High foreclosure rates in places like Atlanta and Cleveland are far more troubling

than most people realize…

Here is why, houses have been appreciating over the past several years at an astounding rate due mainly to low interest rates which fueled an increase in demand…

To get into these homes, which are vastly overpriced, far too many people entered the speculation market via interest only loans or sub prime interest rates with balloon payments of higher interest rates to kick in at a later date…

The theory was that the people could refinance in a few years out of the adjustable rate and into fixed rates or even sell the house down the road and walk away with a tidy profit…

The only problem was it all depended on the housing market to keep spiraling upward…

That ain’t the case now…

There is a thread about the increase of foreclosures in Atlanta on the board right now and here is the article it links too in the NYT…

http://www.nytimes.com/2007/07/09/business/09auctions.html?pagewanted=2&hp

The article, while informative, does not answer one of the more damaging aspects of the downturn in the Housing market. And that is property valuation. As these homes drop n value, as determined by hosing sales and auctions in the area, homeowners will be able to adjust down the stated value of the property for Property Tax calculation…

Here in Ohio, Property is revalued every three years and the tax valuation is based on the tri-annual adjustment. Local schools, cities and the state then set their budgets based on the current valuation of the housing stock in the area…

What happens in the areas that need the income the most, inner city schools and inner ring suburbs, is they run short on revenue as the housing stock is devalued and are forced to cut service…

If the trend isn’t reversed, the lack of service or the poor performance of the school system dependent on that funding, causes even more downward pressure in the property valuation process and we have the classic downward spiral so many of our large cities and inner ring suburbs are facing…

But many of the more affluent suburbs may also see this happen, albeit on a smaller scale. Homeowners can petition for revaluation if indeed the homes in the market are stagnating or turning down. These suburbs will see a leveling off of revenue and will be forced to alter their budgets as well, usually, at least here in Ohio, in the form of higher city income tax rates...

This housing slump is a lot more profound and far reaching than is being reported in the mainstream media…

The real estate bubble in this country is only occurring in a few areas of the country. We will not see a huge popping bubble in the real estate market, but we may see declines in prices in areas like the Florida and Califormia costs, areas of the Northeast, and perhaps the Atlanta suburbs. It's nothing to be alarmist about, just the free market at work.

For the individuals...

But the mortgage companies and large lenders will shovel off their responsibilities, as they do in our skewed version of a free market, by writing off their losses and thus lowering their tax burden...

Or better yet, they will petition the government for relief and we will end up shouldering the financial fallout of this fiasco through a higher national debt...

Another classic example of privatizing the profits and socializing the benefits...

This is very similar to the Savings and Loan debacle in the late 80's...

Free market my ass....

I happened upon this website in a roundabout way via you tube but it gives numbers of mortgage lenders going under, about two a week.
http://ml-implode.com/

There is a link to here
http://ftalphaville.ft.com/blog/2007/07/06/5717/its-not-only-hedge-funds-playing-the-cdo-lottery/
That suggests a lot of these hedge funds holding are held by pension plans, if so could be a big problem

The real estate problem is just beginning.

It is DEFINITELY in more than a "few areas" of the country.

Things are going to get much, much worse, and more widespread.

n/t

How are you even qualified or capable of knowing what's going on, when you're living in Kuwait?

Thanks for your rosy observation.

housing is a symptom of job loss and wages being crushed by inflation

We HAVE to get rolling on job creation. We cannot afford to wait and George will actively oppose doing anything that benefits Americans.

And pushing for a living wage may actually increase the ability of people in the lower income bracket to afford some of these homes that are going through foreclosure...

our middle class...

Which is in severe danger of disappearing...

At least so I'm told...