Thursday, July 10, 2008

Save Our Neighbors' Homes

One area that has yet to "bottom" in any sense, and one that unfortunately does not appear to be improving anytime soon is the housing market.

This news today from Bloomberg is unsurprising, but nevertheless sad to hear:

Foreclosures Rose 53% in June, Bank Seizures Triple
U.S. foreclosure filings rose 53 percent in June from a year earlier and bank repossessions increased the most since RealtyTrac Inc. began collecting data in January 2005 as deteriorating property values forced more people to give up their homes


Unlike statistics about big companies taking billions of dollars in writedowns, these home foreclosure statistics are about real people losing the most important tangible things in their lives...their homes.

Some self-righteous "free-marketers" I have met like to get on their high horses and say stuff like: "They shoulda' known better before gettin' in that house they couldn't afford" or even worse "It serves 'em right for overextending themselves", but such a view is not only insensitive, it is also borderline unintelligent at a macro level.

Very simply: if the most sophisticated investors and financial analysts in the world, including the Federal Reserve, could not anticipate the possibility that the housing market might implode like it has, how could an average American with a moderate education do so? In other words, why was it so unreasonable for homeowners to buy into the same hype about the housing market that is now coming back to bite the creators and sellers of residential ABS, CDO's and other securities?

To me it seems almost irrational to have such a double standard, but perhaps more importantly it is insensitive and un-American.

We live in this country as fellow-citizens relying on one another for things from as simple as our city streets and services to things more complex and difficult like war and peace and finally for our financial system including the real estate mortgage market. That the mortgage finance market is important is beyond debate given how central the concept of 'home ownership' is to the American Dream. Its importance is reflected in the ongoing discussions in Washington about what should be done to help Fannie and Freddie as well as the government's intervention in preventing the failure of Bear Stearns.

While relying on the government to do something to help here while shaking our heads at our neighbors is surely an easy thing to do, it is, as I stated above, an unAmerican way of dealing with the situation. As citizens who help one another in a myriad of ways, a better way of dealing with the foreclosure crisis would be to literally go next door and talk to your neighbor about the challenges she faces. Those of us who happen to be graced with a more comfortable situation should try to think of ways to help those who are feeling the strains of the housing crunch just like we tie yellow ribbons around trees to support our troops abroad or stop on the side of the street to help someone with a flat tire.

I know such a statement is amorphous and perhaps idealistic, but as millions of our fellow citizens continue to lose their homes, it seems to be important. Maybe writing your government representatives in Washington is enough given the realistic strains on your time and energy.

But in the mean time, before you or someone you know makes an insensitive or irrational comment about how homeowners should have known better, consider this fact:

Warren Buffett's Berkshire Hathaway's stock is down 35% since November of last year.

If Buffett can't navigate the current markets, how can we expect more from homeowners?

I am hopeful that we will come together, perhaps through Congress, to do something to help here. In the mean time, good luck with your mortgage payment and your portfolio.

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