Posted on 12/28/2007 12:09:11 PM PST by shrinkermd
The bank was not repaid money that was paid to the original seller. The bank’s former money is now the seller’s money. ALL of the original money is accounted for. It has just changed hands.
The bank bet that the asset’s value would cover their loss in case they had to foreclose and resell it. An assets value is not controlled by the bank, but is determined by what someone is willing to pay at the time of sale. If the bank decides to sell at a time that the value of the asset is less than what they “bought” it for, then this is a new transaction and it too is zero sum.
In the stock market, if a guy buys a stock for $50 and sells it for $30 does $20 disappear from the money supply? No, the original seller to the $50 buyer got the $20 difference.
Then I have the other $50k or gave it to someone else. You lose $50k, but someone else gets it. Zero sum game. My point exactly.
All I can say is, I hope my property taxes fall too.
“For which his employers fired him. “
They fired him for being right?
“assumption not supported by any data outside the wishful thinking of this Democrat activist “
The data he is using to back this up is his thesis that housing prices can’t forever be sustained at 60% of median incomes.
Housing prices have doubled since 2002 and incomes have only risen about 15%. That’s what a bubble is — pure speculation, not market value.
His thesis makes sense, given that the pendulum will probably swing too far to the downside, as corrections usually do. So a fair market valuation would probably be somewhere in the 2002 price range and then when the market recovers it will start going up again.
“Then I have the other $50k or gave it to someone else. You lose $50k, but someone else gets it. Zero sum game. My point exactly.”
I gave you $100k for a house......you could only sell it for $50k, which you gave to me.
The value of the house went down - so that money is gone.
You may have an obligation to pay me back - but this is necessarily being negotiated away in many cases.
So, in this case, you HAD my $100k, spent it on a house, the value of the house went down, when you sold the house you only got $50k, and then you negotiated the other $50k away.......
I think we’re at the point where we have to agree to disagree.
As I understand it, the real estate industry provides funding to UCLA for the Anderson Forecast. No industry funding, no Anderson Forecast. My feeling is that while the industry likes having the Anderson Forecast issue blue sky predictions while the industry is on an up trend, it would prefer not to have the public react to predictions of multi-year declines while the industry is on a down trend. After all, markets are based in part on sentiment, and there's a lot of raw land and in-process inventory (i.e. finished and unfinished homes) riding on that sentiment.
We are having a problem with definitions. My point is that the crises mongers act as if everybody loses in a falling market, but this is not true. The guy who sold the house, sold it at inflated prices and made a ton. The bank took it in the shorts but the money stayed in the money supply.
Yes the bank LOST money, but the economy didn’t. The money remains in the economy, someone else just now has the bank’s money.
You are confusing money that is lost to an entity with money that disapears from the economy.
WE’RE ALL GONNA DIE!!!!!!!!!
Banks charge extra high interest rates for people that buy a house without selling the old house. The reason is they ASSUME you are going to rent out one of them, so they charge you commercial rates on the new one.
It might be different if the old house is paid off. But I doubt it.
A house tht sits vacant will soon fall apart. Bad things happen to homes that don’t have anyone living in them. It doesn’t seem to make any sense, but that’s the way it is. I think it’s probably because when someone lives in it, that person sees little things that need attention and takes care of them. WHen there’s no one there, the little things pile up and gradually turn into a whole lot of big things. I bought a house that sat empty for over 5 years...got it real cheap. There was tons of stuff to fix. I’ve been in it 10 years now and I still feel like I’m playing catchup.
“”It’s the bank’s money that disappears. They expect to be repaid the $500k, but instead are repaid only $350k. The 150k is gone.””
They also lose the interest payment on that $150K
“Yes the bank LOST money, but the economy didn’t. The money remains in the economy, someone else just now has the bank’s money.
You are confusing money that is lost to an entity with money that disapears from the economy.”
I respectfully point out that the statement: “Yes the bank LOST money, but the economy didn’t.” makes no sense and is in and of itself a contradiction.
This money that the bank lost is real money. It is money that will not be available for other productive uses, it is money that will not be available for other borrowers.
When a bank can’t or won’t loan money, the economy suffers greatly.
“You are confusing money that is lost to an entity with money that disapears from the economy.”
Again, I struggle with how to respectfully assert that this statement is completely incorrect. I cannot understand how you could believe this to be true.
I appreciate the discussion, I really do, but as poor a student of economics as I am, I really think you are worse, and I mean that in a nice way!
God bless you and your family. I take it that you are an engineer. I love engineers. You guys make everything work. I assure you that I am right on this, but that is what ignorant people always say on Free Republic.
Engineering is based on physics. Matter/energy is neither created or destroyed. Neither is money on a micro level. The fed can print more or it can burn more to adjust the money supply, but our everyday real estate transactions don’t count. Money doesn’t disappear.
Happy New Year!
exactly. Unless you intend to move, the market price of your house is irrelevant. The only thing that matters is if you can afford the note.
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