For Lease, For Sale, Foreclosed
I have traveled first by bus then by car back and forth across the United States for at least 30 years. If you have been conscious while performing such an activity one of things you might notice besides a full moon over the Mississippi or egrets flying over some swamp in southern Louisiana, is the economic cycles of the country.
The first time I associated an economic down turn with what I was seeing on the road is when I began noticing abandoned shopping malls in the middle of no place. It would seem to me as I sped across the country that I would pass a necklace of unfinished shopping malls. Or that I would talk to retailers who spoke of moving out of an expensive or non productive mall and moving on over to a mall that at least had some people wandering around in it.
Now more than shopping malls have been abandoned by their owners. Many business districts all over America are choked with buildings that are "Available", or "For Lease", or "For Sale".
In some residential neighborhoods, it would seem that all your neighbors know something you don't otherwise, why are they all trying to sale and leave you there by yourself?
Have you noticed the gas stations that are closing? What's up with that? Are you using that much less gas? Are that many of us out of work? Or are we just traveling less? Fewer road trips for the sheer hell of driving.
And wasn't for sale sign on that same house a year ago? They haven't managed to cave enough on the price to get someone to buy it by now?
Some folks who moved for a job or promotion are supporting two houses and not much else. The house in their old community is not selling...
Vacations in hell.
Bus tour of the damned.
Some states and cities have been hard hit foreclosure. There is a financial concept which could be referred to as "swimming naked." One of the easiest ways to explain is to use two words: "Bernie Madoff." As in Bernie made off with your cash. As long as the economy was riding high, Bernie Madoff could keep hidden from the world that he was robbing Peter to pay Paul. A good economy covered the fact that Bernie was actually "swimming naked."
Well Bernie was not the only emperor with no clothes on. Liberals and progressives, with the best of intentions--mind you, there intentions are always good--convinced banks to loan money to people who could never pay the loans back to buy houses. And then conservatives, always around when there was money to made, packaged these worthless loans and sold them to world. Almost everyone on planet earth was bankrupted by the one-two punch. One of the morals to this particular story is that when liberals and conservatives point to each other and say: It's his fault! They are both right...
But wait,there's more. One of things that might have kept thousands of home owners from having it revealed they were "swimming naked" was the housing bubble. It seemed that the value of houses would rise forever.
No it didn't. The value of the houses wasn't rising at all. Only the prices where rising. As soon as enough people realized the the value was out of whack with the prices the bottom fell out and many homeowners found themselves "under water" but not in a good way. They owed more on the houses than they could make by selling. Worse than that, they had of course borrowed money to buy the houses. This is kind of like those speculators on Wall Street on the options market who borrow money and buy an investment that loses. They have to pay back their loses and loans. No one has that kind of money. If they did, why would they need the loan. And so homeowners do what wall street investors cannot, the walked away from houses they could never afford in the first place and the federal government picked up the pieces.
A further wrinkle in this is that some people took out adjustable rate mortgages and then found out why they called them ARMs. The bank wanted an arm and a leg when the rate adjusted upward and suddenly the home owner could not afford the payments.
The Government is here to help
The governments of Iceland and Greece have shown us the future and it doesn't work. If we were really, really smart, we would all urge the governments to stop acting like a Marxist nationalizers of businesses and debt and instead sell all that bad debt and get the heck out of the market place.
Since our politicians want to get re-elected and since some of our politicians are closet socialists, that won't happen.
There is a plan afoot to allow folks underwater in their home loans to refinance at a lower rate even though technically they qualify to do so. Allowing nature to take it's course and letting bad behavior reap it's own reward would be a better choice in the long run but as a nation we are no longer good at taking short term pain for long term gain.