CAN'T AFFORD A HOUSE? PAY FOR SOMEONE ELSE'S!
by Thomas M. Sipos, managing editor.
[May 10, 2007]
[HollywoodInvestigator.com] If home prices are too high for your budget, don't feel bad. You can
still enjoy the vicarious thrill of paying for a stranger's house, thanks
to pending state legislation.
you've wanted to buy a house for many years now, but you've seen prices
skyrocket. Especially in California. You might have gotten
zero-down, subprime mortgage, but mortgages must be repaid.
you're on a tight budget, you're a responsible person. You don't
want to buy property only to default on the loan, much less declare bankruptcy. You're an ant, not a grasshopper. You work hard and save for tomorrow. You don't borrow money you can't repay.
Instead, you've waited for prices to come down. Everyone said they
would. All that easy mortgage money was driving up home prices to
artificial levels. The houses weren't worth all that. Bad loans
were distorting the market. A market correction was inevitable. It's not like current homeowners have any right to complain when reality
And reality has hit. On April 2, 2007, the Associated Press reported:
"More than two dozen subprime lenders have shut down in recent months and
others are scrambling to stay in business as a spike in defaults caused
by borrowers unable to make payments has rocked the mortgage industry. Now, as lenders tighten credit standards, the housing market will likely
see further declines in price and output, senior economist David Shulman
wrote in the quarterly [UCLA] Anderson Report."
Did he say "further declines in price"? That means houses will become more
affordable -- good news for responsible lower- and middle-income
people who don't borrow more than they can repay. Nice to see the market
works for them too.
Here's more good news. Alex Spillius reports in the London Telegraph (April 6, 2007): "The mortgage crisis in America has deepened so much that
family homes can now be bought for less than £15,200 -- the price
of a new car. A four-bedroom home near the original Motown recording
studio in Detroit recently sold for £3,700 ($7,000), less than most
used cars. A boarded-up bungalow fetched £685, and a three-bedroom
house listed for £276,000 attracted just £69,000. … Up to 1.5
million Americans could lose their homes in the next two years, while repossessions
rose by 42 per cent in 2006."
In other words, up to 1.5 million homes will suddenly become available
to new home-buyers at sharply reduced prices. Since when is affordable
housing a bad thing?
Of course, there are losers. Among them are irresponsible mortgage
lenders who threw money at irresponsible home buyers. Wealthy homeowners
not in default will also see their artificially inflated home prices fall
to true market levels. (Easy come, easy go.) But the winners
will be the responsible lower- and middle-income people who've waited patiently
for the free market to provide affordable housing.
Yet just as the ants are about to reap the rewards of their patience and
thrift, state governments are stepping in to bail out the grasshoppers
-- with the ants' tax money -- and keep home prices artificially high. Gilbert Le Gras reports for Reuters (March 27, 2007): "A growing number
of state housing agencies are developing or considering issuing bonds to
assist subprime mortgage holders to refinance their obligations at fixed
That is, they will issue taxpayer-subsidized loans to people
already proven to be a bad risk. Le Gras cites Ohio, Maryland, Rhode
Island, Massachusetts and Virginia as states that already have or are developing
mortgage refinancing programs. Colorado, Washington, Wisconsin and
California are considering such programs.
The political pressure comes from homeowners in risk of default and from
those in no such danger but who would like to keep their home prices artificially
high. Helping the first group is welfare for the irresponsible. Helping the second is welfare for the rich, because market interventions
to keep home prices high benefit those who "have" houses at the expense
of those who "have-not" houses.
Think about it. The free market was all set to make houses more affordable
for greater numbers of responsible lower- and middle-income people. Instead, government will distort the market to keep prices artificially
high for the rich and irresponsible.
So if you can't afford a house, don't blame the free market.
Copyright © 2007 by HollywoodInvestigator.com.
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