The Deadman Night Rider

A forum for evening students of the SMU Dedman School of Law and other outlaws..

Saturday, March 29, 2008

Exactly what I've been wondering lately

From the Opinion section of this weekend's Wall Street Journal:

Mr. Frank and Senate Banking Committee Chairman Christopher Dodd are planning more schemes to move the risk to the taxpayers from those who made bad decisions, such as buying mortgages that are now in default. As a result, ordinary citizens will ask themselves: Why should I pay my mortgage if my neighbors can get theirs reduced?

I heard my new favorite "dream home" story on NPR this week: first-time homebuyer (single income, with children) buys dream home for $249K on a sub-prime ARM. The reporter made the obligatory mention that with a mid-600s credit score, the buyer could have qualified for a traditional mortgage (but of course failed to mention that it wouldn't have been enough for the price range our intrepid home buyer was looking at--only smart to get all the house you can get, right? After all this is your home, your wealth builder!).

Two months ago, the ARM reset, which doubled the mortgage payment. Of course, home buyer claims that he never saw this coming. Here's the best part--when they finally(!) had the home appraised as he was looking to get out from under it, it came in at a whopping $180K, leaving Ace an almost $100K deficiency if he sells. He's waiting for foreclosure to see what the bank can get out of it. If he can hang on long enough, though, this is the kind of guy who stands to reap a huge windfall if any of the 'solutions' to the housing crisis being batted around right now actually comes to pass.

UPDATE: watching CNN program that claims that on the average (pre-meltdown), people stayed in a house for only nine years--a medium-term investment by rational, i.e., not residential real estate, standards. Compare that with the statistics about how many times the average person today can expect to change careers (not just jobs) in their lifetime, and you'll see what I mean that the demographics simply do not favor the home market long term.


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