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Ezra Klein’s blog is typically very good. But this piece is terrible, pardon my French. It basically shows that people who defaulted on their mortgages today are not quickly getting new mortgages and buying houses, and among the reasons are that they don’t have money for a down payment. The author claims this is not an “encouraging” prognosis.

Really?

On what grounds? That home ownership is oh, so, oh, so, oh, so important? That issue has been much debated and is particularly frustrating given folks’ concerns about stagnating labor markets. Do we really want to encourage high-fixed cost aspects to working? If I got a job offer tomorrow, I’d probably have to turn it down because I am stuck in my owned home. Plus, being stuck in homes without much turnover in my view perpetuates the trend toward higher property tax rather than returning us to Tiebout competition.

But most important, look at what the author says. They don’t have down-payments. Which tells me these folks (perhaps including yours-truly) should never have been in owned homes in the first place nor should they be in them now, unless they are willing to scale back on the kind of house that means. And the author’s major concern? That the folks’ new rentals arrangements are not as nice as the homes they were unaffordably residing in before this. That’s particularly striking coming from a blog that has a dedicated environmental writer and for which urban living, rental living, smaller-less-swanky living would seem to be advantageous. Plus, having fewer people with low down-payments in mortgaged houses will reduce the influence of Fannie and Freddie, will reduce the power of the big banks and reduce the lobbying influence of the Realtor-lawyer-inspector-insurer lobby, or so one may hope.

But nope, we just want more cowbell instead.

2 Responses to “Nor is it a Particularly “Good” Diagnosis”

  1. Speedmaster says:

    >> ” It basically shows that people who defaulted on their mortgages today are not quickly getting new mortgages and buying houses, and among the reasons are that they don’t have money for a down payment. The author claims this is not an “encouraging” prognosis.”

    Isn’t that kind of how things are supposed to work? If you’re a bad risk, with recent hard evidence of same, and can’t even scrap the coin together for a tiny amount of skin in the game, why would anyone loan you a large amount of money?

    • Harry says:

      Amen, Speedmaster.

      I recall a WC post some time ago about having some more hair of the dog.

      The people who do have, say, 30% to put down get delays from their banker, who has to check with the lawyers in the compliance department.

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