What's wrong with falling home prices ?

Discussion in 'Economics' started by Kicking, Jul 22, 2008.

  1. Why didn't anybody care about home prices going through the roof but now that they are only correcting everybody wants to support the market? Let's face it if you bought a home after 2004, you were by definition a speculator no matter what, you bought expecting still higher prices. Now please if you were so convinced of ever higher prices in the long run explain to me why you now want to walk away from your home and why we should let you do this ?

    In the end one may argue that there is no valid social reason for home prices to appreciate more than inflation over the long run and that governments and central banks should make this an objective of their overall economic policy. This type of crisis would never have happened in the first place.
     
  2. Arnie

    Arnie

    It used to be that most people probably had no idea what there house worth and didn't care. Why would they? They bought it for the utility, not as an ATM.

    That's all changed now, it parallels our use of credit for everything. My dad was pretty old when I was born (he was born in 1905) and he used to tell me that years ago, going into debt was looked on as scandalous. People just didn't do it. Now the pendulum has swung the other way and people are ridiculed for NOT goining into debt (ie. all the late night infomercials on how you never want to pay off your mortgage).

    Every generation has to learn the same lessons.
    :eek:
     
  3. "A smart man learns from his mistakes. A wise man learns from the mistakes of others"...

    Apparently we are neither smart nor wise...
     
  4. You are absolutely right there. When you think about it the 3 most important markets for human survival real estate, food and oil are not included in inflation that makes absolutely no sense. The only thing this practice serves to do is make it look like inflation is stable even though it is going out of control.
     
  5. I agree,the people who came piling in at the top caused property taxes to go up too as appraisals valued everything higher and now they just want to walk,it is a joke really.
     
  6. Just as an aside....

    This is why spreading the wealth through stock ownership is so important....people would be conditioned to prices....

    What is a house ?

    A house is a $100 stock that could go from $50 to $200 while you own it.....

    Problem is ....margin......

    If one levers the stock 30 to 1, one incurs the chance of losing....a very high probability....

    High levered debt cuts both ways....and boy oh boy.......

    ...................................................................................................

    The US is like one big prop firm giving out 30 to 1......

    Never heard such cackling and clucking about commonalities....

    ...................................................................................................

    Another thing ....the commissions for buying and selling any real estate related debt including derivatives need to be on an open electronic exchange.....

    Also the commissions on buying selling property should be minimized boiler plate....too many unecessary legal, tax, middleman costs.....which keep transaction efficiency out of the equation.....The point being the current financial debacle is largely due to big markups,fees, and commissions.....on redundant boilerplate items....

    Electronic name transfer should cost almost nothing....
     
  7. Nothing is wrong with housing "Deflation".

    And its not technically deflation. Its a return to fair value.

    Banks, specs, builders and owners hate it cause they got caught on the short side.

    What can you do?

    Money pumps end badly. Now we pay the price. Theres no way around it.
     
  8. olias

    olias

    That's how I feel too.