Let me explain. The higher foreclosure rates means folks who should never have had a mortgage to begin with are being flushed out. Now that more and more folks no longer need to service a debt that consumes 80% of their income, they now have money that can be used for consuming goods and services. The less people servicing mortgage debts, the more velocity of money as less and less money entering the banks blackhole and into Joe The plumbers corner store, the dentist, Walmart,etc.. Notice how Credit card delinquencies have been dropping as foreclosures have been increasing. My opinion is increasing house prices is bad for the economy not good. Housing should not consume a large portion of earnings, otherwise it becomes less money moving around the economy.
You're clueless. People now facing foreclosure are not necessarily those who never should have had a mortgage. Rather, they are those who hung on the longest, tapping savings and even 401K accounts to try to hang on. As they went from 2 incomes to one they borrowed from savings/IRA's/ 401K plans to keep afloat. And they will NOT have more money for consumption. They're tapped out. No savings. Declaring bankruptcy. Living month to month. And yes, they still have housing needs. So they're renting apartments which do require $$$$$. And they'll have expenses for utilities, phone, water, etc. PS Housing does NOT consume 80% of ones income. LOL.
IT does when you earn 45K and you buy a 280K home. Too many folks when house crazy and bought very expensive homes with heavy mortgages. If it takes 2 fully employed persons to service a mortgage, than the home purchased was too much. Too many folks who had homes almost paid off, borrowed on the primary residence to speculate on the bubble. And what drove housing prices up. The chase for the McMansion's as a totem of success.
This actually makes sense. Here is a real life example. Friends of mine are getting foreclosed on. They are throwing a b-day party for their kids (it was this weekend). They are getting f-closed on, and with the extra money they are not paying to the bank, they are spending on extra toys and food for the party. This does not sound rational of course, but that is the heart of the American consumer. So, I guess to me, this would make a lot of sense. Actually the more I think about this, the more I think this is brilliant. Or was this already accepted by most to be the truth?
well your friends are fucking idiots.. more toys and food.. I'm sure that's what they need... no offense of course.. Don't you think it would make sense for them to save that money for a first and last months' rent check? Just saying...
haha dude read my 2nd paragraph -this is not rational of course, but the heart of the american consumer
There is two people I know who are not paying living rent free and are spending like crazy. they are not paying mortgage and the bank has not kicked them out yet. it has been 8 months.
Original post makes sense. The best way to get the economy moving forward on a sound footing is to dischage debts. Foreclosure is a way of doing this. Bankruptcy is the ultimate way.
Seconded. GF asked me yesterday, "If so many people don't have money, why is the mall so crowded?" I told her, this is America, as long as there is credit available there will be fools to leverage themselves into ever posession they can, while barely making minimum payments. We don't need money here. America: Give me credit or give me death.