Let Home Prices Fall

Declan McCullagh Says Further Government Intervention Will Do More Harm Than Good

(CBS)  This column, Other People's Money, is written by CNET's Declan McCullagh. It appears each Wednesday on CBSNews.com.

---

By now it should be clear that our economic woes have been caused in large part by an unsustainable increase in housing prices, which are now falling back to earth.

Some of the blame must go to politicians like Democratic Rep. Barney Frank, whose prognosticating abilities were evident five years ago when he fought reform of Fannie Mae and Freddie Mac by claiming they do not pose "a problem with a threat to the Treasury." Whoops.

Now these same Washington soothsayers are predicting that today's economic troubles can be ameliorated by propping up real estate prices. Reps. Frank and Nancy Pelosi said last week that it's "essential" to partially guarantee 1.5 million mortgages, and President-elect Barack Obama also wants "direct, immediate assistance for homeowners." (See related CBS News video.)

Meanwhile, the Bush administration is horrified that Americans are saving money and banks are returning to the tighter lending rules they used a few years ago. It announced this week two different programs totaling $800 billion that could, in part, goose house prices by lowering mortgage rates.

On Capitol Hill, house builders have been swarming like houseflies. Toll Brothers wants Congress to "stimulate demand by reducing mortgage rates and fees" and creating more tax incentives to buy homes. The Wall Street Journal reported on Monday that builders are "ramping up" lobbying efforts.

In reality, more government intervention will do more harm than good. The sooner prices are allowed to naturally fall to normal, post-bubble levels, and the sooner that houses become affordable, the sooner the economy can heal itself and start growing instead of contracting.

By way of analogy, imagine a reprise of the Dutch tulip mania of 1637. Say the price of tulip bulbs has grown handsomely in the last few years, and impressive fortunes were made by early speculators.

Bidding wars erupt, with the winners hoping to resell them the bulbs at a handsome profit months or years later. Cable TV hosts proclaim that a golden age of prosperity has dawned. Prized bulbs change hands for $1 million each, and skeptics are reviled as doomsayers.

Eventually this boom leads to a bust, as new buyers become scarce, and the price of tulip bulbs suffers a dizzying fall down to $10 each. Speculators complain to Congress. Politicians pledge to use tax dollars to purchase bulbs for $1,000 or $10,000, invoking phrases like "stability" and "liquidity crisis," or offering taxpayer-backed loan guarantees to speculators.

This would sound silly for tulips, but it's close to what's happening for houses. All this will do is slow -- and not arrest -- the process of prices falling. Not even the president of the United States can veto the laws of supply and demand.

It's difficult to convince someone to buy a tulip bulb (or house) today if he thinks the price will be a lot lower in a year. Worse, government spending diverts funds away from productive purposes, including investment, education, and infrastructure.

By usual metrics, such as the ratio of prices to incomes, the ratio of rents to mortgages, and the ratio of current prices to expected ones, some areas of the country still look pretty bubbly.

In the decade ending August 2008, according to S&P Case-Shiller data, house prices in New York metropolitan area leaped by 2.2 times, though incomes grew only modestly. The Washington, D.C. area experienced a 2.1-fold jump -- while non-bubbly areas like Cleveland saw an increase of a mere 1.17 times, which is consistent with incomes and inflation.

The median family income in Allentown, Penn. is $46,400, and the median home price is $125,000, meaning houses tend to cost 2.7x the median income. Compare that to San Francisco, where homes consume a whopping 11.6x the median annual salary.

Robert Shiller, who teaches economics at Yale University, has calculated that housing prices have remained remarkably constant from 1890 through 1998, rising only 13 percent when adjusted for inflation -- through world wars, the automobile, and the rise of the two-income family. When the dot-com bubble burst, money flowed into real estate, encouraged by the Federal Reserve cutting interest rates more than prudence allowed.

Which brings us back to a taxpayer-funded "rescue" of homeowners. It's true that many people who bought homes in the last decade acted responsibly, made sizable down payments, and purchased a house within their means; they owe more than they paid through no fault of their own.

On the other hand, many people were speculators, fibbing about their income, lying about their assets, and treating their house as an ATM to finance cruises and flat screen TVs. Many banks were in on the game, knowingly placing people in homes they couldn't afford. Even if a bailout is justified, Washington is in no position to determine who's deserving and not. Any bailout punishes renters and Americans who were fiscally responsible by taxing them to benefit those who weren't.

Prices in some areas need to fall, and the market needs to return to normal. Eventually it will. All Washington can do is prolong the pain.

---

Declan McCullagh is the chief political correspondent for CNET. He previously was Wired's Washington bureau chief and a reporter for Time.com and Time magazine in Washington, D.C. He has taught journalism, public policy, and First Amendment law. He is an occasional programmer, avid analog and digital photographer, and lives in the San Francisco Bay area. His e-mail address is [e-mail]

[easeup-2009]

That guy looks like he was on the business end of countless atomic wedgies, purple nurples and indian burns when he was in school.

[jsklinemn]

To "easeup"... Good Call!!! Good Call!! What I''m afraid of happening is that the valuation of my existing house for which I''ve been in now for upwards of 8 years now, becomes worth less than what I''m paying on my mortgage. Truth be told; my house is not worth what I had to pay for it, but it was what we could afford at the time and in 2000, it really was cheaper than paying rent.

[nikosk11]

Just for the record, Barney Frank had no power five years ago. It was the GOP that had full controll of congress and the white house, and it was the GOP that dissmantled all regulations in order to serve and please their master(s).

[lady_organs]

Let us not forget that it was the fault of liberals that we are in this mess.

[mikezembill]

Lady_Oorgans let us not forget that it is the republicans that got us in this mess end of story.

[wl7bzh]

That guy looks like he was on the business end of countless atomic wedgies, purple nurples and indian burns when he was in school.

Posted by easeup at 11:38 AM : Nov 26, 2008


Lemmie guess-you were a jock in school?
Big fun picking on the nerd huh?

By the way, how''s that Union job working out for you?

[drinuk]

Lady_Organs = Transvestite Fruitcake, Off you go Blossom, back up the Yellow Brick Road, and don''t forget your Pills.

[penigma82]

This guy is hardly qualified to make these kinds of observations and be presented as some sort of expert by CBS. There was a time when CBS News was the highest pinnacle of journalism, wow how the might have fallen.

Deflation would be catastrophic to the economy if it were significant. Homes would be sold at a loss, the single most significant investment the averge family has, it''s home, would essentially be wiped out in value/equity growth. Further, companies unable to sell products at a cost necessary to cover labor and operating expenses would rapidly go out of business. Negative wage pressure would leave families unable to pay for things which DIDN''T fall in price due to the fact that they were (for example) manufactured offsore.

Only capital I - Idiots say things like, let the market rule in times of economic crisis. Letting the market rule got us TO this crisis - and the proper and JUST role of government is to help molify the effects of crisis, as well as to help to try to prevent them through justifiable oversight.

[centerfall94]

That guy looks like he was on the business end of countless atomic wedgies, purple nurples and indian burns when he was in school.

Posted by easeup at 11:38 AM : Nov 26, 2008


Lemmie guess-you were a jock in school?
Big fun picking on the nerd huh?

By the way, how''''s that Union job working out for you?

Posted by wl7bzh at 12:15 PM

LOL!!! .... funny stuff.

[easeup-2009]

Lemmie guess-you were a jock in school?
Big fun picking on the nerd huh?

By the way, how''''s that Union job working out for you?

Posted by wl7bzh at 12:15 PM : Nov 26, 2008

Awwwww......hit a sore spot? Don''t worry, no one will take your lunch money anymore.

BTW-How''s the Star Wars action figure collection?

[aht772e]

while the article is correct that housing prices must be allowed to fall, it is a fallacy to assume that the only way to do that is to offer homeowners no relief. Housing prices will fall no matter what, and with no homeowner relief, homeowners will degfault, and banks will be able to sell only at new lower prices. Unfortunately, this glut of cheap houses will also make my house and your house worth much less as well (especially if empty houses become rundown on our dtreet). However, if mortgages can be adjusted via bankruptcy, etc..., then homowners can stay in their homes and the banks will have lost not quite as much money (because your home and mine will have retained some value). The "moral hazard" should be either that people must declare bankruptcy, or guarantee the government (or whoever is covering the loss) some share of future sales above the newly adjusted price. Its not too hard to understand if you really want to help the PEOPLE of the US and not just the banks and corporations.

[get_it_str8]

BTW-How''''s the Star Wars action figure collection?
Posted by easeup

HAHAHAHA Stop it your KILLING ME...LOL!!!

[rockpeterson]

The sooner prices are allowed to naturally fall to normal, post-bubble levels, and the sooner that houses become affordable, the sooner the economy can heal itself and start growing instead of contracting.

That is what I say.

[stick1772]

Lady_Oorgans let us not forget that it is the republicans that got us in this mess end of story.


--------------------------------------------------------------------------------

Posted by rxzyu at 12:13 PM : Nov 26, 2008

Idiot. Barney Frank and his buddies in HUD and elsewhere failed to see this coming and insisted that this kind of lending continue to help the "poor" get into homes.

Explain how this was Republican? Nice Democratic/lib led bailout. Really working well. 700billion my a55. Try about 7 trillion now.

[arlt1627]

Idiot. Barney Frank and his buddies in HUD and elsewhere failed to see this coming and insisted that this kind of lending continue to help the "poor" get into homes.

Explain how this was Republican? Nice Democratic/lib led bailout. Really working well. 700billion my a55. Try about 7 trillion now.

Posted by stick1772

Stick, I think you''re missing the overall point here. It was not a political screwup that led to this mess. Let''s call the "kettle black!" BOTH parties allowed de-regulation to take place over the past decade. Then HUMAN GREED took over. Greed of the massive banking/mortgage corporations who bought up credit-debts. Investors, hedge funds, and the rest of Wall St. continued the greed because so much money was being made off of homes. Real estate agents, land speculators, etc also were greedy and wanted higher valued homes so they influenced appraisers. Developers were also to blame for obvious reasons. And, finally, the homeowners that bought too much house for nothing down were also greedy and didn''t buy what they honestly could afford. There. Not political in any way....just the cold hard facts of reality and now we ALL get to try to fix the problem. Quit worrying about political blame. That won''t fix the current problem.

[skysoldier75]

"The sooner prices are allowed to naturally fall to normal, post-bubble levels, and the sooner that houses become affordable, the sooner the economy can heal itself and start growing instead of contracting."

Declan McCullagh is absolutely correct: the stratospheric prices that homes fetched at the peak of the bubble were totally absurd - they were not even close to being realistic values, and any attempting to keep those values artificially inflated are doomed to failure.

A house that sold for $25K only 25 years ago would now be appraised at $175K or more -- but that does not actually make it WORTH that much; it was only rampant "speculation" and "flipping" plus the false assumption that home prices would ALWAYS go up, and NEVER go down, that pushed prices to such totally ridiculous levels to begin with.

As the enormous "Baby Boomer Bubble" begins to retire and liquidate their real estate assets over the next couple decades, the housing market is going to be totally saturated with homes for sale - and the size of that "sellers" group dwarfs the size of the group that will be buying, thus creating a constant surplus, and ever-falling prices. It''s simply inevitable.

If you bought-in at the high "bubble" prices then too bad for you; you''re going to take a huge loss. It''s unfortunate, but there is really nothing that can - or should - be done about it, at this point. It''s just a natural supply-and-demand "market adjustment" that''s going to play out one way or another, like it or not.

[humanavance]

"Fellow Citizens,

Until prices are brought into line with wages we will have no economic recovery.

This means that a falsely valued $750,000.00 home will have to be brought down to its real value, $75,000.00.

And all the governments of the world pouring all the cash taxpayers of the world have left into an effort to sustain false prices will fail.

That''s why socialism, communism, and fascism have always failed.

Because their economic, as well as humanitarian, models do.

And there is no better recipe for disaster than corporate capitalism on the way up, accompanied by corporate socialism on the way down."
SearingTruth, September 2008

A Future of the Brave

[clovisbuford]

Idiot. Barney Frank and his buddies in HUD and elsewhere failed to see this coming and insisted that this kind of lending continue to help the "poor" get into homes.
Explain how this was Republican? Nice Democratic/lib led bailout. Really working well. 700billion my a55. Try about 7 trillion now.
Posted by stick177 You continually try to lay this on the democrats , the data shows the CRA had very little to do with this . The data analysed by the Federal reserve also shows that while Fannie and Freddi are part of the problem at this point they were not the root cause. You also ignore the huge part the packaging of these sub prime mortgages into SIV''s played in the collapse . There is also the Gramm ,Leach ,Bliely act of 1999 which blurred Depression area firewalls between various banking and investment firms . The commodities futures modernization act also played its part (both done by Phil Gramm ). The shadow market in CDO''s which is basically credit default insurance is 65 trillion $ estimated(4 times the worth of the actual market) and largely unregulated. You are stuck on ideology and refuse to recognize the whole emphasis on deregulation which pushed by Republicans and supported at times by various democrats is behind a lot of the current financial crisis.

[remarkor]

That tulip analogy was the worst and most useless analogy I ever heard. What the hell was the point of that? Besides to fill space.

[clovisbuford]

Expect hyperinflation soon
There will be hyperinflation on par with that experienced by the Weimar Republic. Gas and food prices will jump up sharply to new highs and keep rising. Meanwhile, Consumer spending on anything outside food and energy will completely collapse, and most retailers will be forced into bankruptcy. Unemployment will soar, and there will be social unrest.
Posted by Hackerpc at 01:20 PM : Nov 26, 2008 actually in the short term with the falling like a rock, prices in oil and copper etc. the commodities market , I myself think stagflation is more of a concern . If things get as bad as are expected and we are on the top side of this rather than the bottom , there will be social unrest.If people are pushed to the edge of survival by economic conditions , people in survival mode tend to act different than fat sassy consumers.

[oilfix]

When you choose a policy to suppress incomes and encourage borrowing,a point is reached when people
can no longer borrow. So you relax lending
requirements and bundle the loans into newly created
financial instruments to disperse the added risk.
Again a point is reached where no futher leading is
possible. So you effectively eliminate leading
standards and create exotic instruments to hide the
risk and pass them off as ''good as gold''. People
are borrowing again and all is right with the world.
Soon those newly created borrowers are maxed-out
and defaulting, infecting and damaging the entire
credit system.

[skysoldier75]

Houses on the market today are actually only "worth" from 20% to 50% of their current "list" price.

If you''re thinking about buying, you''d be a fool to consider offering more than $0.10 to $0.50 on the dollar on that list price. If you''re actually paying the asking price you''re going to become just another casualty of this inevitable market correction.

[seabelly]

I agree with Mr. McCullagh completely. Unless Congress would like to magically triple the national median household income, housing prices must drop. I live on Long Island, where average home prices run between $400,000 and $450,000. That''s for a pretty standard 3 bedroom, one bath ranch or cape cod; resale, not new construction. Property taxes for homes on a 1/4 acre or more start at $10,000. People can''t sell their houses for these prices, and in my opinion, they shouldn''t. By a function of average income, they should be selling in $250,000 - $300,000 range.

[clovisbuford]

"Repugliscum 2006: Posted by jbrown88881 at 01:46 PM : Nov 26, 2008" name calling by either side is not conducive to actual discussion of the issues in my opinion ,y''all have fun playing , but you should play nice .off to run errands .

[hdstretch]

Failed to see this coming? I don''t think so. More along the lines of, Hey, let''s clean out the banks of our money, and then when the feds put more in, we can clean that out too. In the meantime, our industry and job markets are coming to a standstill.

How can we pay back loans when we have no income? How can we pay taxes if we have no income? Besides, with gas at 4 bucks a gallon, who wants an SUV anymore? It''s a hostile takeover attempt. That''s ok, all we want right now, is to take the guns away, and we''ll be bringing in those drugs too, ok?

ARe we done with this yet?

[gjb5649]

This article is correct. Home prices were able to skyrocket due to easy credit and low interest rates. It was obviously unsustainable but no one wanted the party to end on their watch. All of the current efforts to keep prices up will just prolong the inevitable and make it worse.
The housing market became the next tech stock market only much more dangerous.
Just like the overpriced tech stocks overpriced housing must come down.

[skysoldier75]

Houses on the market today are actually only "worth" from 20% to 60% of their current "list" price.

If you''re thinking about buying, you''d be foolish to consider offering more than $0.10 to $0.60 on the dollar on the list price. If you''re actually paying the asking price you''re going to become just another casualty of this inevitable market correction.

[denn034]

Amen.

[wl7bzh]

Awwwww......hit a sore spot? Don''''t worry, no one will take your lunch money anymore.

BTW-How''''s the Star Wars action figure collection?

Posted by easeup at 12:26 PM : Nov 26, 2008


Sore spot? Not really-By the way does the little woman still have her Supermodel job? You know the one where she is serving as the design guide for the Pillsbury Doughboy with the massive yeast infection?

[churchof1000]

Declan McCullagh, you couldn''t be more right. Great article.

[lady_organs]

This board has become unfit for christian reading.

[rational_1]

That tulip analogy was the worst and most useless analogy I ever heard. What the hell was the point of that? Besides to fill space.
Posted by Remarkor at 01:33 PM : Nov 26, 2008

Because it actually happened. The author is making a point in contrasting real worth versus perceived worth. In both the tulip and housing markets the latter exceeded the former. The resulting crashes are inevitable and not necessarily undesirable, as the author clearly points out.

[rushlimpdrug]

There must be some mathematical genius
that can pull another equation out of
his aazzz and make everything look good
again.

I mean, that is what they did to prove
homeless could afford a great home.

Thanks barney.

"I love you,
you love me,
let''s all live
with Freddie MacKeee . . .

[wl7bzh]

This board has become unfit for christian reading.

Posted by Lady_Organs at 02:27 PM : Nov 26, 2008

And my dear lady, why would a woman of your obvious character be "trolling" this red light district?

[bckrd1]

Absolutely right on. The Gov''t needs to stop trying to stop the way things work. Every thing needs to run it''s course and not be interfered with by using our tax dollars. The people who made these terrible decisions need to take the consequences of their actions. The prices were way beyond reasonable or sustainable and need to come back down to earth. Once that happens people will once again start buying and be able to stay in their homes. The only reason the Gov''t is putting all this money out is because the rich started calling their buddies at the White House crying they were going to lose a lot of money unless they got help and so here we are.

[kevinkkloste]

This whole thing was good for the economy. We need to get the price of everything back in line.
Even Bryers ice cream is making smaller packages again.
1.5 qts instead of 1 3/4.
We need prices of consumer goods to fall and cut the salaries of the over paid exec''s and ceo''s.

[voidmaster-2009]

I figure that within 3 years I will be able to pay cash for a house -- which is about how is should be.

[barbaraf4]

The housing speculation is part of the problem. Buy your home and LIVE in it. It is not necessary to double your return in two years and then buy up, only to repeat the process every two years.

I don''t care if my home is losing value right now. The value will eventually go up again and I''ll still be living here.

Someday, when our kids and grandkids have to sell this place, it will be their problem; however, since anything they get will be profit to them, who cares.

[perk235]

Wow, a whole article on a financial melt-down without a word on DERIVATIVES or CREDIT DEFAULT SWAPS. The risky bets made by the cowboys of the financial industry are worth $60 TRILLION.

Yes, the predatory lending practices that allowed banks and mortgage brokers to make a ton of money is part of the picture. But the world-wide financial melt-down is due to DERIVATIVES.

[erasmus81]

This board has become unfit for christian reading.


Posted by Lady_Organs at 02:27 PM : Nov 26, 2008

You must be new, I guess.:)

[rushlimpdrug]

Posted by avoice at 02:47 PM

You thinking make sense so please
shut up while the masses wait to
be saved.

The reality is that "Americans"
now vote in "leaders" as opposed
to public servants.

The country is just about as dumb
as these "leaders" would like it
to be.

Anyone care for a donut?

"Don''t tazer me!"

[easeup-2009]

Sore spot? Not really-By the way does the little woman still have her Supermodel job? You know the one where she is serving as the design guide for the Pillsbury Doughboy with the massive yeast infection?

Posted by wl7bzh at 02:19 PM : Nov 26, 2008


That was lame, nerd-boy. Go upstairs & tell your mom that I told her to slap you.

[wl7bzh]

That was lame, nerd-boy. Go upstairs & tell your mom that I told her to slap you.

Posted by easeup at 03:19 PM : Nov 26, 2008

Whatsa matter yard ape-Not accustomed to someone talking back to you? Why don''t you get the little woman to get you and the boys anuther beer cauz thar''s probably a game on somwhar. eeeehaw

I bet life don''t better than that do it bubba?

[fridak-2009]

Yeah, let them fall. So what if half the county is living under bridges. Chance to make a big fortune buying their forclosed homes and renting them back to them. (That''s what makes America GREAT!!)

[stomarin]

Letting housing prices drop in theory sounds good but the problem is in the details. The issue is the "toxic" assets that have debt attached to them that now is so far under water it threatens the financial system. Then it is not just Wall Street''s problem, it is our problem if the financial system melts down. So we can''t just allow all the prices to drop without taking those toxic assets off the books of the stupid financial institutions that funded them. Or you have to do something to stabilize the housing pricing market which is what they are trying to do. Was the financial system tied to the debt associated with financing tulip purchases?

[htcarter]

Part I of a 2 part comment: I do not pretend to be the most studied person on the planet with respect to macro economics but I am a successful business person and investor and that success includes success in real estate and finance. Today I own and operate a firm that lends to growing businesses because that is a far less efficient market than even real estate. I think the author here is directionally correct. Should we not be absolutely outraged that politicians are deciding that it is better for all of us if we are propped up as consumers as long as we can be propped up whatever the tangible costs, ripple effects, or unintended consequences? If you are a capitalist, how do you now discount for that the fact that politicians are clearly willing to change even the basic free market principles that have been at our country''s core? Capitalists now have to weigh the wildcard of government bans on short selling, bailing out clearly flawed businesses and asset classes that are clearly overvalued. Do we really expect financial markets to more efficient today or going forward? How do we price the uncertainty of government action or inaction %u2013 with a higher discount rate or lower discount rate?

[htcarter]

Part 2 of a 2 part comment: Isn%u2019t the truth that those folks in Washington right now decided that their relative wealth and power (and that of their business class brethren) is better preserved by attempting to avoid (postpone?) a depression marked by a reshuffling of the capital market deck (and particularly the financial services deck)? Of course, but are you better off? Why would the treasury not offer to lend to business people who have clearly demonstrated the ability and proper temperament to make overall sound investment and business decisions and let them find the bottom for all of these various asset classes rather than put money into companies that we know have bad assets and we know have flawed decision making and compensation systems? For every reason I have heard about propping up AIG and Citi, I can think of an alternative fix coming from outside this firms. Same with GM, Ford and the warranties. What I have not heard is a sensible argument about why we should price fix with housing housing (I know this is a result of Greenspan fixing the price of money at 1% and that was nuts too). Housing values are a function of incomes and interest rates. By fixing U.S. housing values we are by extension pretending to be able to fix U.S. incomes. Does anybody believe that we can fix (put a floor in on) U.S. incomes and at the same time participate honestly and sustainably in a global free market economy? I would like to be enlightened on this. Tom Carter

[bjcone8559]

"Any bailout punishes renters and Americans who were fiscally responsible by taxing them to benefit those who weren''t. "

This has forever been the battle cry of the greedy, religious? right. It is the same old, ''I''m not my brother''s keeper'' song. "I want everyone to have the best health care possible... as long as it doesn''t cost me anything." "Those people are homeless and starving because they choose to live that way." "Why should my tax dollars be used to pay for food stamps?"

It is high time that republicans come out of the closet and admit that they are NOT christians. To state, now, that the government should stay out of the mix and let the masses lose their homes and then, possibly, go hungry because of mistakes the government has made is simply evil. The majority of people who are losing their homes now DID NOT cheat to buy more home than they deserve (as republicans claim). They bought homes based on their optomistic expectdations of the future. It''s called the American dream! Their dreams have been dashed, not by their unwillingness to work to obtain it, but by those at the top who are greedy. Jobs have been moved to slave-labor nations by greedy corporations. In millions of households incomes have dropped or eliminated!

I sincerely wish that every one of you republicans (who place so little value on the dreams of others) lose your homes and your incomes, and your savings and your investments. You should get a taste of your own medicine.

[easeup-2009]

Whatsa matter yard ape-Not accustomed to someone talking back to you? Why don''''t you get the little woman to get you and the boys anuther beer cauz thar''''s probably a game on somwhar. eeeehaw

I bet life don''''t better than that do it bubba?

Posted by wl7bzh at 03:28 PM : Nov 26, 2008

You know what? I WILL enjoy drinking beer & watching football! You go ahead & enjoy biting your pillow & watching Dancing With the Stars.

I''ll bet those mean jocks really did a number on you!! LOL!!!

[seafang]

That''s right let them crash. After all, when those people went to the bank and were told they couldn''t afforda $100,000 house but the bank would lend them the money anyway; and then turn the whole mess over to fanny mae, and let the taxpayers worry about it; they figured.
Well if this guy will let me buy a 4100,000 house I can''t pay for, I might as well go for a $500,000 house I can''t afford either.

So they are the ones who drove the house price up to where legitimate buyers couldn''t afford them; so let them fall, let them file for bankruptcy, along with the crooked banks that loaned them the money they knew would never get paid back.

After all of the bailouts of these deadbeats; who is going to be left to bail out the taxpayers.