8 Responses to “Harvard economist: Stop falling home prices” »»

1. confused
   Comment by confused | 10/13/11 at 8:59 am

   Seriously? Let it burn, Marty….let it burn. Only after banks and individuals absorb their losses can we get back to growth. And those of us who saw the bubble while it was happening should not be forced to assist those who bought at those morbidly high prices.

2. Rob
   Comment by Rob | 10/13/11 at 9:28 am

   Principle forgiveness is a bad idea. History has shown that no government can ever stop real estate value from falling. Real estate is the largest asset class and no government has enough capital to stop the real estate market from finding its natural equalibrium, especially given the state of the government’s high debt and huge budget deficit. Giving tax money to those who made a bad investment creates a moral hazard.

3. Rob
   Comment by Rob | 10/13/11 at 9:37 am

   Based on his proposal, government should reduce mortgage principal when it exceeds 110% of home value. Even if I could pay, I would ask for the reduction. It is too easy to exit one’s problem. I think the better idea is to offer lower refinancing rate or extending their payment period to 50 years from 30 years which will also have the effect of lowering their monthly payment to an affordable amount. It would be a win-win, homeowners gets to keep their homes and government does do have to write a check. In today’s low rate, government pays almost zero interest anyways. Government would still make money by borrows at zero and lends out at 3%.

4. Mike
   Comment by Mike | 10/13/11 at 10:23 am

   Hmm, did he advocate (or does he advocate) we take money from those who benefited from the housing run-up from 1998 through today? Oh, he’s just suggesting we give money to those who lost, not take money from those who won. So the only losers in the game would be those that weren’t greedy or didn’t take excessive risks. Sure, no problem, that won’t reinforce undesirable behavior.

5. Funny
   Comment by Funny | 10/13/11 at 11:07 am

   Confused

   Problem is, the erodeing of wealth and the economy hurts us all. The economy isn’t a zero sum game.

   Don’t think for a second that for a second letting it hit bottom helps you. Far from it.

   These also a peculiar thing about economics. Downturns are self sufficient, and tend to cascade until they hit bottom.

   Humans are a weird lot, and we panic, and it makes things worse.

6. Mike
   Comment by Mike | 10/14/11 at 3:04 am

   Funny, I think where Confused is going is that a large portion of our country has taken an entitlement attitude, that success is not a result of hard work but rather just showing up. Fed monetary policy and the resulting asset bubble fed this attitude. For a long time, the key to investment success, trumpeted by the investment industry, was just get your money into the market anywhere, at any price, and your wealth would increase. The same was true for real estate – and the real estate industry fed that idea just like the investment industry.

   Critical analysis? Forget it. Prudent investing? Not needed. Cash flow analysis of property? Who cares. Buying within your means? Old fashioned. Everyone knows real estate “only goes up.”

   I was posting to real estate boards (including this one) from 2004 and was attacked and ridiculed for pointing out basic analysis showed then-current price levels were not sustainable. Just ask Bradley, he was there.

   Similar to (I think) Confused, I took the time and saw the writing on the wall, so prepared myself. His comment, “let it burn” is more a statement that people need to be exposed to the consequences of their poor decisions, or else they will continue the same destructive habits. Like a 2yr old and a stove, apparently there’s no way for them to learn other than by experiencing the pain.

   In the mean time, those of us who prepared, sacrificed, and foreswore the excesses of our peers are gratified to see our effort and sacrifice being rewarded.

   Does it suck for those experiencing the pain? Absolutely, and I feel for them. But we as a society have to break this self-destructive entitlement mentality or we’re going to end up like Greece. And debt forgiveness flies right in the face of that ideal.

7. Funny
   Comment by Funny | 10/14/11 at 7:54 am

   I agree somewhat, but do the enablers have no responsibility to the problem, and the end result?

   the facts are that legislation and regulations were in place to prevent this sort of thing. They were repealed, at the request of the lenders and financiers. They saw opportunity to make a quick buck by changing the rules and making investment much more risky.

   People played by their rules, and everybody got caught with their pants down. There’s people out there with fixed rate, affordable mortgages who lost their jobs and now are in dire straits too.

   then there’s the people that did invest responsibly, take out a responsible mortgage; then found themselves out of work due to the collapse and broke once their savings ran out. Even the prepared got whacked. Consider yourself lucky you didn’t.

   As I’ve said, were human. Retribution and I told you so arguments are like breathing to us. It served us well in the past. But in a social unit as big as a nation, and in terms of economic productivity; it’s a self inflicted wound to think like that.

   Your conservative savings and investments would be more prosperous for you, if we can find a way to get back to reasonable employment and to get other peoples finances in line. Letting housing simply collapse isn’t going to do anything positive for the equity in you house, for example. Short or Long run.

8. confused
   Comment by confused | 10/15/11 at 1:40 am

   Pretty much what I meant Mike.

   Funny, if prices drop and everybody takes their hit, my saving will buy me more if not all of my house. Every dollar the government raises house prices is another dollar of public debt and another dollar out of my pocket to pay for place.

   As someone said, if you want to take the money from the people who prospered from the bubble be my guest.

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