>The average taxpayer elected officials who deregulated the financial industry so much that it became impossible >for the average taxpayer to be able to know the actual value of a house. We got the government we deserved >and the price of it. None of which really has anything to do directly with the lender's behavior today.
In hindsight, the housing bubble is obvious. Heck, at the time, I knew there was a housing bubble, and if you look at Brin-l archives, you will see that I wrote it. I understand why deregulation allowed for tremendous leveraging, so that financial institutions no longer held proper reserves. When the panic hit, TARP was used to keep them from going under. One interesting thing about the bailout of the banks is that it is now, mostly, paid back, and that the government earned over 4% per year on the TARP money http://finance.yahoo.com/news/Wall-Street-Bailout-Returns-bloomberg-28797969 06.html?x=0&sec=topStories&pos=5&asset=&ccode= http://tinyurl.com/232xzu2 But, that's a tangent. What I don't understand is why the bubble can be blamed on this. It seems that the tremendous amount of cash looking for a home, and the stupid Risk Assessment Model (developed by solid state physicists) that said that average US housing values can't go down more than 1-2% (because they haven't in about 90 years) led to the bubble. I have owned houses in two local downturns, Houston in '85-'86 and Conn. in '89-'92. In both, there were many folks, including me, under water. In the second downturn, I sold my house for 75% of my purchase price. With the first, I bought an inexpensive house (~45 dollars/square foot) and lost little in the sale....which was more than made up by my sign on bonus at my new company (I wouldn't have moved without it). With the second house, I saw the market as overpriced, but rents for any house big enough for my family were so high that 3 years of the difference between the cost of renting and the cost of buying would have been about as large as what I lost. I also thought that, if I was force to move because of a buyout, the buying company would cover most of my losses, since I knew I was a key employee for any sale. That happened, and the new company covered all but $3000 of my loss. But, without that, I would have lost enough so that bankruptcy was probably the best option. So, I'm finally at my point, if someone buys a house that is clearly overvalued, as houses in the SF area still are, why should someone else pay their loss? Is it any different than putting one's retirement money into a NASDAC index fund in 1999? Dan M. _______________________________________________ http://box535.bluehost.com/mailman/listinfo/brin-l_mccmedia.com
