what 'mark-to-market' price do you think the mortgage holders are going to provide the gov't ? do you think the gov't will inspect every property to determine the "burnt down" price ? that's a very big IF
these are all logistics. of course they are not going to evaluate every single house. I'm assuming they will evaluate the price by zip code, recent sold prices, etc.
What determines the new value of homes? I'm in FL and I can tell you this real estate bubble didn't just blow... in some areas it's catastrophic. Former $500,000 homes are in partially complete subdivision with crime in full upswing. Homes didn't just lose 20-25% and retain the reduced value. Oh no, instead the vicious cycle has begun. The other economic issues (bankruptcies, job losses, govt service cuts) have made ghost towns of small segments of communities. As these ghost towns spread, crime spreads, and the "good name" of the community is negatively impacted. Thus, the 25% decline in value becomes 35-40%. Then, persons upside down in the mortgage (developer, home owner, whoever) walks away and the house falls apart. becoming in many cases a crack house (no kidding, half million dollar crack houses) Code Enforcement has little teeth during foreclosure so the process is endless and leads to more neighborhood decay. Further reducing everyone's property values whether caring for your home or not. What was a nice new home 4 years ago, potentially suffers from decay, blight, criminal mischief, rain/weather damage from broken windows etc... Now the value drops further 50-70%??? In the end, the burned down house might just be a better proposition. ashes are easy and less costly to clear off the lot. I'm usually a positive person. :eek:
They are beyond worthless, they are worth more burned down for reasons already described. In some new suburbs, where 50% of the homes are unsold or foreclosed, they would be better off consolidating the people into half of the homes on the same streets and bulldozing the rest. The inventory levels need to drop so that there is competition for existing buildings.
So said the mercantilists. So said the east india company. Mercantilism is proven destructive by economists of all schools time and time again, yet there are still exists adherents who claim it is better. History is renown for having trade restrictions that have been deemed in favour of the economy at whole. And who is doing all this lobbying. The industries that benefit from it. Meanwhile everyone else suffers. Capital is not put to where it should go, and instead is forced to inefficient industry. When money is thrown at useless companies like GM, other industries like the high tech suffer. For the labour that is taken out of the pool could be better used in that industry. Therefore, we are less competitive in that industry that we do better in naturally. It's a no brainer. Because of free trade, we now can buy more then we ever could. Because of free trade, everything is cheaper. Economics is all about efficiency. That is what makes it economical. It is retarded to suggest that any regulation that changes that natural efficiency is better. Golden rule: If you force labour towards a non-competitive industry, you make another competitive industry less competitive by a factor of greater loss as there is gain in the other. It is non sensical. There is no logical argument to not have free trade. It is a backward redneck attitude that for some frustrating reason cannot conceive the flexiblity of the workforce to deploy to other industry. It is Joe the plumber looking out for Joe the plumber and soaking up capital. This is half the reason the united states is suffering, because they still have parts of it's industry stuck in the 1700's.
This is really stupid. If your house burns down you're at -300k, plus -20-30k for removing the debris and you have a 50k asset. And you rather have that than a 200k+50k asset. Can I be your real estate agent? And for the 'free trade benefits all' crowd: Free trade means whoever produces most efficiently produces the widget and not whoever produces the widget the cheapest relative to all its other production capabilities. In our world free trade benefits the big industrialized countries, where developing and underdeveloped countries are worse off, since their production bases are sucked out of the country. The worst thing a small country can do is to open up its borders for big countries. If it does its an invitation for raping and pillaging hordes to come. And for whoever said that people should be 'aggregated' into fewer homes should spend some time in inner China, or North Korea, because that's communist economics for you, and whoever presents such ideas should be spending some quality time exposed to the consequences of such ideas...
Reread my scenario before calling the example stupid. Do you understand what "free and clear" means? It means you HAVE NO MORTGAGE! So you would rather lend 300K (or own that debt) on a house that is worth 200K than own a lot that is worth 50K - free and clear? You prefer being 100K in the red than 50K up? Think before you write.