You’re correct about the relative price of homeownership and renting, incidentally, that’s the benchmark I frequently use. I think it’s important to bear in mind, however, that in the event of a market correction, there will be a lot more people moving into the rental market as they finally get out from under homes they can’t afford, and the increased demand will lead to increased costs. How much those costs will increase will vary a lot regionally (the three rules of real estate are, after all, location, location, location!) but I think it’s fair to say that in any given market the current rental costs don’t completely and accurately reflect the full costs of transitioning from ownership to rental.

It is not readily apparent, but renters also get a deduction. The landlords get it, but if they did not, they would have to raise rents to make up the difference.

And if you look at the rental prices these days, they are way less than mortgage interest is on similar properties. (That was, of course, the real clue that we were, and still are, in a bubble — investors cannot buy a house, rent it out, and make a profit. That dries up the pool of buyers.)

Which brings me to this from Mouse:

I am in full agreement with the dogooder — let the prices fall where they may. People will face foreclosure. So what? They will be able to rent a similar house for far less.

I’d agree that foreclosure != homelessness, or that it shouldn’t, and I’d say that this is an element that the government should look at generating solutions that make the process of transitioning to new housing smoother. One idea: our Federal income tax laws are biased in favor of home ownership by making mortgage payments tax-deductible; not having that deduction available anymore opens up taxpayers who are in a transitional period to what can be a significantly higher income-tax liability. I would propose instead helping taxpayers with bad mortgages get their feet back under them by exploring tax deductions for homeowners who either go through foreclosure or sell their homes at a loss without purchasing a new home within six months–perhaps making rent tax-deductible for qualified tax payers, perhaps by applying a certain percentage of the last FY’s tax payment as a deduction. We can either treat it as a complete write-off, or treat it as a rebate with the expectation that it will be paid back at a future date. My goal would be to prevent affected homeowners from hemorhaging money in non-deductible rent payments and income tax while they try and get their finances back in order.

That’s only one idea, and it may not be perfect as I’m just trying to think off the top of my head. But there ARE things we can do to help a market correction along so we can get America moving forward again, and we won’t start addressing those things until we abandon the Administration’s tunnel-vision focus on the Government buyouts of mortgage-backed securities.

Mouse…I rarely agree with you but I’m with you on this point!

No real “wealth” has been lost. No houses have disappeared, no land has disappeared (except, perhaps, in Galveston). Stock-holders still own the same percentages of the companies as before.

I am in full agreement with the dogooder — let the prices fall where they may. People will face foreclosure. So what? They will be able to rent a similar house for far less.

The real reason politicians don’t want to tell people that their $350k house is worth $200k is that the politicians want the property tax revenue.

In July, Gateway said its 800,000 preferred shares of Fannie and 800,000 preferred shares of Freddie were valued at $38.5 million. Those holdings are now worth $3.74 million.

The American economy can crank out $200 Billion over night, so we should be asking why the Bushies are so damned desperate to get this bill crammed through BEFORE the election. Do they think Americans are stupid, or is Bush trying to sabotage the McPain ticket’s cahnces at the polls. Either way, Americans would have to be NUTS to put the Bush team (aka McCain) back in the White House for another term.

This is yet another NEOCON power grab. Remember the lies about Iraq and about the Patriot Act? Well, here we go again. Let’s not be fooled anymore by these crooks.

Table this issue until AFTER the election and we will suddenly see that it was a red herring, all along.

Now, let’s talk about what Obama’s first 100 days should include…

My suggestion is to have the political prisoners of the Bush Administration to be freed.

But the crazies are also reliable voters. Which is why I’d say there’s about a 33% chance we’re about to be skinned.

We’re all in a lot of trouble.

Yep. This is not going to be pretty.

For two years they sat on their hands. Congress is not bailing out Wall Street, but merely covering up their own participation in this whole affair under the guise of deflecting blame away from themselves.

I am conflicted about this plan, but what I am not conflcited about is the fact that there needs to be Congressional hearings and ethics investigations regarding all these Congressman to evalaute what they knew and when they knew it as well as those officials from Fannie and Freddie.

Maybe if McCain wins in NOvember we could see such hearings if he held true to his “make them famous” approach, but should Obama win you can bet with a Congressional majority it will get buried and the press will again let the story die.

We’re all in a lot of trouble.

But unless we accept the market correction and acknowledge that fact, and unless we actively help people get out of the homes they can’t afford and transition into homes that they can afford, prices won’t fall to the point where buying property will make sense again, the market won’t fully recover, and without a housing market recovery, there won’t be anyone to sell mortgages to, which means banks won’t be able to generate new business that will bring in positive revenue.

There is a lot to be tremendously concerned about here. Some short-term support will undoubtedly be necessary, but unless the plan operates in a way that addresses the underlying market fundamentals (which, despite some peoples’ opinion, are not actually sound) we may end up spending a $700B buying ourselves into socialism for the long haul by purchasing a financial system founded on a lie about housing prices.

I think I could come up with some securities to sell

adiosvirgilgoode
the home blog (hov)

Hey Shawn, get the excitement while you can!

Didn’t hear from MB.

Haven’t been reading much on blogs – been working trying to catch up since the convention. I’ll check out your blog

Sticking around? Did you hear back from mb?

I am writing more Virgil Goode articles. Have you read any of the stuff I have been doing since the convention? (I know you commented on the video thing…)

With 40 days to a election that replaces him, I’d “just say no” to his $700 billion Wall Street bailout.

This is yet another “we must attack Iraq NOW” style speech and if Paulson is in charge of the $$$ every member of Congress should vote against the proposal

I am watching Rachel Maddow, who is hosting the coverage on MSNBC.

Tone and partisan struggles? He wants to now show everyone what a great country this is?

If it isn’t good enough for everyday, why bring it up now?

if I was going to ignore the law, I would be rich too.

Tough vote, just in time for the elections. You know, there is a growing body of evidence that this is no emergency at all. Plans made well in advance, a number out of thin air.

No failed executive multimillion bonuses? I will believe that when I see it.

I’ll take later.

~

Is this whole speech going to be about fear mongering?

Still haven’t heard why I should pay for this.