Wednesday, February 18, 2009

Info About & Reactions to Homeowner Affordability and Stability Plan (Updated)

Here are some links to pertinent answers about the program, and opinions about it:
Update at bottom.

Who qualifies, What to Do, etc.:

Answers to FAQ here.
NYT: Meltdown 101: FAQ here.
NYT: The plan in graphic form here.

What's Wrong With the Plan:

Barry Ritholtz over at The Big Picture:

The Obama plan is a little better than I expected, but it still dances around an issue that is sacrilegious to many economists: Home prices are still way too high for any stabilization and/or housing bottom to form.

...[T]hey are still too high by most valuation metrics. Propping up home prices and the desperate attempt to forestall foreclosures only serve to delay this inevitable process. To effect a stabilization, housing bottom and recovery, overpriced assets need to fall even further.

Go to any suburban neighborhood — the one you or a friend/family member lives in. Look at the starter homes that a newlywed couple just starting out might consider. Small capes, 2/3 bedroom houses or cottages. Assume that this couple are late 20s/early 30s, and are making decent — but not 6 figure — salaries.

Can they afford that starter house? If not, then the entire real estate chain is frozen.

BB: While this remains an issue in many areas, it's particularly true in the Charlottesville MSA.
Read the rest of Ritholtz here.

Mike Shedlock, over at Mish's Global Economic Trend Analysis:

I do not buy this "acted responsibly" nonsense. If a person took out a loan greater than 38% of their income they most assuredly did not act responsibly.

Furthermore, the Obama plan increases the size of Fannie and Freddie, rewards servicers for no reason, giving them an incentive actually to waste taxpayer money, and rewards those who acted irresponsibly. Is this a good thing?

Read more from Mish here.

Calculated Risk parses the plan, but reserves disdain for homedebtors who used excessive leverage. He carefully comments on most parts of the plan here.


But analysts and administration officials alike cautioned that it would not come close to halting the tidal wave of foreclosures. Nor would it provide much help to millions of homeowners who are “under water,” or holding mortgages that are bigger that the market value of their houses.

More Opinions

Economist's View has a summary of other reactions, as well as links here.

WSJ: Dems Praise, GOP Disses Plan here.

WSJ: Homeowner Aid Risky to Banks here.

UPDATE: Thursday Feb. 19 10pm - More Links

(btw, Dow closed at 6 year low...a little lower and it will wipe out any "gains" of the past 12 years. Currently, it's down 46.6% for the year.)

Barry Ritholtz expands on Homes: Still Too Pricey to Stabilize, here.

Time Magazine: Saving the Housing Market by Speeding Up Foreclosures, here.

WaPo: US Doubles $ to Fannie & Freddie: $400 Billion, here.

newgeography: Housing Downturn Moves Into Phase II, here.

Charles Hugh Smith: What's Obvious: This Is Not the Bottom in Housing, here.


Dukes of Moral Hazard: Re-default rates are 55% after six months, here.

Mean Street blog, Plan is Bound to Fail here.

Real Time Economics blog, Economists react, here.

Obama may turn to Hollywood for help, here.

Some ineligible Americans riled up, here.

Our first HASP post here.


downtownenvy said...

I think these comments are reflective of what is going on here in Charlottesville. Unless you make at least $200,000 a year you can't afford most of the family sized homes that are for sale right now. The assessments don't help because they give some sellers the belief that they are justified in asking huge pre-recession prices.
I don't want to "steal" a house here, I would just like to buy one that is a reasonable price and truly reflects the current economic climate. By the way, I stole the "steal" reference from a local realtor's blog. I know there are some unrealistic buyers out there, but I still think the real inventory lies in the prices being asked.

Real C'ville - The Bubble Blog said...


We saw that post the other day. IOHO it doesn't adequately characterize those who are waiting for a realistic price drop in this area. Prices have risen on average 70% since 2002. Meanwhile, we are surrounded by land that is dropping in value, some to the extreme.

AND more properties come on the market here every day.

BTW, we're going to add some more links to this post, several from the WSJ. As a conservative paper, they're excoriating this plan. They do make some good points, however, no matter what one's politics. One of which is how "unfair" the plan is to buyers who have waited out the market and will now be required to make a 20% down while their taxes are used to help an imprudent neighbor. The 20% down doesn't always hold: FHA loans can have 3.5% downpayments BUT they also have limits of $437K.
Which may be too low in these parts!

And Barry Ritholtz has identified the issue that's freezing the Charlottesville MSA: starter homes are too expensive. So there are some lateral moves, but few "new" buyers.

(Additionally, the top price ranges of this market are stalled. Not a big time for $2-$20M rural properties anywhere, though....)

Beth said...

I agree downtownenvy. I'm a potential buyer, and I'm not looking for a "steal." I'm looking for a home that will close at a value that won't drop dramatically in the next year, putting me in the same situation as all the Americans who need help from this housing plan! The current listings that are not "steals" could turn out to be bad financial decisions. In a climate where people worry about losing their jobs, it is ridiculous to accuse people of bargain shopping when they are merely trying to avoid decisions that could make them go under.

Mark said...

All this bill is going to do is piss off the hardworking savers whose kids have to fund it, and cause the Democrats to get crushed in the mid-term elections. This is a $75B attempt to prop up inflated home prices. Ridiculous. The unanimous opposition makes me proud to be a Republican again.

Perfect Circle said...

downtownenvy or bb, link please?

agree with mark about this plan, the stimulus bill, and the billions that have been committed to Geithner even though his bank plan seems as hazy as TARP.

we're headed for the toilet. it's just going to take a little longer to get there this way.

Real C'ville - The Bubble Blog said...

Barry Ritholtz expands on his Homes: Still Too Pricey to Stabilize post, including charts:

Real C'ville - The Bubble Blog said...

Sorry, dropped the ball on the other link. The agent's blog is The blog posts don't have their own URLs. To find the post, look on the right side of the page, where there's a menu of posts. Click on "Real Estate," and a list of posts will pop up. The post is titled "Stealing a Home."