3-4 years later. That is why I took out a 3 year ARM. Remember, I put down 20 % equity. With the market the way it is now, I have 3 homes on my block that have been for sale for over a year. There are no buyers. Why?? Because banks are not giving out mortgages because of falling home prices. So, I have no choice but to wait it out. You probably are asking if I knew I was going to sell my house 3 years later, why bother buying. Well, I have always been a homeowner. The tax advantages of being a homeowner are greater than being a renter.
The one thing I don’t understand are people saying they are waiting for prices to fall even further. To me its a self fulfilling prophecy. With that kind of thinking prices will keep falling. When will we say its now time to buy.
I do agree that there are homeowners who can not be helped. The government will weed them out and make a decision that refinancing is not for them. But there are others like me, who are in ARMs with rates that will reset to 8-12%. They should have the option of refinancing to todays more acceptable 6% range.
You could be in my shoes one day. Trying to sell your house but can’t because the buyers mortgage company wants over 20%, maybe even 30% down. Could you afford that in todays environment. What happens if you need cash to send your child to college, and you apply for a home equity loan. Forget about getting approved. Hope your child is a Mensa genius. Do you see where I am going with this. Its easy to say forget about ‘them’. But ‘them’ could be you tomorrow. Read Tuesdays Financial Times ‘US credit crisis is hitting the wealthy’. How about them apples. LOL. Irina.

By: Terri

Terri — Wed, 30 Jul 2008 18:56:02 +0000

“Are there really that many non-homeowners who have great credit and a 20% downpayment?”

Yep, there are. We’re military and live in San Diego County, CA. In late 2001 when we first moved here from an overseas duty station we moved straight into military housing. There were hundreds of homes being built around us and we were shocked at the prices being asked and rather distraught that after 26 years in the military, and once again living on US soil, we could not afford to buy a ‘forever’ home where we wanted to retire.

We were equally shocked when so many people began moving out of our military neighborhood and into those houses wondering how in the world they were able to afford them – especially those that were very low in rank. ARM, to their rescue, or so they thought at the time. We didn’t bite.

We are now estatic about the housing situation here. We have watched homes once advertised at $600-800,000 now being offered at $300-$500,000. We have been saving all this time just waiting. So we have more than 20% to put down, and we have outstanding credit.

I do not work to bail out those who were impatient and stupid and am really disappointed at the potential ‘help’ I see being offered.

By: Joe @ Simple Debt-Free Finance

Joe @ Simple Debt-Free Finance — Wed, 30 Jul 2008 18:23:44 +0000

I think this part says it all:

“I truly believe people are not in this housing predicament because they are reckless with their financing.
I for one pay all my bills and will continue to do so.”

Personal finance is MUCH more than simply paying your bills. Will she still be able to pay her bills when her mortgage rate resets?

By: Meaghan

Meaghan — Wed, 30 Jul 2008 14:27:28 +0000

JLP,
Thanks for responding.

It is certainly possible that there will be buyers for all the houses that get foreclosed on. In my opinion, though, due to the volume of easy credit and the widespread notion that rent is ‘throwing money away’, most of the people who are qualified to own houses are already in them. There are people my age (recent college grads renting while saving up for a downpayment, etc) who don’t own homes, who will probably take advantage of a soft housing market and buy, but I don’t think that it’s enough to make up the difference in most areas. Another issue to factor in is the tightening credit situation. Are there really that many non-homeowners who have great credit and a 20% downpayment?

In the area I live (not my immediate neighborhood, but neighborhoods around it, and one neighborhood I used to live in) there are a significant number of boarded up houses. There are areas in other parts of the country (Detroit being an extreme example) where whole blocks are mostly vacant. No one is going to want to buy a house in those areas, at any price, if they value their personal safety at all.

As to whether it’s simply delaying the inevitable, it’s certainly possible. And I certainly don’t know enough about economics to say whether the delay will do a net harm or good. I can believe that it might give those people who would like to take advantage of the market enough time to save up a downpayment, or that it would give people in danger of losing their house due to illness or job loss a better chance to fix their situation, but I can also believe that the more quarters that pass during which the prices of houses decline, the more people who might buy into the market are going to be convinced that real estate isn’t a great investment after all.

By: Mike

Mike — Wed, 30 Jul 2008 05:51:42 +0000

That post by PJ is about the best post by a European reader that I’ve seen since I started blogging back in 2005.

By: JLP

JLP — Wed, 30 Jul 2008 03:51:19 +0000

Meaghan,

Thanks for the long and thoughtful comment.

Like I’ve said before, if housing prices come down enough, there will be buyers. In other words, I don’t expect houses to sit vacant for very long.

I have my doubts about the effectiveness of this housing bill. I have a feeling that it’s going to do nothing but prolong the inevitable and that these people will end up losing their homes anyway. I’d prefer that to happen sooner rather than later.