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But if those purchases are monetized rather than funded by debt

I am a bit confused by this concept. Are you suggesting that the Fed print money to buy these underwater mortgages? If so I would suggest that if this was done it be done instead with the bonds currently being held on the Fed balance sheet. If we can twist further out onto the curve then we could twist into asset backed debt.

You could start the program off in a very minimal way,

No you cannot. Unlike a tweak to welfare programs there is a basic fairness issue that cannot be addressed with a small roll out. Who gets first shot, the South East, Florida, the North East, California? If the 'wrong' choice is made this can quickly morph into an issue of race or another salvo in the class warfare argument from either side of the argument.

Because this would be highly political in its details they Fed ought not to be involved.

You really do not want to get into the business of renting these houses if the plan is to sell them. Houses with renters are a pain to sell. There is always the contingency that the renters be given x days in order to move out. Month to month renters have little emotional ownership in the place they are living; why would they if they could be somewhere else next month?

The underlying question/problem you addressed in a different post; What should be our national policy relating to the housing and real estate markets? My largest concern is that this question has no clear answer. Without answering that question any program that is devised, emergency or long term, is stab in the dark or attempts to set a course. If it is an attempt to set the policy course and it does not have enough political backing then it is prone to whipsawing which further acerbates the problem. The Obama team used the stimulus money to attempt to set a course for some of their policy initiatives but they only had near term stimulus support and now sustaining those programs has run into other political resistance.

As I stated prior I believe around 5 million existing homes and 400,000 new homes sold annually is likely to be sustainable. Some economist peg those numbers much higher in the +6 million +700,000 range. Who is mostly right? If we do not answer that question then we do not know where we are going. If we do not know where we are going we are not going to go anywhere useful.

Answering that question also has significant ramifications on GDP growth and anticipated growth. Target the higher number and you are stating a belief that real estate, new and old, should be a higher percentage of GDP than if we choose the lower number.

"We have got to fix the housing market?" is the populace question of the day. I am asking "To what end?"

If we cannot answer the second part we are better off letting the market work things out even if it takes your estimate of 10+ years.

I would love to see more construction workers back to work as long as it is the right number of construction workers. The previous number was inflated any attempt to re-employ that many construction workers within the industry again is misguided. I know it is callus but I have little sympathy for the debt burdened. They choose to take on that debt. The fact that the underlying asset has changed value underneath them does not change the fact that they chose to buy that house for that price. The argument that they do not have as much discretionary income because of the upside down mortgage as before is false. The house payment has not changed. If they were leveraging the house to buy stuff that was their choice and it was built on a thin, unsustainable premiss. If income has changed within the household it has nothing to do with their mortgage or the house's market value.

We over built. We overspent often using inflated equity values of homes. Many planned poorly.

I don't see where a do-over benefits us in the long run.

One program I would get on board for would be a public/private partnership for relocation. If someone has a job offer in hand and they are in an upside down mortgage providing some government assistance in partnership with the employer makes sense to me. Employers will often offer relocation as part of an incentive package to hire the right employee but under current conditions few are willing to eat the difference between loan value and market value. The employee cannot afford to take the loss and thus must pass on the job. I suspect tens of thousands may be stuck in this situation. If they can take the new better job their standard of living improves. If they can take the new job it leaves their old job vacant for the next up and comer who is likely to also improve their standard of living.

People are more important to the economic engine then property. Get the right people in the right places and the economy starts lumbering in a more positive direction.

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