Posted on 02/23/2009 9:26:40 PM PST by JimPrevor
If President Obama is to sell his mortgage bailout plan to the public, an important argument will be his claim that preventing foreclosures actually helps all homeowners by preventing housing prices from dropping...
The claim that the program helps “shore up housing prices for everyone” has been frequently repeated by administration officials. Housing and Urban Development Secretary Donovan elaborated on the point...
The 9 percent figure seems to come from a study by three analysts at Fannie Mae in a report titled, Spillover Effects of Foreclosures on Neighborhood Property Values, which was abstracted this way:
We project that the spillover effect of a foreclosure on neighborhood property values depends on two factors: the discount of foreclosure sale and the weight placed on the foreclosed property as a comparable in the valuation. The former is related to housing cycle and the latter varies by time of foreclosure and its distance from the subject property. Empirical results based on a 2006 sample show that this effect is significant within a radius of 0.9 km (roughly 10 blocks) and within 5 years from its liquidation. The most severe impact is an 8.7% discount on neighborhood property values, which gradually drops to anywhere between −1.2 to −1.7% for foreclosures liquidated within the past 5 years. These spillover effects vary slightly when the sample selection bias is taken into account. Based on an alternative sample of purchase transactions in 2003, the estimated spillover effects in booming years are reduced by half, confirming on the important role played by housing cycles.
The only problem is that the study doesn’t prove what the Obama administration would like to say it does. Some of it is playing with data. For example:...
(Excerpt) Read more at weeklystandard.com ...
Even if it were true, it still wouldn’t make sense. If a home goes into foreclosure there is a good chance there is someone on the sidelines who has been patiently saving his/her money and would like a chance to buy the home at a lower price.
So, while the home is sold for a lower rate, thereby theoretically lowering your ‘comps’ for the next few years, you’ll still get a buyer who can afford the house + maintenance ect, rather than a person barely holding on by their fingernails who cannot afford maintenance because they can barely afford their mortgage payment and food.
Why don’t they just buy our houses from the mortgage companies and give them to us?
The oversupply has forced a 40% to 60% drop in homeprices nationwide.
The solution is simple ~ create a housing shortage.
Yes, that too. But to do that we have to let prices fall so that inventory will be bought up.
Exactly opposite what Obama and friends are trying to do.
let housing prices drop. thats good for people who want to buy a house.
Although they laughed at Henry Wallace when he had 12 million baby pigs slaughtered in an effort to raise pork prices, houses are different. They're big, bulky, can't run away or squeal, and don't get reproduced next year anyway.
A house, unlike a pig, if removed from the markets, doesn't come back!
His staff probably hashed them out over bong hits and lines of coke.
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