Thursday, June 10, 2010

No inflation? Really?

Only if you don't need food, energy, transportation or medical care. And who needs those, right?

And a few more graphic tidbits for you this afternoon:

Privately owned businesses continue to be able to provide less and less of the nation's wage base - and with little in the way of savings, more and more people simply have less discretionary income to spend, meaning more and more small businesses will fail unless the community rallies behind them.

Equity? What equity? The banks own all the property. And then there's the underwater homeowners issue - those with negative equity. What is the real homeownership rate if we exclude all those with negative equity?

What can we do to help solve this problem? Jewish communities should try and raise funds for interest free mortgage loans, for one thing. Most people wouldn't have negative equity or be so far underwater if their house payments didn't spend the first 15 years of the loan going entirely for interest.

As it is, more and more people are losing ownership of their homes. One of two things will happen - if there are affordable rental properties in the area, they will not be affordable long because competition from the various former homeowners to rent them will drive up rental rates, eventually. Right now, renting can actually be a great bargain, since few can qualify for conventional mortgages and there are far more houses for sale than buyers for them. A lot will be rented instead of sold, where HOA rules permit.

For areas where few rentals are available and/or the price is still prohibitive given the $55,000 median wage, a lot of families will end up moving in together, either with relatives or good friends, to spread the costs of the home over more working adults. This type of co-housing arrangement can work, and more and more people will try it (some by choice, some not so much).

Ideally, the community should band together to buy distressed properties, preferably for cash, and enter into not-for-profit lease-to-own agreements (that is, no marking up the price from the home's foreclosure or sheriff's sale amount). The prospective owners should pay no interest or very low (1% or less) interest to facilitate speedy recovery of home ownership rates in your community. It is a morally commendable program to establish - not to mention increasing homeownership rates reduces crime and connects people to the community.

In this economic crisis, it is immoral to charge people interest rates they cannot afford, and to jack up the price of the properties to make a profit on homes that have been foreclosed or sold for back taxes. The good of the community needs to come before the greed of those who would continue fleecing the community where the Big Banks and Financial Robber Barons left off.

With real inflation of the things people actually need to live on every month continuing upward with no end in sight, the community needs to band together and stabilize the home ownership situation, not exacerbate it by attempting to exploit those who have lost their jobs or had their hours reduced. This should not be our way - and yet in many places, it is. We have a moral and ethical obligation to make our community sustainable, even if it means giving up some personal gain. Is that so hard to understand?

Charts courtesy of miscellaneous recent posts at Dr. Housing Bubble.

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