Friday, February 20, 2009

DataQuick, January, 2005 to Present

(Click on picture for larger view)

As one commentor over at CalculatedRisk said, "it is nice to see marin get bitchslapped".


Note: I forgot to mention that these data points are year-over-year percent (de)appreciation.

Update February 22, 2009: Due to the incredulity of one commentor regarding the previous chart, I made the following chart using the same DataQuick source:

(Click on picture for larger view)

For the Marin data series in the above chart, peak (June, 2007) to trough (January, 2009) is a -45.4% decline. For the Bay Area series, it's a -54.9% decline.

Sunday, February 01, 2009

Foreclosure Is Part of the Solution, Not the Problem

As the Obama Administration rushes to prove that it is just as clueless and fiscally irresponsible as the previous administration vis the "credit crisis", I found this Wall Street Journal article refreshing. Yes, foreclosure is a perfectly acceptable choice for people who find their precious house price is less than their mortgage -- that is precisely why the house is held as collateral. There is absolutely nothing wrong with "walking away", "jingle mail", or "mailing in the keys".

The cure for the current economic "illness" is not greater and greater amounts of what got the economy sick in the first place. It's not effectively 0% interest rates. It is not massively punishing savers. It's not more lax lending. It is not more artificial asset price inflation. It's not more housing tax incentives. It is not forcing tax payers to bail out failed businesses that deserve to be weeded out of the business "gene pool". It's not the Fed buying bad assets at ridiculously inflated prices or setting up bogus banks to hold the bad assets. And it most certainly is not preventing or delaying foreclosures.

How long will it be before the myopic, short-sighted, entrenched group-think in Washington is finally forced to admit or shamed into admitting this simple truth? How impoverished must our country become, how much crushing debt must we pile on to the younger generations before they understand this?

The cure for the current economic mess is what's been needed for the last decade or more: to allow the free-market to remove the excesses in the economy and to price assets based on what people earn for themselves. Foreclosure is the free-market in action doing exactly what it should be doing and what needs to be done.

Government and government-sponsored market interventions and manipulations are the exact opposite of what the markets need.
Preventing foreclosures has become a top priority of politicians, economists and regulators. In fact, allowing foreclosures to happen has merit as a free-market solution to the crisis.

If the intent is to help homeowners, then foreclosure is undoubtedly the best solution. Household balance sheets have been destroyed by taking on too much debt via the purchase of inflated assets. With so little savings, a household with negative equity almost implies negative net worth. Walking away from the mortgage immediately repairs the balance sheet.

Credit may be damaged, but homeowners can rebuild it. And by renting something they can afford, instead of the McMansion they cannot, homeowners are most likely to have some money left over each month that they can save toward a down payment on a house they can eventually afford.

If the intent is to help the credit markets, then foreclosure is undoubtedly the best solution. The securitization model has proven to be flawed...

...The intent of [loan] modification programs to date is to create a generation of mortgage slaves. Fortunately, mortgage slaves can free themselves via foreclosure, and the masses are choosing to do so.
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