Okay, I really am growing tired of this. Apparently, homeownership has become the latest middle class (and below) entitlement to be supplied by the federal government. Yes, it's true, you MUST own a house, and if you can't make your payments, well, Uncle Sugar will step in to help out.
Let's look at this problem differently, shall we? I was once at a tailgate with a good buddy of mine who runs a mortgage brokerage. This was actually, last football season, right at the beginning of THE CRISIS. He was telling me about some of the phone conversations he was having with folks who weren't paying their mortgages. He said something like,
"I'd be on the phone with someone living in a $500,000 home who hadn't made a payment in six months. They'd been in the place, maybe two years, put nothing down, and probably had about $4000 equity in the place. When I told them that they'd have to begin making payments again--or they'd be foreclosed upon and have to leave---they started ranting about how I couldn't "kick me out of my own house". My own house? Guess what. That's MY house! I've got $496000 tied up in it and you've got $4000."
That's the way this "crisis" needs to be viewed. Putting aside for a moment the negative impact of foreclosures on neighborhood home values and the like, what exactly is so awful about foreclosures? I'd wager that if we were to run the numbers, we'd find that the average lost equity for homeowners foreclosed upon in the last year was less than 10% of the assessed value of the home...even the deflated value. This whole "main street vs. Wall Street" argument is a straw man...foreclosure is a bad thing for those foreclosed upon, but it isn't the end of the world. There are apartments, there are other homes to rent. While your credit rating may take a hit, that's to be expected. The banks and financial institutions who put the big money out, across thousands/millions of customers...they're in a huge pickle. This is why the bailout was SO necessary. We can't survive without a banking system; we can survive with a million or so more people paying rent.
Let's face it; mortgage payments really ARE simply rent to own. Not until you burn that mortgage do you really "own" that house, and I'd wager that the percentage of American households (not in retirement) owning their own home free and clear is pretty small. Yes, there is a tax advantage to owning (one I'd like to see go away). And yes, there is the potential to make money on real estate. We complain about "leverage" on Wall Street, but what in God's name is virtually every real estate transaction but a leveraged deal? You're using the mortgage company's equity to make yourself some money....that's what leverage is all about! And when the deal goes south....leveraged positions are never fun.
The economy can stand more foreclosures.
Thursday, October 23, 2008
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11 comments:
If you think about it, the tax advantage is for owing, not owning.
I paid about $12k in interest payments on my mortgage last year, and was able to deduct that from my taxable income -- roughly a $3k tax savings to me.
I also paid about $5k in property taxes. Again, some tax savings to me, a bit over $1k.
If I owned the house free and clear, I'd owe Uncle a much bigger chunk.
Ken--I've never bought this argument. What about the opportunity cost of the money you're paying into a mortgage?
I realized last year that paying the bank $18k/year to save me from paying $3k to Uncle Sam was a sucker's game. Heck, I'll get at least a $10k standard deduction anyway.
'course I'm not one of the high rollers normally found on CW's site, just a simple country boy livin' within his means.
"The economy can stand more foreclosures."
Perhaps. But Washington, including both Obama and McCain, cannot stand the inncessant whining of millions of registered, entitled voters.
I'm surprised of such an assessment from someone who lives within 150 miles of one of the most political places on earth.
Ghost--I'd like to see a breakdown of party registration of those being foreclosed upon.
If Obama wins I can almost guarantee all those people in all those houses they couldn't afford will basically be given the homes. Some on the left are already saying they should be provided 99 year mortgages etc. Good God!
I have a solution however. CHEAT! Cheat like hell. Cheat on your taxes, lie at every turn. Make the bastards work to take your money.
We may be approaching the point of aggressive civil disobedience. Active civil disobedience. Very active, if you catch my drift.
The point is, you have no rights you are not willing to fight for, and I don't mean just in the political arena.
Remember this about leftists. They're pussies. They'll fight like dogs until you go up side their head, and then they'll dance like a circus bear. If they try to impose socialized medicine (or any number of other leftist schemes) on me and my family, or if they try to take away any of my God given rights protected by the Constitution, then I feel obligated to in fact, go up side their heads. I hope you feel the same way. If not, good luck in your brave new world.
CW - As would I. For shiggles, and as a totally unscientific exercise,I compared the 10 hardest hit regions of California (which accounts for almost a third of total US foreclosures) in terms of foreclosure rates (Q208 v. Q207 as reported by DataQuick) by the 2004 presidential election results.
The result:
County/Region YR/YR % Result
Monterey - 249.5% (Kerry)
Sutter - 243.1% (Bush)
Santa Cruz - 242.6% (Kerry)
Merced - 201.6% (Bush)
Sonoma - 197.8% (Kerry)
Santa Clara - 194.2% (Kerry)
Imperial - 188.6% (Kerry)
Stanislaus - 169.4% (Bush)
Napa - 162.5% (Kerry)
Madera - 158.1% (Bush)
Statewide - 124.9% (Kerry)
Both republican and democrats appear almost equally as efficient in fiscal irresponsibility.
1968 - A Republican is a Democrat who has been mugged.
2008 - A Democrat is a Republican in foreclosure.
GG--good data, as far as it goes. But really not persuasive. Six of ten counties/regions went Dem; a sixty/forty split in a presidential election is also known as a landslide.
What is the correlation in these counties between party and propensity for for foreclosure?
I'm not sure John McCain's coddling of this demographic has given him much of a boost in any demonstrable way. I believe these folks were likely to vote Dem to begin with, and McCain's grandstanding on this has only driven committed Conservatives crazy.
This is a political issue, and I think McCain called it wrong.
CW - I totally agree that this is a political issue.
Both candidates are clearly pandering to this demographic; but I think Obama has the edge here, as he is perceived to be in the better position to dole out the goodies once the democrats achieve supermajority. Think of it as a long term investment by the dems.
For what it's worth, I don't think this new bailout is meant to address the current foreclosure crisis, but rather the one that looms on the horizon once unemployment tops 12%. We've only witnessed the flash of the atomic blast, the real destruction awaits...
And this is coming from a glass half full kind of guy.
All true. Crisis is the friend of tyrants. If there were any justice the politicians who protected Fannie & Freddie as well Raines and Golick(sp.?) should all go to prison.
The point you're making however, that the assets are still there is absolutely valid. Send ever damn one of them two year leases or eviction papers. All payments are forgiven and rent starts on the first. That's it, otherwise it's grandma's basement.
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