A fair warning: we're all going to hear A LOT in the media and blogosphere in the weeks ahead about the recently passed congressional housing legislation.
And it's not because Americans have suddenly turned into staunch economic policy wonks.
In part it's because the public is hankering for some sort of action from their elected officials in the face of recession (though how effective that action will be is highly questionable), and also in part because the whole housing mess is so darn complicated -- so many ins, so many outs -- that we're all still trying to wrap our collective heads around how exactly we got to this low point.
Paul Krugman -- famous economist, New York Times columnist, Wellstone book title thief -- chimes in with a piece on how effective the impending legislation may or may not be, and a mostly right-on look at how the financial sector's complete lack of risk aversion brought us to where we are. As most economists tend to, Krugman points to perverted financial incentives:
"Lenders ignored the warning signs because they were part of a system built around the principle of heads I win, tails someone else loses. Mortgage originators didn’t worry about the solvency of borrowers, because they quickly sold off the loans they made, generally to investors who had no idea what they were buying."
How much is your home worth? Well, it all depends where you live.
The real estate market is still shaking. New data suggests that home prices have hit a new record low. In every new study that comes out, homeowners from Miami, to Las Vegas, Phoenix and Los Angeles, have seen their home value go lower every time.
Is that disappointing? Of course it is.
Should we sell? Is not a good time.
Should we stick to it? Yes, if you can.
Have we hit bottom? Nobody knows.
Banks are facing their worst foreclosure crisis.
Don’t take me wrong, it’s good if you are in the market to buy a home for yourself or if you are an investor, but if you are not, and you own a home, most likely the value of your property is down at least 15 %.
Why do banks care if you are loosing your home? By having to sell repossessed homes, banks have to literally slash their prices down. It gets very costly for them, after all, they have to pay property taxes, maintenance costs, and whatever utilities that need to be paid, all of this expenses for a house that it’s just sitting there, vacant, and the bank is getting nothing in return.
The latest study by the S&P/Case-Shiller Home Price Index of 20 cities, revealed the news that for 22 consecutive months home prices dropped. Only from April to May, 2009 the decline was of 0.9 %
Posted by: yanni raz | July 30, 2008 at 11:25 AM