Housing crisis???

[Guest]

http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/the-housing-mess-5-dumb-questions.aspx

Do we simply have too many houses?
In a word, yes. The Census Bureau says the U.S. has about 128 million houses, condos and apartments but just 112 million households.

Is that a problem? You bet it is. "We've got too much housing and yet not enough housing that people can afford," says Danilo Pelletiere, the research director for the National Low Income Housing Coalition. "There are a lot of houses, but they are in places and in shape that people can't use them." Also, many who want to buy can't get a loan because credit is tight.

These are among the drawbacks of free-market economics. In Soviet Russia, where the state owned the housing, planners -- in theory, anyway -- could have shuffled people and jobs around to fill up those empty houses. (It was supposed to have been a more efficient system, but, as time showed, it had its own problems.)

Another wrinkle: Even if all the empty homes were near the people who needed them -- and they're not -- their upkeep costs could be huge. Many homes for sale are just too grand for the buyers. The heating and cooling bills, repairs, paint, gutter cleaning and yard mowing could break many of the people who need homes. "Even if you give them to them for free, there would be this problem," Pelletiere says.

What's affordable? Spending no more than 30% of your income on housing. By 2007, almost 15% of Americans with mortgages were devoting half their incomes or more to home payments.

Affordability didn't seem like such a problem during the real-estate boom of recent years, although wages were falling or flat. While cheap introductory mortgage rates were available, developers and buyers were lured not to the small, thrifty homes they needed but to what were essentially luxury digs.

It's happened before. "In a lot of poor neighborhoods, there are mansions that have been turned into slums. You can see what it looks like when you build houses where the following generations and the demand can't keep up," Pelletiere says.

[Guest]

If the government takes away the tax incentives of owning the non-primary residence homes, I believe it will dampen the motivations of owing more than one home.

[Guest]

I like Jim Cramer's idea: a government program to burn down all foreclosed houses. Massive inventory reduction.

Seriously, we should let the builders and mortgage cos go under. They created this problem with their greed, pushing about 10% more people into homes that historically should have been in them and pushing everyone into more expensive homes than they should have afforded. Let them go under, let us lick our wounds and move on. Artificially extending them a lifeline is the worst possible solution.

[Guest]

I agree with you. Let them fail. The market will figure it out, which it will. I think affordable housing should come with the zoning (which I believe was the original intent of Mt. Laurel). Just make smaller houses. Smaller houses, less heating/cooling, less yard, etc. etc. When we looked in Cranbury, we would have bought something smaller, but we wanted new and there was nothing small available. But we still didn't buy something that was beyond our means, just something a little bigger than we wanted.

[Guest]

Here's the basic view in my opinion. You let them fail just as you let them suceed. Housing on the coasts is much more than in middle america because of the economics. If you can allow one area to inflate prices then you also have to allow it to deflate prices. I know people who sold their parents homes that were bought for 15,000-25,000 50 years ago and now are selling for 750,000. You have to take the good and bad otherwise there is too much intervention.

That does not mean you should not institute laws and regulations governing how business is transacted.

[Guest]

If you let the mortgage companies go under - remember, the only major company who said they did not want to receive federal funds was Wells Fargo - who's going to service your loans, let alone make new ones? Neighborhood banks can only portfolio so many (they just don't have the deposits to support them and, given the state of the market, you don't want them to), which leaves a whole lot of homebuyers in a bind. Which leaves a whole lot of foreclosed houses on the market. Might be fair to let them go under, but it wouldn't work. And I don't want my kids living with me until they're 30...

[Guest]

[Guest]

Actually, just someone getting close to retirement (hopefully), who isn't really happy about your scenario (remember how long it took Japan to recover from a not so dissimilar situation?). And the idea that "if there is a market, there will be a service provider" applies to McDonalds and cell phones, but mortgages are just a little different before they require massive capital. Or, oh - wait - you could sell them to investors, so you don't actually need to have the money to back them. But that's part of what got us here in the first place, isn't it?

I think the massive spending on public works is a great idea, and the fact that banks are hoarding money awful. I just don't like the idea that 20% of houses in Cranbury could go into foreclosure and people couldn't get financing to buy them.

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