Please EXPLAIN how we stabalize housing prices?????

[Heather MC]

I was always told, something is worth only what another person is willing to pay for it.

If people are not willing to pay $600,000 for tiny shack in No VA anymore it's ain't worth $600,000 anymore. And if they want to sell the $600,000 Shack in No VA they have to lower the price to something that will get it sold.

No one can control the fall of housing prices b/c you can't force people to buy the houses at what they were going for 3 years ago.

I heard McCain last night say Stabilize housingn market, and I said to John, ok the TV, I said
How? How do you plan to force people to buy houses at the higher rates? you can't, the Housing market will keep falling, or people will stop buying. IN NoVA I keep an eye on real estate as a hobby, and some houses I have been watching for years now, because the owners will not lower the price. So the houses just sit there. Just because you want $600,000 for your shack, by the way that was the peak price for a modest home in No VA at the hieght of housing boom. Anyway just because you want that price now doesn't mean jack shit if you can't get a buying willing to pay that price.

EDIT:
I live in a tiny shack, that's my nickname for it.

[NightWatcher]

1. the government will just buy all the houses

but a healthcare plan would be "socialism". Sorry McFlacid, I dont see the difference.

[Virginia Dare]

7. The government owning all these houses...

it does sound like something out of an Ayn Rand novel doesn't it?

[mscuedawg]

9. Excellent point!

[1corona4u]

2. It's all supply and demand. nothing more.

We have a 15 year glut of houses on the market right now.

[Eurobabe]

12. yep, and the rest of the world is looking about the same

our plans are OFF the table.

[demnan]

3. In Dale City

you can buy a nice 3 level town home with real hardwood floors for $90K now. Why would you pay more in Fairfax?

[Virginia Dare]

If you work in D.C. the commute is hell and expensive..n/t

[Heather MC]

8. My DH is stationed on a base very close to DC

If we were to Move to Dale City, I would lose my husband to the Highway. Right now he is so close he runs to work, which, of course saves money on gas. but the greatest thing is a lot of time he can get our boys from school so he gets to be more in their lives than a lot of dads who have to work all day and only see their kids just before bedtime.

that's the Appeal of Areas like Arlington and Alexandria, if your Job is in DC you get to live close to work. That's why a shack could cost $600,000 during the housing boom
location location location

[On the Road]

4. Apparently,

He will stabilize housing prices by:

-- Buying mortgages
-- Reducing the pricipal by 10%, and thus
-- Keeping people in their homes.

How that is supposed to work is beyond me.

[RoadRage]

21. People need to realize that not all investments make profits!

This idea that if you bought a house 4 years ago for $500,000 and it's now only worth $300,000 - and it's the governments job to make up the difference.. it's REDICULOUS.

My stock portfolio was worth $100,000 7 months ago.. now it's worth $60,000. Is it the governments fault? Should they have to pay me back the difference on what I lost? Of course not!

The same is true with housing. If you over-paid for the $500,000 shack.. that sucks - but you still HAVE the $500,000 shack. If you want to sell it, you have 2 choices - sell it at a loss (whatever the current market will allow for) and take the hit, or stay in the shack until prices get back up to where you will break even or make a profit. That could take 10 years.. but that's part of the problem of owning a home.. it is a RISK. If it wasn't a risk, then why would anyone ever rent? If we set a precedent that you can buy things.. and when the market falls flat the government will bail you out everytime - we're going to see more of this problem, not less.

[Virginia Dare]

5. I live in Northern Virginia..

in a fairly modest home in a fairly modest neighborhood, and houses in my neighborhood were going for nearly 600,000 at the peak of the market, so I can validate what you're saying, and it scared the SHIT out of me at the time.

The value of my house has dropped about 30%+ since then, so it's not hard to see how people got themselves in a world of trouble.

Fortunately, while this was going on, I decided to pay off my mortgage and didn't borrow against the overinflated value of my house. so I guess I'm okay right now, I won't be out on the street should everything fall apart anyway. Lots of people won't though, and that will have to be dealt with.

Perhaps the only way to do it is as McDead said, buy up all of those mortgages and renegotiate them, but if we end up having to do this, it will take massive tax hikes to pay for it. That's the part where he is delusional.

[BumRushDaShow]

6. There's a general trend line that exists for housing prices

that includes factors like supply/demand, but mostly inflation-adjustment. Thus the general direction is upwards at a pretty constant rate.

I think one can look at that curve and note this brief period when the prices shot up out of kilter with the slope of that line. And IMHO, if one extrapolated the line the way it was SUPPOSED to be (without the spike), then one can estimate what the house value SHOULD be.

[Aloha Spirit]

13. I agree with this, but don't think that would solve the problem because earnings haven't kept pace

with inflation.

[BumRushDaShow]

Earnings will definitely be the difficulty

and will also boot people out of houses right now that they couldn't afford anyway even before the spike. But then this shows a big need for lower income (without the stigma) housing and no more McMansions.

Getting the minimum wage up a lot faster and bringing industry and technology BACK to the U.S. will help too.

[Aloha Spirit]

20. Maybe the Treasury could buy some of the bank-owned properties and hand them over to communities for

conversion to affordable housing.
Problem--this type of solution ( on smaller scale) has often been accompanied by scams and graft.

[izquierdista]

10. Take speculation out of it

In a market economy, speculators increase the amount of turnover and provide more supply and more demand. But too many speculators will draw in more and more money until a bubble forms and then lose it in the resulting burst. If you don't want free market booms and busts, like were common in 19th century America, there have to be market controls (government) that put dampers on the amount of speculation. Requiring substantial down payments (20% used to be common for real estate) would be a start. Whenever commodity markets get overheated, the exchanges often raise the margins to run some of the speculators out and restore equilibrium. Another thing that would help would be to give more breaks to principle residences. Much of the speculative boom in housing recently was in properties to be flipped. If they had to pay double the property taxes on those properties than people living in their principle residences did, then that would put a wet blanket on some of the speculation.

[yellowdogintexas]

15. in many states, property taxes are significantly higher for 2nd, 3rd, etc homes

whether investment properties or vacation homes.

Homestead Exemptions provide a discount in prop tax for the primary residence, are driven by state law, and vary widely from state to state. Some states increase that exemption when homeowner reaches age 65, becomes disabled or is a disabled veteran. Some are income driven.

Texas reduces prop tax 50% at age 65, for example.

Homestead exemptions are very generous in Louisiana, Mississippi, and Illinois. California locks in the assessment value of the home at time of purchase so the base against which taxes are calculated does not change until it is sold, in lieu of homestead exemption. (in times of deflating prop values, homeowner may request an assessment review, but for years the California law protected homeowners from steadily increasing property taxes based on frequent reassessments)

I can't remember all the different ways states handle this, just the ones I dealt with the most when I did customer service for a Major Lender as a tax specialist.

[izquierdista]

35. California is "Prop 13"

Which had nothing to do with homesteads and everything to do with anti-tax Republicans. But you are right, they vary widely, and consequently don't do much to control the market overall. If there was a national pattern (de jure or de facto) that the first 50% of a principle home's value was exempted and a non-principle home was taxed at a higher rate on all of the value, I think that would have removed a lot of air out of the real estate bubble.

[Aloha Spirit]

11. My take: He wants the Treasury to pay the net value lost in the real estate bubble burst.

His goal is to negotiate more affordable mortgages for home owners and prevent the housing glut from accentuating the downturn in real estate sale prices.

Do you notice how this does not change the existence of a housing glut? That glut--that excessive volume of housing--is a result of too much investment in real estate, and actually outpaced excessive mortgage lending. So ... you're right. The value of property depends on how much someone will pay for it. If the government subsidizes the loss in demand to match today's selling prices, I don't see how that will reduce the downward vector of a huge supply.

Frankly, the consumer pricing index has gone up 10% in 3 years. If wages catch up to inflation (as if), we will be fine. Ha.

[City Lights]

14. Maybe his plan includes Cindy Lou using her beer money to stabalize the

housing market. In that case, he really won't know how many houses he owns. :rofl:

Seriously though, I wondered where he was going last night when he said that and still have no idea. I don't think he really knows either. He just threw that out here hoping it sounded good to those watching.

[izzybeans]

16. Well we can get started just as soon as one of you buy my house.

:)

[Heather MC]

17. awwwww

:rofl:
awwww

[izzybeans]

18. You can buy my 3bd 2 bth home

built in 1890 with exposed brick and original woodwork, an office with floor to ceiling built in book cases and a fireplace for $119,000.

I had it for sale for about a year after I had to relocate to Chicago for work. It's rented now, but at a loss.

If you want to move to Indiana, it's all yours.

:)

It's hitting places where prices aren't inflated too. There was a flood in that town this summer that ruined about 1/5 of the town's homes. The city is buying them up to build a park, but no one has the money to buy another one.

[Heather MC]

19. I am going to wait and see what color Indiana becomes on the map before I decide to relocate there

I have spent my entire life in Red states
Kentucky, VA, Carolina's
If I relocate it has to be a blue state

but the price is Awesome I could sell my shack here in NoVA
and buy your house twice and still have enough to add an in ground pool with a movable floor for parties
it's tempting

[Aloha Spirit]

22. I think if banks can trade mortgages around, home owners should be able to "trade" their debts.

If that eBay CEO will be Treasury Secretary, maybe we can "trade" mortgages through an eBay model.
Ha.

[izzybeans]

31. Well the backyard's big enough

I'll throw in the apple and pear trees free of charge.

I hear yeah.

I'm glad to be in Chicago.

[Waiting For Everyman]

23. "Stabilize" doesn't mean the boom price comes back, it means

prices stop falling. The way to do that is to have more buyers and fewer foreclosures. The way to do THAT is to make the mortgage terms more affordable. A usury cap would do it, along with eliminating things like prepayment penalties, etc. You keep "players" out of it by only controlling it for owner-occupied primary residences - no 2nd, 3rd, or whatever homes.

Recouping lost equity from the boom will only come back in time, and if it's done right, that will be slowly. All investments of every kind are taking a haircut, that's the nature of the current economic climate - but it beats a total crash.

If something like this is NOT done, then the mortgage securities we already bailed out will become worthless, and home prices will keep dropping. Does that sound like a great idea?

It's the only answer there is. Mortgages have been tightened, but in reality they have to be loosened in order to solve this. Tightening now is like closing the barn door after the horse is gone. People simply can't afford it - the high rates many are being offered, either on a refi or a new loan. If rates stay that high, the RE market (what's left of it) will implode. The banks' cost of money is very low, so there's no excuse for it, except giving the banks several percent extra for nothing.

[NashVegas]

24. We Do It By Not Caring About People Who Buy Homes to LIVE IN

And focusing on people who buy homes as an investment tool.

I watched the graph on CNN last night, and it was clear that Ohioans saw straight through McCain's bullshit. When he spoke about keeping housing values inflated, he flatlined; when Obama talked about helping people *stay in their homes* the line went to the top of the chart.

[Waiting For Everyman]

26. That's ass-backwards.

Investors have been the problem already.

[Raineyb]

28. It seems to me that when McLame talks about stabilizing home prices

he means help keep prices at their over-inflated levels. I can't see how house prices can stabilize until it drops to a level where people will pay for them.

I've always said that I would rather pay higher interest on a mortgage than pay higher price for the house itself. I can write off the interest. But so many people felt like they had to get into the market now, now, now that it drove the house prices up. To be honest, I'm not sure that people who overpaid for a house should have the difference made up to them.

:shrug:

Regards

[NashVegas]

30. You Know, I Never Even Thought About That

The part about connecting high rates / low prices to write-offs and how it's better for home-buyers.

[Douglas Carpenter]

25. Catch-22

housing prices will not start rising again until credit markets stabilize

credit markets will not stabilize until housing prices start rising again

And most likely the housing market still has way to go before it is finished deflating

[nosillies]

27. I don't give a rip who wants to buy my house, as long as someone will do it!

Anybody want a nice home in central Florida?

It's sitting empty right now because we had to move to another area. I'm having to pay for two places to live, two electricity bills, two water bills, etc. We're going under fast.

I don't give a shit what stabilizes home prices, I just want it done NOW.

[Johonny]

29. It's part of their plan

They raise housing prices way beyond there equity limit. Pricing housing buyers. Now they want to save all their fake equity. This isn't about the single home owner. It's about rich people like McCain that have major equity in property values. The artificially inflated them, bought up tons of land and now want the American tax buyer to save the fake equity. As a non-home owner desperately looking to buy into a market over priced by 50 % all I can say is "thanks but no thanks" to saving your fake equity.

[marco86]

32. The answer to this is actually simple

Jobs Jobs Jobs

Under normal circumstances, the supply/demand equation is going to control. For example you can lower interest rates, which will raise demand at all prices because it is more affordable, which drives prices up. The supply/demand is out of whack because the prices went to high so you have many people wanting to sell but few that want to buy at the high prices. Add the credit problems and it is difficult to buy so the prices drop, and drop and drop. The problem is that so much of the economy was built on the premise that we have to keep building homes and prices have to keep going up. Now you have construction and related industries not working, which slows down the economy as a whole - no money to spend. You have to get these people back to work yesterday and that means huge infrastructure projects that provide a return - wind, solar, etc. If people are not losing jobs they do not default and the price drops can stop. The problem for bansk is that it is not enough to stop dropping, The financials are toast without a recovery - increase in prices. That will only happen if demand blows supply away, which will be balanced by building more homes, so it will not happen.

Create jobs, and you stop the bleeding but the limbs that have been lost are not growing back

[marco86]

36. To be clear

If homes are overpriced, supply/demand will take care of it. If there are no jobs prices can drop below reasonable like in detroit. half the homes for sale are under 20,000. over 4000 homes under 20k, and 2/3 of the homes for sale are under 40k. If we were buikding cars and the economy recovered, the median would be 100-150k. Therefore if you don't want home values to drop to zero or near it, a community needs jobs. They do however have to drop to a reasonable price. Remember consumer spending is vital to the economy and if you spend all of your money on interest, you don't spend it on keeping people working.

[lumberjack_jeff]

33. Were it not for the fact that banks worth is tied to real estate worth, one shouldn't try. n/t

[TexasObserver]

34. It will require all lien/title holders to sell at the true value of the home.

The loan defaults. The property is foreclosed. It is held far too long, until the lender who holds title finally takes the big loss, and sells it for 60-70% or so of the unpaid debt. That may happen in a few months, but it could take years.

It's going to be a while before we recover from this, and it will take down banks and homeowners as this progresses. We're a long way from the bottom of this trench, particularly for real estate.