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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Hawkmoon who wrote (102194)	9/19/2009 8:51:50 AM
From: Chas.	2 Recommendations Read Replies (1) \| Respond to of 116555

It must be nice and comfortable to live in a big house that you can't afford (probably to begin with) so just call the bank and tell them you won't be making any payments any longer and the bank says "no sweat no problem, have a nice day" regards

To: Hawkmoon who wrote (102194)	9/19/2009 2:43:13 PM
From: Elroy Jetson	2 Recommendations Read Replies (3) \| Respond to of 116555

We saw the same reluctance to foreclose among banks in Southern California during the 1989 to 1996 real estate downturn - just as many are doing again. What happened was the banks took an even larger loss. As many held off either on foreclosing or on selling foreclosed homes, the inventory of homes to be foreclosed and sold became unsustainable large. Finally after waiting for four years, banks, or the RTC in the case of failed banks, started to sell these foreclosed home in 1993. Home and condo prices took the final big plunge in price and slowly began to attract buyers. Yet these foreclosed homes, now being actively marketed typically took 10 months or more to sell - even with very generous incentives like low interest rate financing for qualified buyers and many expenses pre-paid for a year. All the while prices ticked lower with each sale. Home prices finally began to rise in 1996 when the last of the foreclosed homes was sold. Only then were buyers confident the real estate market had found a bottom. What would have happened if banks had held onto their foreclosed homes for ten years instead of four years? Most likely the real estate market would have remained depressed until 2002 instead of 1996. People interested in buying real estate are not terribly stupid. They know prices are not likely to rise if banks have a huge inventory of properties they are waiting to sell - so they don't buy. What if banks shifted their REO inventory of foreclosed homes into an REI inventory of rental property? It would tie up massive amount of capital severely impairing their ability to lend - hurting both the bank and the economy. I understand your objection to free markets, and certainly a centrally-planned socialist economy has a certain appeal to underwater debtors, but we're better off enduring this period of debt destruction and restoration to economic health in the traditionally capitalistic manner of free markets. .