Friday, March 14, 2008

Return of the Real Estate Ranter

The real estate bailout plans slowly gain momentum while the market continues to decline. As I ranted about earlier, I am not a big fan of any of this bailout business. I continue to be outraged that significant steps are being taken without giving thought to their long-term consequences. Don't get me wrong, I am all for making changes to help regulate the system. But how can anyone (be it consumers, investors, mortgage brokers, or bankers) be expected to change long-term behavior if they face no penalties when engaging in inherently risky activities. The conformal loan limits is a good example - I don't disagree that they should be raised. But instead of raising them by almost 100% (from $417,000 to $729000), why not raise them by a more modest amount, say a percentage tied to inflation?

And then comes the data that of all people who own homes, a third don't have a mortgage at all. Of the remaining 2/3 there are about 2% who face foreclosure. We're really not talking about a large percentage of people. But because people had been using their homes to finance consumer spending, and the demand for homes had driven the construction industry, there are significant portions of the economy that are being affected. Here's an interesting post about how a small percentage of people can affect the economy.

So we trudge along. LA Prices are still declining (generally now back to 2005 and even 2004 levels), the conformal loan limits have been raised (most dramatically in California), and the bailout plans are being fleshed out by the powers that be. At some point there will be a confluence where the external factors and my personal situation intersect and I am able to purchase a house. As I wait I vacillate between outrage and fear, wishing that everything could achieve some kind of impossibly peaceful balance. Serenity now, serenity now, serenity now.

Also, Calculated Risk is a really good blog. I just wish I had a firmer grasp of the concepts they talk about.

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