Home ownership hurts the economy. That’s the startling conclusion of a new report that demonstrates a strong correlation between high rates of home ownership and high rates of unemployment. While correlation may not be causation, the correlation is too strong to be ignored. Whether or not home ownership itself is the cause of unemployment is debatable, but whether it does or not, the report will be useful to politicians who need political cover to scale back the home mortgage interest deduction. I’ve covered the merits of the home mortgage interest deduction in many posts. The bottom line is that the [Read More...]

I first began writing about strategic default back in 2008 in the post Should you walk away from home debt?. Many people were facing a cost of ownership greatly exceeding the cost of a comparable rental, and with declining prices, they were sinking underwater and had no realistic hope of future equity. On a purely financial basis, it was wise to strategically default. The shortest path to equity was to walk away from the huge debt, save money, and wait until the credit scores improved enough to repurchase again at lower prices. I gave that advice frequently from 2008 through [Read More...]

The government needs to get out of housing finance. The losses at the GSEs apporach $150 billion, and the FHA needs its own bailout. These are losses all of us who didn’t participate in the madness get to pay. And as long as the government continues to back 90% or more of loans for residential real estate, the very real possibility of another even larger bailout looms. Given these realities, government policy makers have been and should be focused on reducing the government’s exposure and minimizing taxpayer bailout dollars. However, in a stunningly stupid proposal, some housing advocates idiots are [Read More...]

Many times over the last six years, I made the argument that lower debt service burdens are the key to a sustained economic recovery. Bankers and the federal reserve want to see an expansion of credit for completely self-serving reasons. They point to times in the past when an expansion of credit fueled economic growth as evidence of its necessity for a vibrant economy. Perhaps it’s partially true. An expansion of asset-backed debt is good for the economy, but most credit expansions involve the populace taking on huge amounts of signatory debt, and expansions of signatory debt invariably lead to [Read More...]

The housing bubble has many lessons to teach us. I have written on the subject for five years now in hopes that people can learn from the successes and failures of those impacted by the housing bubble. Someone recently posted a link in the thoughtful remarks to a website devoted to those who are underwater. It’s a chance for people to share their stories. As you might imagine, this is a giant pity party and a support group for housing bubble losers. Below is a selection of stories as well as some others I have collected over the years. Personal [Read More...]