I think wage deflation, and continued asset/price/commodity deflation, is showing that Fed sponsored inflation is not here yet and is not really close. It will be eventually though, we agree on that, especially if they lollygag in taking away their various acronym programs which is very likely to happen. But that cannot happen until deflation ends, which would mean we have bottomed and the recovery has begun already. On that front, I do not see the value of homes increasing from such inflation unless it is coincident with wage inflation as well. Right now it looks like we will again get some form of stagflation, wage gains are depressed by globalization and have been for almost a decade now. Bad times to be a middle class salaryman like myself.

I think we tried the ‘grow out of recession via debt’ in 2002 and it didn’t work out great. Our main creditors won’t stick around to pony up again. I think we are looking at a nice L shaped recession, and I doubt we will be bottoming until next year. Still too much overhang of supply all around the economy and too much bleeding in employment. We are now seeing widespread wage decreases, which bodes very poorly for any asset (like a home) which greatly depends on income rising for its price support.

So we either agree with you or are deleted.

Go back and read the comments of the people I specifically thanked @118. Most of them were disagreeing with me.

Examples of interesting and informative comments that lift up the level of discourse: “Your argument is wrong, because of X, Y, and Z.” “I disagree, here’s why…”

This thread has mostly consisted of the latter type of comment, and I appreciate that (thank you b, MortgagedAndLost, One Eyed Man, PhinneyDawg, patient, and others…).

The former type of comment seems designed to do nothing but instigate a mud-slinging fight, and will be either totally ignored, disemvoweled, or simply deleted per the comment policy in the future.

Bernanke was also “confident” about a lot of things, for example sub-prime is the only set of problem loans and they are contained. You shouldn’t listen to folks like him because their job is to lie in public, much like a Realtor.

What is happening right now is the rate of freefall is slowing. This is good, but it hardly means we are at a bottom unless you think this is a V shaped recession and the slowing will turn into immediate growth soon.

You’re out of touch.

The guy who posted the comment is runnig a bed and breakfast by the web site attached. Hotel, travel, and business trips are down. His Real Estate nut must be massive. His business depends on the economy being fluid.

Banks have held the economy hostage now for almost two years. It is a global economic fiasco. Banks have acted in a way that goes far beyond greed. It is a willful act of demanding excessive profits at the expense of, not just American tax payers, but of all governments in the world.

Literally people will starve to death so that a guy like Warren Buffet can make a couple of billion dollars.

I know that poor Warren and Bill Gates have lost so much paper profit that they need our charity, but let’s have some perspective.

Banks lent and people borrowed with the idea that the expanding economy was based on global cooperation. We were to all rise together, sort of thing. No one, I mean no one would expect the Financial Markets to trade paper and count it as profit. I’ll repeat, no one saw it.

The Ponzi Scheme was never the Real Estate, it was the paper. It was never mortgages, it was the promise of equity. It was never the home owners at risk it was the people who bought stocks.

We see it already, Bank of America buys whoever, and Warren Buffet buys Wells Fargo. Citi buys whoever and the price of the stock goes up. That’s the money. Those are the players and we all pay for them to make a profit.

Some bodies home loan means nothing to anybody, but you. The money’s already made. Nobody cares about 30 year money. Today is all that matters.

If my recollection is right, Tim doesn’t have a day job. Undoubtedly if he had to actually pay for the roof over his head like the rest of us he would, but he doesn’t. I have suspected for a long time that the latter fact in itself plays no small role in his attitude–he doesn’t have a dog in this fight.

By Angie @ 110:

It is clear that one’s perspective is often influenced by having to, you know, fully shoulder the kinds of adult responsibilities that the vast majority of the population deal with day in and day out.

Typically I bring up this small, relevant fact on occasions when you get snide and superior about people who don’t share the luxury that you enjoy–because YOU don’t have to make the choices that they face.

RE: Angie @ 112 – http://en.wikipedia.org/wiki/Ad_hominem

An ad hominem argument, also known as argumentum ad hominem (Latin: “argument to the person”, “argument against the person”) consists of replying to an argument or factual claim by attacking or appealing to a characteristic or belief of the source making the argument or claim, rather than by addressing the substance of the argument or producing evidence against the claim.

The process of proving or disproving the claim is thereby subverted, and the argumentum ad hominem works to change the subject.

The fact that you have apparently convinced yourself that the above-quoted comments are not shining examples of ad hominem is quite amusing.

This will be the last time I dignify your ad hominem attacks with a response.

So is the argument that you must own a house and have a certain type of job to be a legitimate poster on here? I really dont get your point Angie?

and rather than explaining why you think it has such a large bearing on the issues at hand, you just like to drag it out once in a while and beat me over the head with it.

Oh, bull "chocolate". I’ve explained it before, but since you seem to forget every time I do, I will gladly remind you.

It is clear that one’s perspective is often influenced by having to, you know, fully shoulder the kinds of adult responsibilities that the vast majority of the population deal with day in and day out.

Typically I bring up this small, relevant fact on occasions when you get snide and superior about people who don’t share the luxury that you enjoy–because YOU don’t have to make the choices that they face.

On this occasion, for the new reader who was perplexed by your perspective, being aware of where you are coming from might also be illuminating.

Heck, it’s Cinco de Mayo, a holiday–maybe next time you get your unders in a bunch we can remember the date and I’ll refer you back to this exchange.

Also, I still don’t buy the implication that someone who goes through foreclosure suddenly becomes homeless. There are tons of rentals available out there, most of which are going to be cheaper than what they were paying on their huge mortgage prior to foreclosure.

See, if you’d actually put in a rental application lately, you might know that many/most landlords these days pull credit reports–or, failing that, subscribe to (cheaper, less cumbersome) evaluation services that spit out Thumbs Up/Thumbs Down answers about whether a landlord should rent to a prospective tenant, which are largely based on credit history. Other possible consequences for a prospective tenant with a crappy credit history include increased rent, requirements for more prepaid rent, or larger security deposits–effectively making renting more expensive than it would otherwise be. So: Foreclosure on someone’s record can absolutely make it harder to find rental housing.

Stop being so smug and start looking at the reality of the current situation. Telling your readers that it is good that homeowners & lenders deserve to be homeless and stiffed for the money is just plain stupid.

Apparently you missed the “in my opinion” part of the post above. I’m telling my readers what my opinion is. I don’t see what’s “smug” about that. Also, I still don’t buy the implication that someone who goes through foreclosure suddenly becomes homeless. There are tons of rentals available out there, most of which are going to be cheaper than what they were paying on their huge mortgage prior to foreclosure.

Apparently, you have one of those boring and stable jobs that is not currently threatened. Not everyone is in that position.

I’m working for myself, trying my best to make a business out of this site and a handful of others, I’m also doing contract writing and contract web design, and working a part-time job in the field I was actually trained in—electrical engineering. Sorry if that’s too “boring” for you.

Every once in a while there are posts that hint that the Tim is coming off as lacking compassion. But I don’t think it has anything at all to do with his housing situation. I think it might more have to do with his background as an engineer. You never do hear the phrase “overly emotional engineer” bandied about.
Also- blog posts are just snippets, and thankfully the Tim is not overly verbose, otherwise he might be posting his romantic poetry :)

By Vincenzo @ 90, to Tim:

Stop being so smug and start looking at the reality of the current situation. Telling your readers that it is good that homeowners & lenders deserve to be homeless and stiffed for the money is just plain stupid.
Apparently, you have one of those boring and stable jobs that is not currently threatened. Not everyone is in that position.

If my recollection is right, Tim doesn’t have a day job. Undoubtedly if he had to actually pay for the roof over his head like the rest of us he would, but he doesn’t. I have suspected for a long time that the latter fact in itself plays no small role in his attitude–he doesn’t have a dog in this fight. (Before you come out with your self-righteous schtick, Tim, planning to eventually buy a house is just Is.Not. The.Same as having to make a monthly nut to keep your family out of the rain. Thanks.)

http://www.msnbc.msn.com/id/30565403/

As to whether Congress could remove the special protection against cramdown retroactively, that’s another issue entirely. I know I’ve researched that sort of issue in the past, but I don’t recall the answer.

The Supreme Court long ago recognized, however, that a secured creditor’s interest in specific property is protected in bankruptcy under the Fifth Amendment. Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 594 (1935). That case involved a Depression-era statute that was intended to help bankrupt farmers avoid losing their land in mortgage foreclosure. The statute in Radford provided that the bankrupt debtor could achieve a release of the security interests either (i) with the lender’s consent, purchasing the property at its then appraised value by making deferred payments for two to six years at statutorily-set interest rates; or (ii) by seeking from the bankruptcy court a stay of the proceedings for up to five years during which time the debtor could use the property by paying a rent set by the court, which payments would be for the benefit of all creditors, with a purchase option at the end of that period. Id. at 856-57.

14. Justice Brandeis noted that the “essence of a mortgage” is the right of the secured party “to insist upon full payment before giving up his security [i.e., the property pledged].” Radford, 295 U.S. at 580. In invalidating the statute, the Court stated that “[t]he bankruptcy power . . . is subject to the Fifth Amendment,” and that the pernicious aspect of this law was its “taking of substantive rights in specific property acquired by the bank prior to the act.”

from http://hotair.com/archives/2009/05/04/senior-creditors-chrysler-deal-violates-5th-amendment/

I’m not sure the cause, but one possible explanation would be that perhaps back in mid-April they were waiting/hoping for this cramdown legislation to pass.

Thanks for asking, Patient.

Pretty close to our dream house. We weren’t bargain hunting.

We were looking for in-city, good neighborhood, either a big yard or a view, and 2000 sq ft. We got in-city, a big yard AND a 180-degree view, and 1900 sq ft. We sacrificed a bit on space, as 600 sq ft was basement, albeit basement with a view of the lake. We are really, really happy. We were very lucky to have found more house than we could have imagined we would get even a year ago. Very expandable if we have more kids, to boot.

I figure if the same house were to come on the market a year from now, it might come in 5-10% lower than we paid, but I think we got 10-15% discount off peak, so I won’t complain about the price. A bit more patience and home-limbo might have save us a few bucks, but then again, we might not have seen a house this nice a year from now. I’ve watched the housing market religiously for 2 years, and in our price range, this is the most perfect house for us I have seen in the time period.

I’ve been in favor of this change for years and years, long before there was a downturn in the housing market or my being a real estate agent. That’s related to my repeated comments that refinance appraisals have historically been high. That means that people owing more money on their homes than what they are worth is not a new thing. And it’s also related to the fact that typically the last refinance a debtor did (if not more than that) was likely a bad idea. If they’d had better financial advice earlier, they would have been in a better situation, and the no cramdown rule prevented helping them.

I think you and I are on the same page in general. My feeling is that its better to let someone look at the facts, case by case, and have the power to decide if it was malbehavior or not. I am generally against any legislative action which removes judges discretion and gives it to lobbyists or other special interest groups instead. Maybe that puts too much faith in the judicial system, but I think it is much better placed there than with Congress these days.

b said:

“These are changes that will last well beyond the correction, and may help you down the road if you have a catastrophic illness in your family ruin your currently responsible finances. ”

I’ve already been there b. I spent ten years on my death bed thrown away by the medical establishment and left to die. I lived in abstract poverty during that period, free from government assistance, and tackled an impossible task–figure out what was wrong with me and how to treat it with $0. Actually, I’m quite surprised I made it out the other side because the illness seriously whacked out my ability to think, concentrate, and remember. Fortunately, I had been somewhat of a musical pioneer prior to getting ill, so I had some idea of how to create a way out of the dilemna (walk away from mainstream thought and work my own ground). As my health improved, my ability to think improved somewhat as well. So that was a big help. It was a freaky time of indescribable suffering mixed with whacky health theories and pinching every penny I could get my hands on in order to experiment on myself. I could have just as easily lost the battle and died. Fortunately, after ten years of intense battle, I felt I had won.

It’s not necessarily that I don’t feel sympathy for the people losing their homes. I found out the hard way, if you’re serious and want to get your hands dirty, you can start all over again and build a decent life. In fact, if you have your health, you have everything there is in life that’s important. I really don’t think intellect matters when it comes to losing all your worldly assets. If you experience it once, it teaches you to prioritize your life and become prepared for a potential downslide in the future. Suffering is the best teacher around.

In nature, the strong survive. New cars, boats, planes, houses, clothes, tv sets, etc. really don’t matter so much in the grand scheme of things. When you are deathly ill, you realize what a sham most mainstream life really is. It’s like a silly game people play because they don’t know any better. We as a society can’t stand to see a single family go on living without all of this worthless BS, because we ourselves cannot imagine our own lives without it. Unbelievable to me, we equate going without materials as suffering. I have a difficult time understanding that mindset, but I do acknowledge it exists for others. I think it can better be thought of as travelling light and getting one’s priorities straight. And that’s really the great thing about our country, it allows you to learn from your mistakes and start again from scratch.

I fully agree with what you said about some people walking around without even knowing they’re alive while being led by a pruning hook from the nose (the walking dead). And I fully agree with your humanitarian premise of becoming their stewards. However, I’m more for teaching them how to take care of themselves than I am for teaching them how to mortgage their souls for a new TV set. And as I said previously, the best teacher is to suffer. The opposite of good teaching is too enable mal-behavior.

This post is one of those. Tim, you make an erroneous assumption that people in trouble with buying high in an emotional market somehow bought houses they could not afford. What about people that bought and then lost 25 to 35 percent of the purchase price. Now they are paying on a house that makes no sense.
Why not let the courts force the lenders into being civil and real? What possible sense could it make to beat the homeowners and the lenders because the lenders are stuck in being idiots? That is what government and the courts are for; to make sense when none of the parties are meeting in a real way.
The market is correcting from total greed, we need all the help we can get to help it return to reality with all parties forced to the middle with the least damage possible.

Seattle is the only market in the country that has not YET corrected to the extent that the rest of the country has.

JUST WAIT. The Seattle job market drop has caused the rental market to tank. That is because in the recession/depression people can’t afford to pay their RENT, much less a overvalued mortgage.

Stop being so smug and start looking at the reality of the current situation. Telling your readers that it is good that homeowners & lenders deserve to be homeless and stiffed for the money is just plain stupid.
Apparently, you have one of those boring and stable jobs that is not currently threatened. Not everyone is in that position.

Open your eyes to what is going on.

Seattle is very likely going to go down much further. It is a snowball effect. Developers can’t sell, homeowners can’t pay, lenders can’t lend, business can’t sell…..
We need to pull together as a society and fix this with compassion and forward thinking. Try helping out at a homeless center or feeding all the people that can’t feed themselves.

Vincenzo

As to the concern for the banks, I don’t think it’s that. I think it’s more the jealousy, for want of a better term, that people have when certain people are getting breaks that they are not also eligible for. It doesn’t seem fair, and to some extent it isn’t. But unlike some of the refinance plans, at least this one requires the filing of a bankruptcy, which is a significant negative. It’s not like you’re going to have two neighbors who bought at the same time, one delinquent and gets a cramdown, and the other saying: “It’s unfair that I can’t file a Chapter 13 too!”

Why would anyone think that these bad product providers will do anything good?

We might as well protect tobacco companies. They are a huge industry engaged in stress reduction.

There are alternatives to both loans and oil. The sooner we get to that point the more chance we have for survival.

1. For a lot of these situations the bank is going to take a loss anyway, perhaps even a greater loss in foreclosure. Also, I believe the legislation had some pre-qualifiers, including possibly requiring that the debtor tried to negotiate with the bank. Allowing this legislation would thus give the banks greater motivation to at least be responsive in those mortgage modification situations.

2. There seem to be two sides to this type of issue. Some people say ignore your contract obligations and walk away if the value of your house declined, even if your contract payments didn’t increase. Some here are saying you shouldn’t be able to alter that obligation through bankruptcy.

But my point wasn’t to say that oil companies are run by a bunch of great guys, but simply to point out the average American doesn’t understand why the oil companies were making so much money. They thought it was simply because they decided to screw us all over by raising the price of gas.

“It’s really rather simple. You sign a contract. You default on that contract. The terms of default written in the contract are executed.”

In defense of Jonness I agree for the most part (the commie callout was a bit harsh.) It seems that most people defending cramdowns seem to have the mindset that one’s house is everything and depriving them of their property is a violation of their rights. It isn’t everything and property is not a right. While people go to extraordinary measures to save their homes while under financial stress (sometimes foolishly), life does not end with the loss of property. It isn’t the 1800’s where only landholders could vote. And being (or becoming) a renter isn’t second-class citizenship. And I believe contracts need to be honored: if someone’s word is no good what value is it? Have we no honor left in our society?

b @ 75 said:

“These are changes that will last well beyond the correction, and may help you down the road if you have a catastrophic illness in your family ruin your currently responsible finances. ”

Its hard to think what as a person would think or do in that situation but if my wife was diagnosed with cancer and we spent $200,000 fighting it and she got better but it forced us to declare bankruptcy, the last thing I’d be thinking about is my house, because my home (wife, family, you know the actual important stuff) just got better. I imagine losing a home’s a sad endeavor but that coupled with bankruptcy I would think actually gives people a true fresh start with no mortgage around their neck. We place wayyy too much value on a SFR, and not enough on what’s inside (and I’m not talking about the Pottery Barn funiture and the granite contertops.)

As long as we are going to extremes I’m going to say that banks and financial institutions are engaged in unAmerican activity. Anti American terrorists have an ally in our banking and financial markets.

Banks can fix the mess they made. They don’t want to. Banks are more concerned with generating fees than collecting debt.

Banks want our tax dollars. Banks want all the free money they can get. Why is it when we give money to multi billion dollar global corporations it’s a bail out while people who take a fraction of tax dollars in order to eat are welfare recipients?

Banks are liars, cheats, and thieves hiding behind small print in fifty page documents. Financial Institutions have destroyed massive amounts of wealth with paper profit products, but hey, the people they swindled should just pay up.

Or more recently the profits of oil companies. When you own a lot of a commodity, and that commodity triples or quadruples in value, you’re going to make a lot of money. It doesn’t mean they’re overcharging, unless somehow you expect a corporation to sell assets at less than market value.

RE: calvis @ 69 – Unions can resist all they want, but it will not do any good in a deflationary environment. They don’t set the prices of their goods and services – the market does. The UAW put up plenty of resistance and we can all see how that ended. I am with Scotsman on this one. High-end homes are the most vulnerable to future deflationary forces.

I think the main reason the high end homes are hurting is the stock market. That’s where a lot of people held their wealth, and a lot of that wealth evaporated.