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Thursday, March 27, 2008
posted by jason | 8:16 AM | permalink
Hi folks. Right now my blogging is consigned to an odd post here and there since my family life has become very crazy in the last month and will remain so for another month. But I will be back in full swing, and as a side note, I am now giving McCain a 50/50 chance of winning (used to be 20/80 or something) thanks to the Dem inter-party squabbling.

But onto the article on the housing market I was just reading. From the LA Times:

--Statewide, median sales prices fell by a stunning 26% from year-ago levels in February, with home prices dropping at a rate of nearly $3,000 a week, the California Association of Realtors reports. Further, the CAR says the Fed's interest rate-cutting campaign "will have little near-term direct effect on the housing market."

--In the San Fernando Valley, losing a home to foreclosure is now almost as common for families as buying a home. The L.A. Daily News: "During January and February, there were 1,084 foreclosures and 1,335 sales of houses and condos in Valley communities from Glendale to Calabasas, according to the San Fernando Valley Economic Research Center at California State University, Northridge."

"It's bad. It's really bad," market analyst Nima Nattagh told the Daily News.

This is crazy stuff, and frankly I think we have at least another year or two of this while we wait for all the 2 and 3 year arm people who were sold houses they can't afford to foreclose. In the mean time, the housing market has no choice but to lower and correct itself.

Frankly, I don't want the government to correct it. People who lose their houses in a foreclosure are not done in, and they are eligible to buy a new house in another few years. In the meantime, they can live in their houses rent free (most states) during the foreclosure process and catch up on their bills. Why would we want to keep people in houses they artificially can't afford and keep prices high? Right now- barring a $100,000 job or living in the country and telecommuting to work- most people can't afford a house without two full time incomes. Owning your own home should not be so difficult.

Obviously, a major self correction such as this has repercussions throughout the economy, and an economist would know better than me. But am I the only one who sees dropping home prices as not the worst thing in the world?
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No. You are, in my humble opinion, dead on. If the government lets a couple of banks go under because they made dumb decisions, then more power to them- perhaps they will not make such risky investments from now on. And, also, if they stop forcing banks to give loans to lower-income people, that will help. And if every speculator that bought 20 houses in Las Vegas or CA has to resell their houses at 30% less than what they paid- great! That's one of the reasons that the houses were so high in the first place, and they knew it. It's a sad situation that no one wants to take credit for, and no one seems to be at all willing to pay the consequences for, except for the obvious and oft-used cop out- the American taxpayer!

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