Is it just me? Really?

[ellsworth]

[sniglet]

Arguing that we need to "fix" housing in order to help the economy is the same as suggesting that you need to plant more fruit trees because many of them are dying in a drought. Housing is just a symptom of the broader hang-over from the credit boom, in which asset prices were vastly overbid and someone has to take a loss.

Just as the solution to my fruit tree example is to re-adjust water consumption need to fit the new reality of a lower water supply, a slow-down in building is a GOOD thing for the economy right now, which will begin the process of allowing a new equilibrium to be established. Unfortunately, too many people seem to be hoping that somehow we can re-ignite the bubble and spark excessive demand (i.e. speculation) once again.

[rose-colored-coolaid]

[jon]

I think one thing we can all agree on is that we do not need to spend tax dollars to build more houses right now. If they want to stimulate the local economy, they should focus on ways to keep the tax base low and friendly for businesses overall, not just the politically connected ones.

[davidlosh@davidlosh.com]

I'm going to disagree here, but it's on a technicality.

The way I see it, the economy has no real future until housing prices stabilize. There are too many bad debts on too many books, and so long as those bad debts keep getting worse we won't see any form of economic recovery.

You are correct it's the debts. People selling for less than what is owed is coming to a halt. Lenders are holding the line on values. As long as that continues the prices will remain inflated.

So how many loans are out there at over value? Millions.

The lenders are dictating the market place as they have for the past ten years. The only solution is to stop generating new loans and pay off the debts that are already there.

Think of it as a game of chicken. Lenders thrive on new loans, new paper, new securities, new money. Lenders buy sell and trade paper. They borrow money, make loans, and trade the paper down to nothing so they can borrow more money to trade more paper. That's as simple as I can make that point.

When you stop generating loans and just pay what's owed you put the lender out of business. The lender is converted to an investor getting interest income only. That's not the lenders business any more than being a land lord is the lenders business. They trade and make money by trading.

If people just paid what is owed, no matter the cost, the lender will get tired, bored, restless, and then maybe, just maybe, they will be willing to make a deal.

What's actually best is if every one just paid when they felt like it, within reason. just enough to keep the property. They can sell to the next person with a wrap around or rent to own.

Having a bunch of badly performing assets would be torture, and what is the alternative for them? More foreclosures? Who's going to buy them and why would they?

[sniglet]

[rose-colored-coolaid]

[sniglet]

[rose-colored-coolaid]