Thanks for a link to my site. Due to way losses are accounted for I don’t think en masse principal reductions will ever be in the cards. But without them the loan mod program will just delay the inevitable and make things like worker mobility worse. I don’t think think loan mods were ever the answer but if they were the answer they only make sense with principal reductions.
Anyone in the marketplace on the low end sees how hot the market is, the Fed has created a great market to liquidate into. They wasted a perfect opportunity and instead tried to short circuit the market. Whatever the solution is it should be the one that gets the housing bubble in the past as soon as possible. But every “solution” so far has only served to prolong the problem.
I still can’t imagine what the housing market would look like with 7% rates. I don’t think too many of todays homebuyers have thought that far ahead. But that would make the cost of money increase 35-40% and decrease buyers purchasing power significantly. The multi-trillion dollar question is.. how long can the Fed keep 30 yr rates this low. Sales are only this “good” (they are horrible) because of 5% mortgage rates. Even when jobs start recovering, purchasing power won’t recover.
