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View Diary: Housing Crisis, Potential Recession Loom Large in Battleground States (174 comments)

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  •  However bad you think it is, (4+ / 0-)
    Recommended by:
    irishwitch, wa ma, dconrad, JG in MD

    it's worse.

    Two reasons.

    First, banks are sitting on thousands of foreclosures right now, not forcing them through to the end and evicting residents.  The market is so bad they are better off having somebody live in the property and care for it, for free, than to have it sit empty for the time it would take to sell it.  It's that or sell it at a fire-sale rate, and that has two negative effects for the bank.  One, it turns the (fake) asset on the balance sheet into a real liability.  Second, it effects the value of OTHER homes in the neighborhood including the ones the same bank made loans on, meaning now THOSE loans would be under-collateralized.  Eventually, the banks are going to have to let those houses go or sell them in lieu of foreclosure for 60% of value.  The effect on the entire market will be catastrophic.

    Second, the ARMs are just starting to hit their stride.  We've just seen the beginning of the ARM foreclosures, and the number is going to skyrocket.  The result?  Even more foreclosures, even more inventory on the banks' books.

    Hang on.  It's going to be a bumpy ride.

    Punch up your blogs and publications with cartoons from independent lefty artists.

    by dhonig on Tue Nov 27, 2007 at 09:58:37 AM PST

    •  That's what's happened to a friend of mine (0+ / 0-)

      He's about to lose his house, but the bank let him stay in it for so long after he couldn't pay for just this very reason.  Now they're booting him out, but he's in a depressed housing market anyway.  There's no way the bank is going to get what he originally bought the house for.

      Procrastination: Hard work often pays off after time, but laziness always pays off now.

      by Linnaeus on Tue Nov 27, 2007 at 06:52:18 PM PST

      [ Parent ]

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