<p>Only difference with Buffalo and Detroit is they have been dying for a long time, pretty much since the end of WWII they have both been declining, and during the current bubble no one was building there, it was in places like Orlando and Vegas and Tampa , et al that you saw the kind of overbuilding we are talking about…on the other hand, can’t get much more depressed then either of those places. Some of the towns on the list are not dying, the problem with places in Arizona and such is that they built a lot more housing then the local economy could really support, so there are tons of housing developments and such that are ghost towns…</p>
<p>Dstark, I also like your posts, they are pretty well thought out and they are making valid points. You are not wrong that if, for example, people stay in their homes, that it will help stablize house prices (since when houses get foreclosed, they add to the pool of houses out there, and more importantly, banks often will dump them for less the the loans on them, to keep from losing more money). Refinancing will help this, there is no doubt. Eventually, house prices will stabilize at some point when there aren’t many more houses coming on the market, but that will be stasis…</p>
<p>The other reason banks are not redoing mortgages for people under water is as far as I know there is a tax problem with that.If a bank reduces the principal on a mortage, which is what some adjustment programs do, the owner of the house gets hit with a tax bill for the amount lowered by, it is considered income (and yeah, they tried to revise the rules on this so that it wouldn’t be considered income, and it was shot down by the usual suspects). For people whose houses are significantly under water, a lowered interest rate is probably not going to save them all that much, whereas lowering the principal on the loan saves you a lot more over the long term (on the other hand, if a house is worth 50% of the mortgage, I doubt they will go that far).</p>
<p>But even if banks do make borrowing easier, given the low interest rates out there and depressed housing prices, I still don’t think house prices will go up much. Between the loss of income due to unemployment and taking jobs that pay less, for example, I think that the cost of entry is too high on a house, when you rent you don’t have all the costs of owning a home, the repairs, taxes, etc…and factoring everything in, renting is still going to be cheaper. More importantly, even for people with decent jobs, the fear for losing their jobs or seeing their wages cut is a big one, I think even when people might qualify for a house they are reluctant to do so until they see their future being brighter…</p>
<p>Put it this way, in economic downturns housing is kind of like having kids, people tend not to have kids or buy homes when things look bad…I think it is going to take banks loosening the purse strings (which won’t happen until they have recovered from their self inflicted wounds) and making loans easier to get, and it is also going to be signs that unemployment is easing and people are feeling optimistic about it getting better, before that will happen. </p>
<p>There is another question about house prices, and that is what the fair market value will be based on the local economy? One of the reason housing prices plummeted so much in places like Vegas and in much of the sun belt is that they are priced based on speculation, not reality,and in some places if prices of homes dropped in half, it could be that represents the real value of the house based on the local economy. Even in this area, when you get out of the radius of commutability to NYC, house prices took a major tumble, prices there went up because of speculation and there wasn’t the job base to support those prices.</p>
(It’s not going to happen).</p>