Mike Morgan is an old timer in real estate, and one of those people that has been screaming about the impending implosion in the housing market for years.
He has a rather outraged take on what will happen, and it is worth reading. You can find it at http://realestateandhousing2.blogspot.com/2009/02/obama-deal-with-family-b-and-c.html.
{ 3 comments… read them below or add one }
Elizabeth Barrette 02.19.09 at 11:07 am
O_o After reading that, I am not even sure whether the writer is a liberal or a conservative. I am sure that this is a story problem. That is, the usefulness of the essay depends on the accuracy of the stories told within it, so the question becomes: what percentage of people in upside-down mortgages are there because they willingly overspent the huge sums of money they made, vs. what percentage are there because they were pressured or defrauded into spending more than they could afford of the little or nothing they made? If the former category is much bigger, then the author has grounds for complaint. If the latter category is much bigger, and eligible for aid, then it’s more important and the author’s argument doesn’t hold much water. The final example of renters is a straw man, irrelevant to the discussion of foreclosure, although it would be relevant in a larger discussion of the recession as a whole.
I’m reminded of the “welfare queen” fable that Reagan used so effectively to gut public aid some years back. It’s easy to sell people on an idea by telling them what they want to hear. This makes me deeply suspicious.
Bryan 02.20.09 at 9:49 am
I don’t know much about what’s actually in Obama’s proposed mortgage deal, because I doubt even he is clear on the details, but I do have a pretty good grip on the “greedt vs. tricked” debate. I watched a really good documentary on CNBC called “House of Cards,” which described the housing market. There were cases where homeowners were “tricked” into buying more mortgage than they could afford, but this almost always involved (sometimes knowingly and sometimes not) signing a statement that said they made more money then they actually did. (Also, thanks to truth in lending laws, a mortgage broker has to inform you of how much your mortgage will actually cost, so there’s no way you can be “tricked” unless you don’t read the contract you are signing. But that’s a whole other issue.)
There also were people who were banking on their house gaining value. They would get adjustable rate mortgages (ARMs) and then refinance their loans before the payments ballooned. This works, in theory, as long as your house value keeps going up (though you also won’t ever own your home). But when housing prices started going down, they couldn’t refinance (because they had more loan than house) and their payments were then more money than they made. From what I gather, some of this was due to “trickery” on behalf of mortgage brokers (but see the caveat above), but as much if not more of it was simply due to greed, or the idealistic faith that nothing would ever happen to the housing market.
That being said, I don’t know how helpful that post was, because as you said Elizabeth, we don’t know how accurate those stories are. Granted, by definition any sort of bailout only helps those who made bad decisions (or who had bad decisions made for them, in the case of people who genuinely did not know they were getting in over their heads) and leaves those who did the right thing high and dry (and often footing the bill). So the theory is at least somewhat sound, even if the examples aren’t anywhere near accurate.
kristjan higdon 11.01.09 at 3:25 pm
Actually, I met Mike Morgan in 2005 and he was all pumped up about how much further real estate in Florida (especially high end lots in golf course communities in Palm Beach) would go. I presented him with a doctoral thesis on real estate trends which a friend of mine have given me, and Mike disregarded it. He was still in the euphoric state. I think he jumped on the bandwagon a bit late, but made quite of bit of money selling lots through 2005 i am sure, maybe even into 2006. Glad i did not bite on his pitch. Glad he has converted after the fact and still showing the ability to make money no matter the market…he’s able to go with the flow that’s for sure…foresight - hardly.