Re: Underwater mortgages and the economy

On Mon, Nov 1, 2010 at 8:40 AM, Dan Minette <[email protected]> wrote:

>
> >Interesting perspective in the LA Times.
>
>
> >But a bigger problem may turn out to be the millions of Americans who are
> still faithfully paying their mortgages, but on houses
> >worth far less than before the bubble burst. It's not that these
> homeowners
> will stop making their payments. It's just the opposite
> >— that they will keep doing it.
>
> I thought about this, and I think the article misses the real
> problem....that the rise in home values fueled the '00-'08 economy.  There
> is ample reason to argue that folks didn't save, because they saw their net
> worth going up every year, as their home appreciated.  Folks who sold their
> homes for bubble prices spent the money; it's gone.  Some people took out
> second mortgages on their houses and spent the money...with their house
> value rising, they spent the value.
>

No question, either extreme is bad.  But how to manage the volatility is the
billion - or is that trillion? - dollar question.

Nick