Saturday, August 18, 2007


Many thanks to Al and Bob for their good comments. Because the new median home size declines when mortgage rates go up, the actual decline in home prices is almost nil. Of course, there are some very tough markets that have seen major declines but the value of the average home across America is holding up well and the value will jump several percent as soon as people realize that the bark of the sub prime market is much worse than the bite.

The hypocrisy is that many legislators who were all for letting everyone have a shot at the American dream of home ownership are now the ones saying how awful it is. The fact of the matter is that 86% of all sub prime loans are current and most of the rest will be made current. The truth is that many families have gotten into a home and are making payments and are building equity. We reached the highest percentage of home ownership ever and many of these good folk will never again return to the rental market.

Bob is correct that we must be concerned about the potential legislative action but grid lock is the good news in this regard. With a deeply divided congress under Democratic control and with a Republican President, the only bills that will be passed will be centrist compromises. There will be some bad junk passed but all in all the damage is not likely to be great.

Thanks again!