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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (72332)	2/3/2010 2:49:39 PM
From: Maurice Winn	1 Recommendation Respond to of 74559

Here are some counter-parties walking away. There are legal contracts, proper mortgages, but too bad. The person owed the money is out of luck: finance.yahoo.com <No Help in Sight, More Homeowners Walk Away by David Streitfeld Monday, February 1, 2010 provided by In 2006, Benjamin Koellmann bought a condominium in Miami Beach. By his calculation, it will be about the year 2025 before he can sell his modest home for what he paid. Or maybe 2040. “People like me are beginning to feel like suckers,” Mr. Koellmann said. “Why not let it go in default and rent a better place for less?” After three years of plunging real estate values, after the bailouts of the bankers and the revival of their million-dollar bonuses, after the Obama administration’s loan modificationplan raised the expectations of many but satisfied only a few, a large group of distressed homeowners is wondering the same thing. New research suggests that when a home’s value falls below 75 percent of the amount owed on the mortgage, the owner starts to think hard about walking away, even if he or she has the money to keep paying. In a situation without precedent in the modern era, millions of Americans are in this bleak position. Whether, or how, to help them is one of the biggest questions the Obama administration confronts as it seeks a housing policy that would contribute to the economic recovery. “We haven’t yet found a way of dealing with this that would, we think, be practical on a large scale,” the assistant Treasury secretary for financial stability, Herbert M. Allison Jr., said in a recent briefing. The number of Americans who owed more than their homes were worth was virtually nil when the real estate collapse began in mid-2006, but by the third quarter of 2009, an estimated 4.5 million homeowners had reached the critical threshold, with their home’s value dropping below 75 percent of the mortgage balance. They are stretched, aggrieved and restless. With figures released last week showing that the real estate market was stalling again, their numbers are now projected to climb to a peak of 5.1 million by June — about 10 percent of all Americans with mortgages. ... continued...> What surprises me is that people in NZ seem to think they are immune from the same economic forces. So far, they are right - except that interest rates have been falling, as they did in the USA in the early years of the 21st century to reflate after the Biotelecosmictechdot.com bust. So, with lower interest rates, people in NZ think they are doing okay, forgetting that the people who loaned the money are getting derisory payment for the loan. They think the banks lend the money and that banks are just greedy so it's a good thing that interest rates go down, and forget that somebody loaned the banks the money and they are not getting Happy Meal interest payments. They are getting chicken feed payments having worked and saved all their lives. Now the NZ government is planning a "wealth tax" aka a tax on property meaning annual taxes [apart from the ongoing local authority rates charges which are burdensome enough and for which little is provided]. Those new taxes will NOT make property owners feel wealthy. They will feel impoverished and will sell their over-priced houses to somebody who can and will pay the new taxes and the old ones too. When lots of people sell their houses the price goes down. When costs of ownership are added, the price goes down because owning a house has a total value to the owner. Look out below... except that the government can dilute the NZ$ so much that inflation takes over in the time-honoured way, destroying savers yet again. Since many/most of those savers are Japanese, and they don't have a vote, it seems likely that the voters will vote to have their loans repudiated by diluting the NZ$. That will have an effect on the NZ$ exchange rate... Look out below... Mqurice