Skip Nav | Home | Mobile | Editorial Guidelines | Mission Statement | About Us | Contact | Help | Security | Support Us

World

US Real Estate: From Goldmine To Money Pit Mortgage Backed Securities and Derivatives are Flawed and Failing

Kenn Spacefield | 06.10.2008 06:02 | Analysis | Culture | Globalisation | World

The mortgage debt problem is simple really, it has been a total mis-appropriation of equity. The equity lost on flat screen TV's, boats, new cars, vacations, and other living expenses; is equity lost forever. This loss of equity spent on consumer goods and expenses is a pyramid scheme of hyper-capitalism that is flawed and failing. Equity not spent on the property the equity comes from, is equity lost forever, a mis-appropriation of funds, and inappropriate; it is a failing economic model.

Mortgage debt is public, and traded globally, but home appreciation on debt is private profit. This economic model does not work. The idea that mortgage debt is a shared risk of the global economy, interest on the debt is deductible to homeowners, and the appreciation on the debt is private profit; is an economic model that does not work.

The US government promotes and encourages home ownership with tax incentives. The more you owe, the more interest you pay and write off on your taxes, and the more money you make on the appreciation on the debt; if the house goes up, and always goes up in value. This is a failing economic model; because of mortgage interest deductions, shared debt risk, and private profit.

Keeping home mortgage interest tax deductible for the homeowner while they collect equity appreciation on their debt, is a self inflating pyramid scheme propped up by the federal government. The homeowner is rewarded for taking on a higher interest mortgage payment, and this encourages and rewards debt. (People get the biggest house they can afford or maybe two, and use it as a "write off".) This is just plain wrong and this house of cards is flawed and failing. (Home equity loans that are not spent on home repair, remodel, or improvement, is equity lost forever; and its deductible! If everyone's idea is to "up size" now and "downsize" later, who is going to be "up sizing later"? - The retiring baby boomers?.)

The federal governments debt, mortgage debt, and the loss of value in real estate is going to continue to climb. Housing prices will fall until people can afford to buy homes on what they actually earn. The United States has destroyed its reputation and economic trust globally and trashed the constitution here at home. This is a meltdown globally from the US being seen as a respected "superpower" to now being seen; as a bully you cannot trust. All the federal debt and real estate value loss is going to cost the US government a lot, but I feel the damage done to the United States reputation globally and at home; will cost it even more.

I have felt for twenty years real estate has been over-valued, and over priced. Real estate appreciation has been ridiculous and unsustainable. I am still not ready to buy, as the prices are still not low enough, and have 20 to 30 percent - and even 40 percent to drop, before people, on what they make can afford them. This is real estate coming back down to earth, and I am not panicked, or in crisis.

Americans are making less, and housing just kept rising and costing more, more, and more. Hows that working for you?

I have heard there are 70 million (plus) disenfranchised (under-paid) Americans who do not file income tax. I feel more people are feeling disenfranchised with the federal government and I feel this number will rise. This disenfranchisement causes people to shy away from passive participation with the federal government, to active non-participation in the economic affairs of the federal government.

Buying a house turns your life into a business, and the federal government then has total access and knowledge of your finances. The financial markets use government papers to qualify you for a loan.

The federal government has ruined itself in my eyes. I hope for its "fiscal" failure; due to deficit spending. I hope the federal government becomes bankrupt and irrelevant.

It is all about the real estate, which is all about the money, and the federal governments goldmine of income tax collection, turning out to be a dilapidated money pit.

The debt from bad war, torture, illegal imprisonment, domestic spying and "other" bad debts; that the US federal government has yet to realize, tabulate, or equitize. If you have lost your job and your home; the US has lost a taxpayer.

From Gold Mine to Money Pit - the 2008 fall of US Residential Real Estate. A Trillion Dollar band-aid Bail Out that - (like most homeowners did with there equity money and their last home repair; put a band aid on it, and spent the money somewhere else) does not fix the problem.

Are you part of the problem?

The US governments encouragement towards home ownership and the tax benefits granted are well known. With real estate appreciation and the tax credit, it is like living in a little gold mine. You can chisel out equity as you go along your merry way and chuckle at all those people who did not buy real estate sooner.

Where I live houses have doubled in six-seven years and land has doubled in five years. Now land and houses are not selling even at reduced prices, because they have not come down enough to be affordable to the people who live here. (A lot of Californians moved to Washington state and that drove up prices - boy has that slowed down!)

This "bail out" is an absolute joke. The idea the US government can control or diminish house mortgage failure or control or influence the price of housing; is absurd.

Many more people will be walking away from their home mortgages and a lot more mortgage derivatives will fail. This is not the stock market talking, it is home prices on main street.
It is the chiseling away at equity by homeowners who now find their little gold mine is a money pit. It is worth less than their debt they have piled onto their home and the mortgage, and it only makes sense to walk away and buy the house next door for thousands less.

Will the bail out work?

No one knows if the US governments bail out of bad mortgage debt will work.

I feel it is a trillion dollar band aid for a much larger problem; and whether or not it works - will mean what you meant by; "Will the bailout work?"

I feel it is only going to slow the economic problem down in hopes US residential real estate will start to appreciate and the "crisis" is solved.

So the question really is; When will US residential real estate start to appreciate?
No one knows, but here is my opinion;

The US residential real estate market will not be appreciating much over the next ten years.

US real estate is over-valued and still has not come down enough to sell excess suburban homes.

A lot of US residential real estate built over the last 30 years was built out of materials with a 30 year lifespan.

Tens of millions of US homeowners are aging and selling homes in the suburbs and this will accelerate.

There is an exodus from the suburbs to population centers as traffic, cost, age, and pollution, become more of a concern.

The US is experiencing high unemployment, and an economic "slowdown" as "consumers" have less to spend.

The number of residential mortgages "underwater" will continue to rise for at least a year.

It is no longer a new homeowner "sub-prime" lending problem - as many "prime" older homeowners are now underwater due to the constant chiseling away at their equity through second mortgages, and equity lines of credit.

Sixty to eighty percent of US residents are two weeks from the streets, if their lines of credit-money and/or job is lost.

Kenn Spacefield

Comments

Display the following comment

  1. Remedial suggestion — Ilyan

Publish

Publish your news

Do you need help with publishing?

/regional publish include --> /regional search include -->

World Topics

Afghanistan
Analysis
Animal Liberation
Anti-Nuclear
Anti-militarism
Anti-racism
Bio-technology
Climate Chaos
Culture
Ecology
Education
Energy Crisis
Fracking
Free Spaces
Gender
Globalisation
Health
History
Indymedia
Iraq
Migration
Ocean Defence
Other Press
Palestine
Policing
Public sector cuts
Repression
Social Struggles
Technology
Terror War
Workers' Movements
Zapatista

Kollektives

Birmingham
Cambridge
Liverpool
London
Oxford
Sheffield
South Coast
Wales
World

Other UK IMCs
Bristol/South West
London
Northern Indymedia
Scotland

Server Appeal Radio Page Video Page Indymedia Cinema Offline Newsheet

secure Encrypted Page

You are viewing this page using an encrypted connection. If you bookmark this page or send its address in an email you might want to use the un-encrypted address of this page.

If you recieved a warning about an untrusted root certificate please install the CAcert root certificate, for more information see the security page.

IMCs


www.indymedia.org

Projects
print
radio
satellite tv
video

Africa

Europe
antwerpen
armenia
athens
austria
barcelona
belarus
belgium
belgrade
brussels
bulgaria
calabria
croatia
cyprus
emilia-romagna
estrecho / madiaq
galiza
germany
grenoble
hungary
ireland
istanbul
italy
la plana
liege
liguria
lille
linksunten
lombardia
madrid
malta
marseille
nantes
napoli
netherlands
northern england
nottingham imc
paris/île-de-france
patras
piemonte
poland
portugal
roma
romania
russia
sardegna
scotland
sverige
switzerland
torun
toscana
ukraine
united kingdom
valencia

Latin America
argentina
bolivia
chiapas
chile
chile sur
cmi brasil
cmi sucre
colombia
ecuador
mexico
peru
puerto rico
qollasuyu
rosario
santiago
tijuana
uruguay
valparaiso
venezuela

Oceania
aotearoa
brisbane
burma
darwin
jakarta
manila
melbourne
perth
qc
sydney

South Asia
india


United States
arizona
arkansas
asheville
atlanta
Austin
binghamton
boston
buffalo
chicago
cleveland
colorado
columbus
dc
hawaii
houston
hudson mohawk
kansas city
la
madison
maine
miami
michigan
milwaukee
minneapolis/st. paul
new hampshire
new jersey
new mexico
new orleans
north carolina
north texas
nyc
oklahoma
philadelphia
pittsburgh
portland
richmond
rochester
rogue valley
saint louis
san diego
san francisco
san francisco bay area
santa barbara
santa cruz, ca
sarasota
seattle
tampa bay
united states
urbana-champaign
vermont
western mass
worcester

West Asia
Armenia
Beirut
Israel
Palestine

Topics
biotech

Process
fbi/legal updates
mailing lists
process & imc docs
tech