mortgages

Solving the Mortgage Crisis - Part I

I don't know about you all, but I was reading Ben Jones' Housing Bubble Blog 3 years ago when house prices were still climbing 20% a year and housing bulls were laughing at the bubbleheads. To them, the naysayers obviously missed the boat and were just sore losers who rented.

Way back in 2005 there were plenty of people (Federal reserve economists excepted of course) who saw the bubble and predicted that when the adjustable rate mortgage resets came due (beginning en masse in 2007) there was going to be one heckuva housing bust, and a cacophony of calls for a bailout of the greedy and the stupid.

Now that those predictions have come to pass, the question is, should we just let the mortgage/housing debacle play out, or are there ways to intervene that would be socially beneficial?

We ought to at least be able to narrow down the options, filtering out those that mainly bail out the greedy, or else entail too much cost or moral hazard. Of those options that remain, we ought to at least be able to narrow down areas of disagreement. Below are my suggestions.

Round Two of the Housing Bust

After more than a year of a housing bust, and eight months of a credit crunch, its hard to believe that the real estate market could get much worse. With suburbs turning into ghost towns, major Wall Street banks going under, and people losing their homes right and left, you would naturally think that we must be near the bottom.

And yet, if you look at the raw numbers you realize that the real estate market could get much worse. In fact, it is likely to get much worse in the coming years.

You don't have to believe me. Look at the numbers for yourself.

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