Whose fault is it that housing prices are slashed?
Filed under: Real Estate
Today a fellow blogger pointed me to this blog post, which basically shows a 50% price cut for homes in a California neighborhood. One home was sold for $855,000 in April 2006, and now two houses down, a similar one was listed for sale at $400,000 in April 2008.The writer of the blog says, "Mr. Bernanke, that'll be $455,000 to keep the poor folks at 4565 Casa Nova from foreclosing, thank you very much kind sir."
But whose fault is it really, that there is such a disparity in home prices over two years? What if the real value of each home always was in the $400,000 range? Doesn't that just mean that the buyer from 2006 was stupid and overpaid for his home? Why do we automatically assume that it is the fault of the government that someone's house isn't valued high enough?
I'm a realist. I recognize that real estate values have declined and therefore many homes are "worth" less than they were before. But there comes a point where common sense must play a part in the debate. Plenty of homeowners probably paid too much when they bought their homes, and now the market has reduced those values to be more in line with reality.
Those who overpaid on their homes need to pay their mortgages and sit tight for now. Maybe the housing market will rebound, maybe it won't. If you can't get your money back out of your house, there's a possibility that you overpaid. Learn the life lesson and get over it. Quit looking for someone to blame.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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Reader Comments (Page 1 of 1)
5-07-2008 @ 4:39PM
Jason said...
This is one of the few times I wholeheartedly agree with you.
Reply
5-08-2008 @ 2:02AM
whtm said...
ONCE MORE TRACY SHOWS THAT SHE THINKS SHE IS SMARTER THAN ANYONE ELSE ? I HAVE TO SAY THE FEDS RATE CUTS HAVE DONE MORE HARM THAN GOOD ! TIGHT MONEY POLICY IS WHAT WE NEED NOT A LOOSE ONE TO MAKE WALL STREET HAPPY!THE BANKS THAT WAS LENDING MONEY TO PEOPLE WHO COULD NOT AFFORD IT IS THE CAUSE ! IN A NUTSHELL GREEDY BANKS AND DEREGULATION IN THE MORTGAGE INDUSTRIES IS THE REAL REASON !YOU CAN'T PUT LIPSTICK ON THAT PIG! OH AND AMERICANS LOSING THEIR JOBS HAVE ALOT TO DO WITH IT TO!
Reply
5-08-2008 @ 8:17AM
Erwos said...
You loosen monetary policy during a recession, and you tighten it during a boom. That's what the Fed has done since the Great Depression, and it's worked pretty well. Monetary policy, though, can only solve so much. Fiscal policy and external factors all play a role...
5-08-2008 @ 9:40AM
Tracy Coenen said...
We should also note that politicians pretend these things work the same way they did "back then." They just don't. The exchange of information (esp. via the internet) has changed the way businesses and consumers do business. Fiddling with these policies often seems to do more harm than good, in my opinion. At the very least, it's a lot of a dog chasing his tail.
5-08-2008 @ 8:17PM
whtm said...
erwos, im sorry to say you tighten intrest rates in high inflation not a recession with all due respect !
Reply
5-10-2008 @ 12:21PM
maureenschaffer said...
I enjoy your practical outlook and agree with you. The problem my husband and I face is that a fraudulent mortgage broker wrote up a bad loan for us leaving pages out of the package and we ended up being responsible for a loan payment we cannot possibly afford on our income. He lied to us and now we are being held liable. We can't refinance with a legit loan because the value of the house is down. You can't go to the police and report it, because it is a white collar crime. Now we have a case at the Dept. of Real Estate but this has taken almost three years for anyone to even look at it. If we walk away our credit is ruined.
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5-12-2008 @ 3:30PM
FlipFlop said...
Sorry, folks, but the Baby Boom has run its course. The Boomers, most of who were of middle class mentality, who's coming of age was a shot in the arm to our economy for thirty or more years, not only in housing but for retail sales in general.
We had it good for a while, now we must settle in as best we can in order to survive in a stagnant economy, especially hurtful to the middle class, the ones who will pay the price, and yet, be the same people that will oneday lift us again.
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