The New York Times asked me to share research and reports I come across (excluding my own) that may help inform readers on the topic of housing.
Here is my recent handywork as a New York Times “online contributor”:
Subprime Finance: High Prepayments, High Defaults
Think “exit strategy.”
“Think “exit strategy.””
Well, the old fasahioned way could be signing off on a loan that is affordable collateralized by housing that is equally affordable.
It could be holding down a job that pays a wage that makes the loan payments affordable, which seems to be increasingly difficult for ordinary folk in a global economy. I hear over and again that what the US is most efficient at is technology or information or stuff like that, but it seems its cheaper in those fields to hire workers in India or China and pretend they are producing an American product.
Or, it could be a government bailout with hastily minted money.
Or, it could be resignation to the fact that we must expect less than we have had before, which includes declining home values.
Nothing wrong with thinking housing prices will continue to rise if they are going up for some reason solid reason like increasing wealth and not just from spinning the money.
During the nineties and early twenties, I had the privilege of being in an area of declining population and very sloly increasing income. The money spinners discovered the area and flooded it with 800 numbers amd empty promises, the local banks jumped on the corresponding banks wagon, everybody refinanced, remodeled and moved around (no new blood), days on market went from 600 to 90, the ranks of real estate agents balooned, appraisers filled out Fannie forms as fast as possible and housing prices went up 100%.
Not to excuse the borrowers for their part in this junk, but when you tell desperate people that what has been true for their entire lifetime has now changed for the better and permanently they believe it. And for awhile it actually comes true.
I advise, as has been advised earlier on this blog, figuring out how to make money from the bailout because we are not going to exit from this for a long, long time.
The mentality you speak of seemed to include some thinking that the principle amount of the loan didn’t matter anymore either.