Reply #34: Why do dropping housing prices cause foreclosures? [View All]

[pliftkl]

"that isn't going to matter a whit if my neighborhood is full of foreclosures due to cash-outs, lost jobs, and economic blight."

I don't disagree that these are all risks based on the direction of the economy as a whole, but a drop in housing prices doesn't lead to any of these things. The drop in housing prices hurts people in expensive areas who need to sell and who are also under water on their mortgages. This has nothing to do with foreclosures or lost jobs.

In fact, I could argue that the reduced home costs will lead to fewer foreclosures, since the average debt load carried by new home buyers will be lower.