Thursday, December 27, 2007

The Real Estate "Slump"

It seems that every time I turn on the news, or pick up a newspaper, someone is moaning about the bursting bubble in the real estate market. Just now, one of the national news shows was covering the huge declines in real estate value in areas like Miami, Phoenix, and a few cities in California. And each news story bemoans the loss of property value for the homeowner.

Why is there such surprise over this? I don’t get it. There’s the old adage “what goes up, must come down.” Home prices in some area had been climbing to ridiculous heights. I’m sure there are plenty of cases where people continued to buy real estate using all kinds of creative – and risky – financing methods, thinking they could ride the wave to wealth by selling it a short time later. And now, some of those people are crying the blues. Some complain that a house they bought for $300,00 that the bubble raised the value to $450,000 is now “down” to $350,000. Unless the value dropped to below the original price of the house that the owner paid, I don’t see the problem here.

I don’t feel sorry for these people. Not one bit. Those who bought homes in order to resell them quickly, or fix them and flip them at an inflated price, should accept the blame for their greed. People who were not bright enough to understand that an interest-only mortgage gave them no equity in their homes probably aren’t smart enough to own a home to begin with.

So when I hear the pleas for a government bailout, I bristle. I don’t pay my tax dollars to pay for someone else’s greed or stupidity, or for the bad choices they made.

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