What I want to know is how this unwinds. How does this all go when we end the total recession and start to recover?
Lets say things go bad for the next 9 months. That puts us to September 09. The FED stimulates us out of this recession using unusual methods and unheard of rates to get people buying houses again. Unemployment is bad for another year or so after that, but GDP starts growing again in Q3. Inflation will start slamming the economy as all this “stimulus” sets in and the FED starts raising rates to control the inflation and stops “stimulating” to limit the damage this kinda “financial planning” can do.
Then what? Rates go up, and lending slows, reducing affordability and housing values? This loss of value starts putting people who were unable to refi cause they were horribly underwater but survived cause of the low low rates into foreclosure. Foreclosures rise again, hitting housing values, putting more people under water. Values fall until back in line with fundamentals, and if history is any guide alittle lower. People with good credit and the ability to pay get affordable payments, everyone else gets to rent.
