Bay Area Sweet Digs

July 20, 2008

Foreclosure Mess: What *Can* Congress Do? Anything?

1776868301 eff62d6fa3 m Foreclosure Mess: What *Can* Congress Do? Anything?

Once again, Redfin readers and commenters are validated: A housing expert commented last week that any rescue policy to ward off foreclosures could artificially prop up home prices and keep the affordability crisis in many major cities going. Just what you’ve been saying all along, david, red et al.!

“In spite of the downturn in the housing market … affordability continues to be the No. 1 housing challenge,” Rachel Drew, research analyst at Harvard’s Joint Center for Housing Studies, told Associated Press Wednesday.

As we know, affordability continues to be a problem in the Bay Area. As reader MDAccount, a savvy wannabe buyer who saved $25K (Awesome!) and did her homework thoroughly, will tell you, she can’t afford a house. “Until people like me can buy a house, the market’s going nowhere,” she commented July 8.

So if Congress rescues the folks in danger of losing their homes, MDAccount will still be priced out. As the AP writer noted, “Congress is … facing a real estate Hydra … while trying to protect the economy and honest homeowners who were suckered into bad loans, Congress may cut off one of the serpent’s heads, only to see two grow back.”

So, what *can* Congress do to help straighten out the mess? (Photo of Hydra lamppost: psd)

Posted by Janis Mara on July 20, 2008 11:17 AM | del.icio.us | Digg

  • I'm very interested that you say we're doing a good job of getting to the bottom in many areas. Though I think prices will stay low for at least five more years, it would be useful to know when and where the bottom is, very much so. Does your comment indicate that you think we may be approaching the bottom, dg?
  • dg
    The sooner we get to the bottom the better, and we're actually doing a pretty good job of that in many areas. But Congress is gonna make it worse and potentially do extreme harm to our economy if they meddle in this further.
  • All congress is doing is vote pandering, and I don't think their proposal is that popular on this issue. I understand that it is an election year and they feel like they should look like they're doing something other than wasting our tax money, but all they're doing is wasting our tax money. It's pretty pathetic actually.
  • Well, David, I tend to agree with you. I don't see that anything Congress has done has been much help, at least not so far. And, Colin, I agree with you that prices need to return to realistic levels. But what about anon's suggestion? Seems like a humane solution that I don't think would prevent prices from continuing to fall. Basically I agree with a Redfin commentator (one or both of the Davids, I believe, with others in agreement) who said nothing is going to stop house prices from falling.
  • Colin
    Any attempt by Congress to artificially prop up prices will merely prolong the agony and be totally counterproductive in the long run. The only way out of this mess is for prices to revert to historic norms versus wages/rents. At that point, people will be able to afford to buy again and the market will recover.
  • David
    how about congress just stays out of the way. They're only making it worse.
  • Wow, I think that's brilliant! Rent-to-own sounds good, and that way the defaulting owners don't have to go through the anguish (and expense) of moving, while continuing to make good on their obligation.
  • anon
    I'd love to see Congress facilitate some type of program that would prevent blight from taking root in communities. The dilemma there is that homeowners can't afford their mortgages, but still need places to live; banks really just want to get paid, and would prefer not to have thousands of foreclosed homes in their portfolio to worry about; cities want to keep neighborhoods safe and healthy. Having a city full of vacant homes seems like a losing proposition for everyone involved. Not that we need more bureaucracy, but maybe programs could be established locally to maintain these properties and collect rent from residents, which in turn could be paid to the financial institutions to mitigate losses from them? I could even imagine some sort of a regulated rent-to-own loan that would allow underwater homeowners to slowly buy back equity in their homes. In a way, this bails out both homeowners (they keep a place to live) and banks (their property values stabilize and they have some cash flow) without letting either group off the hook for the risks they took. And most importantly, it helps communities maintain their neighborhoods. Just a thought.
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