How Low Will California Home Prices Go? (insurance, refinance)

[sheri257]

Originally Posted by justsomeguy

The number of people that will be helped should be limited - maybe around 80,000 people nationwide. Speculators or people that lied on their loan app. probably won't qualify. In fact I imagine it will be very difficult to qualify for this "bailout" program. I don't think they are going to reduce any mortgages - they are just going to reduce the interest paid on the mortgage - that is why the "price" of the mortgage will be lowered. So an ARM mortgage that resets to say, 10% or something next year will instead be re-financed at a low-fixed rate, maybe 5 or 6% or something I'm guessing.

It shouldn't keep prices artificially high, but it will create a "soft landing" most likely rather than a hard drop - by keeping a lot of homes from being foreclosed on and put out on the market. Even without those homes foreclosed on, there is still a glutton of homes inventory on the market and demand is still low b/c of credit problems, overpriced homes, and market psychology. Supply still outstrips demand so prices will still lower. Hope this answers your question.

This really annoys me. Why should we help these people at all? We're essentially rewarding irresponsible behavior and a bailout of any kind will only encourage people to do more of the same.

[goodbyehollywood]

Originally Posted by sheri257

This really annoys me. Why should we help these people at all? We're essentially rewarding irresponsible behavior and a bailout of any kind will only encourage people to do more of the same.

Right. Reward people for getting in trouble, while penalizing those who don't. That should really work as a viable, long-term solution.

[goodbyehollywood]

Originally Posted by sheri257

This really annoys me. Why should we help these people at all? We're essentially rewarding irresponsible behavior and a bailout of any kind will only encourage people to do more of the same.

Right. Reward people for getting in trouble, while penalizing those who don't. That should really work as a viable, long-term solution.

[it's all good]

Originally Posted by it's all good

L O L too, that's just what I thought. What a deal for the banks.... : )

...just realized how dumb this unfinished thought sounds..."what a deal for the banks" was meant sarcastically... : {

[Sassberto]

Originally Posted by sheri257

This really annoys me. Why should we help these people at all? We're essentially rewarding irresponsible behavior and a bailout of any kind will only encourage people to do more of the same.

Because people losing their homes en masse is not good for anyone, and will impact all the responsible people just the same as the irresponsible.

[justsomeguy]

Originally Posted by Sassberto

Because people losing their homes en masse is not good for anyone, and will impact all the responsible people just the same as the irresponsible.

Exactly. It's sort of like the decision made after WWI to "screw Germany over" because they started the War - that decision, of course, led to the rise of Nazi Germany and the 2nd WW - needless to say, the Allies DID NOT repeat their mistake at the end of WWII. They poured a lot of their own money into Germany to help rebuild, because they knew in the long run it was better than leaving Germany in ruins. Marshall Plan, anyone?

On an emotional level, of course it's not fair and it's infuriating. But with a more objective analysis, it may be what is required for "the Greater Good." Just like we rebuilt Japan and Germany even though they started the wars with us - in the end, the long-term benefits are better than allowing the problem to just eat away at itself and eventually effect EVERYONE.

[Humanoid]

But with a more objective analysis, it may be what is required for "the Greater Good."

We aren't talking about rebuilding a country, we are talking about bailing out people that gambled in real estate.

People are talking as if the government keeps the bubble inflated (by bailouts etc) then all will be rosy. But that makes little sense. How can the government keep the bubble going? It can either fix prices in some way (for example by bailing everyone out) or it can increase the money supply (In reality they will change the fed fund rate and then change the money supply to reach the target). Both of these solutions will cause massive inflationary pressure. Which is better massive inflation or a modest recession? In the 1970s there were inflationary problems too, and the fed decided in 1979 to slow the growth of the money supply. By doing so it caused a recession in the early 1980's. Whats the fed going to do this time? We'll see. Both solutions have negative outcomes, but allowing inflation to get out of control is the greater evil.

[davidt1]

Originally Posted by Humanoid

We aren't talking about rebuilding a country, we are talking about bailing out people that gambled in real estate.

People are talking as if the government keeps the bubble inflated (by bailouts etc) then all will be rosy. But that makes little sense. How can the government keep the bubble going? It can either fix prices in some way (for example by bailing everyone out) or it can increase the money supply (In reality they will change the fed fund rate and then change the money supply to reach the target). Both of these solutions will cause massive inflationary pressure. Which is better massive inflation or a modest recession? In the 1970s there were inflationary problems too, and the fed decided in 1979 to slow the growth of the money supply. By doing so it caused a recession in the early 1980's. Whats the fed going to do this time? We'll see. Both solutions have negative outcomes, but allowing inflation to get out of control is the greater evil.

There are serious politics behind this. This mess represents an opportunity for the out-going President to look like a caring, decent human being. The Presidential candidates see this as a vote-getting opportunity. Meanwhile the brainwashing is working on some of the populace. But greed is still the central theme here. People who have home don't want to see their homes go down in value. House flippers are crying for bailouts because they benefit the most. People wanting to buy are unable to buy at current high prices. It's a mess.

[justsomeguy]

Originally Posted by Humanoid

We aren't talking about rebuilding a country, we are talking about bailing out people that gambled in real estate.

People are talking as if the government keeps the bubble inflated (by bailouts etc) then all will be rosy. But that makes little sense. How can the government keep the bubble going? It can either fix prices in some way (for example by bailing everyone out) or it can increase the money supply (In reality they will change the fed fund rate and then change the money supply to reach the target). Both of these solutions will cause massive inflationary pressure. Which is better massive inflation or a modest recession? In the 1970s there were inflationary problems too, and the fed decided in 1979 to slow the growth of the money supply. By doing so it caused a recession in the early 1980's. Whats the fed going to do this time? We'll see. Both solutions have negative outcomes, but allowing inflation to get out of control is the greater evil.

You don't really have a clue what you're talking about, do you? There is no such thing as "bailing everyone out." That is NOT going to happen. And they aren't saying everything will be rosy by keeping the bubble inflated - they're saying that everything is going to go to Hell in the financial and credit markets, the construction industry, the labor market, and eventually the consumer goods market. It's a domino effect - one section collapses, and there is a risk that the others fall with it, which knocks down the others, etc.

And apparently my analogy flew right over your head - the point is that we did not let our personal hatred over the reckless and irresponsible and damaging behavior of others (Nazi Germany, Japan) override the rational realization that we had to help those who hurt us to be sure that we would not be hurt even more by not helping them. Sheesh.

[it's all good]

justsomeguy, this has been a very informative discussion. You're very knowledgeable about the subject. Thank you for sharing this information. What you're saying makes sense and makes the "bailout" easier to swallow. Thank you for explaining it.