That’s a very fine article with a pretty good summary I thought. I know it has already been discussed on other threads but here are my two cents.
Thanks to Bush’s “homeowner society”, the 70% owning homes will probably be for a bailout and 30% will be against. Maybe some who own their houses free and clear and have some cash in the bank might be against it too. But still, the majority probably rules.
The second thing is that all this might not stop housing prices from dropping. Most of these bailouts won’t encourage a new marginal buyer, because his “new” loan might not be that favorable with all the skeptical lenders and MBS buyers. And of course the “20%/year appreciation” crowd is now seriously silenced.
So if housing prices do indeed fall further, why would people underwater even want to be bailed out. If some of the people have a hard time affording their mortgage, a $200K negative equity will surely convince them to walk and rent.
So any bailout would have to be so massive (10% drop of $30 trillion real-estate market = $3 trillion) that this is going to be impossible to not have other negative consequences.
