The Future Is Now: The Birth Of The American Wasteland

Elias Isquith

Elias Isquith is a freelance journalist and blogger. He considers Bob Dylan and Walter Sobchak to be the two great Jewish thinkers of our time; he thinks Kafka was half-right when he said there was hope, "but not for us"; and he can be reached through the twitter via @eliasisquith or via email. The opinions he expresses on the blog and throughout the interwebs are exclusively his own.

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81 Responses

  1. Lyle says:

    In Nevada there are a number of communities North of Las Vegas that show what happens when a boom pops, start with Virgina City (the comstock lode), Austin, Eurka, Ely, Tonapah, Goldfield and numerous smaller places that are now true ghost towns. (Also in other western states). In Mi look at Calument, in 1900 it had 60k people and today it has 6k (the copper bubble popped). Towns come up and towns go down, Detroit and Flint and indeed a lot of cities in the Old Northwest are examples of towns that went up and then came down. Its just part of the evolution of a town.Report

    • Robert Greer in reply to Lyle says:

      Except this time we’re not looking at a series of many boomlets and bustlets scattered across geography and time, which can average out into sustainable growth of a national economy.  Instead, we have a systemic problem that exists in almost every suburb except for extremely expensive coastal and resort areas.  The bankers clamored for deregulation, created fake wealth with that deregulation, and sold some of that fake wealth to suburbanites in exchange for an interest in their homes.  When the fake wealth they had left over became debauched in the inevitable bust, they demanded that the government let them exchange it for the government’s real wealth.  But the suburbanites can’t exchange their fake wealth (in the form of inflated mortgages) for real wealth, because that would be communism.

      The past couple years have been a pretty straightforward wealth transfer from the middle and lower classes to the rich.Report

      • Michelle in reply to Robert Greer says:

        Agreed. The whole housing boom also masked the fact that we were already an economy in decline. It was the last big party before the fall. We were in Southern California during the height of the boom, where little POS houses in formerly working class neighborhoods were being offered for upwards of half a million plus. It was obvious this kind of nonsense couldn’t last but it was also obvious that while it did lots of people were making tons of money off the delusion that housing prices would always move upward.Report

  2. MFarmer says:

     “a Republican filibuster”

    You can’t use this tired excuse for every Democratic failure to act.Report

    • North in reply to MFarmer says:

      Why? Did the filibuster suddenly vanish?Report

    • Nob Akimoto in reply to MFarmer says:

      There’s some truth to this.

      A glance at the Summer’s economic memo that was leaked a couple months ago shows that overall the Administration viewed the housing crisis as a foreclosure/negative equity problem, rather than a larger, overall home equity problem on the entire market. Thus when designing the counter-cyclical solutions in 2009-2010, they didn’t really take into account the need to do an ACROSS THE BOARD write-down for the entire housing market. (This of course would have taken an extraordinary amount of political capital, and I’m not even sure if it was possible.)

      In all fairness….no one really saw this coming on this sort of scale or in this sort of behavior. That is to say, this was a major blindspot for economists.Report

      • Kimmi in reply to Nob Akimoto says:

        Bull-fucking-shit. Krugman and company saw this coming. Roubini and company saw this coming. Hell , go trawling on CalculatedRisk, there’s tons of people in the Real Market what saw this coming.

        Negative equity is a Super Bad problem. But The STUPID PROBLEM was Republicans trying to inflate and continue to inflate the market with tax breaks for “homebuyers” (investors included), even after the bubble was popping. We mostly quashed that.Report

        • Michelle in reply to Kimmi says:

          Nobody saw it coming? It didn’t take too much in the way of common sense to see that the bubble had to pop and that when it did the whole economy would go swirling down with it. The rapid inflation of housing prices created an illusion of wealth, wealth that never really existed except on paper and in the minds of those who thought the party could go on forever.Report

          • Nob Akimoto in reply to Michelle says:

            As a reply to you both.

            For the most part there’s a distinction to be drawn here between the point of failure being principally about foreclosures and high unemployment, vs. a whole scale deleveraging and equity problem for the entire housing market. Generally the idea has been to address loan write-downs for individuals in distress. The notion of spreading principle write-downs to everyone who relied on home equity as part of their line of credit is somewhat novel.

            People saw that a bust in the housing market would be coming. They just didn’t see it to the extent that you’d create a general equity problem, not a NEGATIVE equity problem.Report

            • Kimmi in reply to Nob Akimoto says:

              also bullshit. it was evident that people were puling money from their homes to keep up their lifestyles as their paychecks systematically shrunk. you’ve got a general equity problem Right There. people spending more than they’re earning.Report

  3. DensityDuck says:


    What filibuster?

    There’s nothing about a filibuster in the article you linked, or in the article that it links.Report

    • Smith was withdrawn because Shelby made it clear he could not get through the Senate. Presidential nominees don’t get through the Senate by and large due to filibusters.Report

      • DensityDuck in reply to Elias Isquith says:


        Many people who are shot in cities were shot by black men.  That doesn’t mean that everyone who was shot in a city was shot by a black man.  It particularly doesn’t mean that we can claim that a shooting death in the city was “due to a black man” and then back up that claim by saying that many people who are shot in cities are shot by black men.Report

  4. DensityDuck says:

    You are right that the only meaningful kind of economic relief for people whose property values were destroyed is principal reduction.

    Which I don’t quite understand the opposition to it.  If a volcano erupted and blew up my house, nobody would be upset if the government paid off the balance after the insurance company paid for it.  But when lax regulation allows irrational behavior to inflate a huge bubble that pops, it’s somehow a moral imperative that millions of Americans be forced to choose between bankruptcy and loss of social mobility.Report

    • Patrick Cahalan in reply to DensityDuck says:

      One way or the other, the market has to correct itself.Report

    • …wait, who are you and what have you done to Density Duck?Report

      • Kimmi in reply to Nob Akimoto says:


        It’s the liberals running after market based solutions, strangely enough. Maybe my liberal friends aren’t liberal enough?

        (details below).Report

      • DensityDuck in reply to Nob Akimoto says:

        What’s that supposed to mean?Report

        • James Hanley in reply to DensityDuck says:

          Whatever it’s supposed to mean, it probably doesn’t.Report

        • Kimmi in reply to DensityDuck says:

          yer startin’ to sound awful liberal, i think is what he means.Report

        • I think it means that you tend to come across as largely unsympathetic (oftentimes, mocking of sympathy). Seeing you on this particular issue as being sympathetic, rather than portraying underwater folks as having made poor decisions and blaming the government for failing to protect them (for instance). I’ve read what you’ve had to say on the subject before, so it didn’t surprise me, but if I hadn’t, I would have guessed that your response to the plight of the underwater folks to be less sympathetic than it is.Report

          • DensityDuck in reply to Will Truman says:

            What happened, in general, was that people went to professionals and asked their advice, and those professionals said “interest-only 100%-financed adjustable-rate mortgages are the smart option that isn’t risky at all!”, and those people said “okay, the professional is saying this, so I guess that’s the right thing to do”.

            I do have less sympathy for someone who got into trouble because they tossed over their initial loans for a cash-out re-financing deal (which is also an interest-only 100% etcetera) and now says that they need government support to deal with the situation.  That involves a lot more agency than a first-time homebuyer doing what the person they paid for advice told them they ought to do.Report

            • Kimmi in reply to DensityDuck says:

              bububuuu da stupidity, it burns!

              (sorry, this is more a rx to you doing this every other place, instead of having a serious conversation)Report

            • What is your position with regard to student loans? Those that took out loans (because they had to) and went to college (as they were told, over and over again that they needed to do) and entered a job market that did not provide them the means to pay back the student loans (as it was largely supposed to)?

              (This isn’t an attempt at a “gotcha” question. I struggle with both of these issues. I see a stronger argument for ratcheting down mortgages than student loans, but primarily on practical grounds – lack of mobility is a cost to society and not just the individual – and not because I view the one group as more sympathetic than the other.)Report

              • DensityDuck in reply to Will Truman says:

                Same thing.  A student could have always gone to a less-expensive college, just like a homebuyer could have always bought a less-expensive house.  And everyone everywhere was telling them that the proper decision was to buy as much as you could possibly afford, because “prices were always going up”/”someone with a college degree earns 10000% as much” and that would make it easy to pay back.

                The issue is about informed choice.  I don’t find someone as culpable for a choice where they made an effort to become informed, and were informed badly, and moreover informed badly in the same way by everyone they asked.  Even if the prospective student had gone to another person and asked for advice, they’d have heard “go to the best (most expensive) college you can find!”  If the homebuyer had gone to another broker, they’d have heard “get a no-down option ARM!”Report

              • Fair enough. Thanks for the explanation.Report

              • Interesting take and I have to say this is somewhere where we’re in agreement.

                I apologize for the original snark.Report

    • Kimmi in reply to DensityDuck says:

      I sure as hell would! You damn well ought to ahve enough insurance to pay for your house to be rebuilt. if not, you’re the one who ought to bear the burden.Report

      • DensityDuck in reply to Kimmi says:

        Insurance will only pay you the market rate to rebuild the house, and if you didn’t have significant equity then you’re on the hook for whatever is left on the mortgage.Report

        • Kimmi in reply to DensityDuck says:

          so you rebuild the house, then? and live there? The market rate to rebuild my house is FAR FAR more than how much my house cost for me to buy. it has undergone significant devaluation in the past 70 years.Report

          • DensityDuck in reply to Kimmi says:

            The mortgage is a loan with the original house as collateral.  If the original house is gone, then the loan has to be repaid right then.  The bank won’t loan you money to pay for a house that doesn’t exist, and they can’t take anything other than the original house; if they foreclosed on the mortgage then they don’t get to also take your furniture and your clothes and your DVDs and such.

            The assumptions all along were that people didn’t finance 100% of the purchase price and that the price always went up.  These things aren’t true anymore, meaning that someone can be in a situation where the replacement cost is less than they owe.  It’s like cars.  If you wreck your car, the insurance won’t pay off your car loan and buy you a new car; they’ll give you the Blue Book value for the car that you actually had.  If this amount is less than you owed, then you have to pay back the rest–right away.Report

          • Kazzy in reply to Kimmi says:

            I’m pretty sure you can pay a higher premium and ensure “replacement cost” under certain circumstances.Report

            • Kimmi in reply to Kazzy says:

              Ding! this is what I’m talking about.

              DD seems to be saying that replacement cost can be less than what the bank thinks the property is.

              Can you pay more, and just get a flatfee back? I think that’s possible.Report

              • Kazzy in reply to Kimmi says:

                You’d have to talk with an insurance expert. I know we paid a bit more because the insurer valued our home at more than the cost of it. If it is destroyed, we would need more mone to rebuild the same house than we paid for it. Insurance would rebuild it while we would still owe the balance of the mortgage.Report

              • Kimmi in reply to Kazzy says:

                Call that insurance agent. I doubt you have “replacement value”, as opposed to appraisal value, unless your house is pretty new. Replacement value is the amount it would cost to get your home back (ours uses plaster in the walls. do you have any idea how much plaster walls cost nowadays??)Report

  5. Kolohe says:

    Using Prince George’s County as an exemplar for anything is generally a bad idea, it’s probably the most suis generis county in the country.Report

  6. Burt Likko says:

    I understand the argument that the bank eats it one way or the other — either the bank eats it on the foreclosure or the bank eats it on the write-down. And let’s leave aside the argument that a government-mandated write-down would constitute a “taking” under the Fifth Amendment and thus put the Federal government on the hook for the bottom line of the write-down. So, okay, I can see the argument that write-downs ought not to be treated like anathema amongst responsible policy architects.

    So if we could wave a magic wand and get write-downs on overvalued mortgages, who should get the write-downs? Allow me to submit that the most benefit from the write-downs would come from home loans that have principal amounts of between $100,000 to $500,000, are underwater by a third to two thirds, are owner-occupied, and — this is key part — are not in default.

    Such homeowners are employed and of sufficient means to increase their standards of living by way of increased consumption from the write-downs, and thereby stimulate the economy with increased money derived from lower mortgage payments, and likely to remain in possession of the homes and thereby keep that stimulus (at least in part) local to their communities and maybe grow the economy some more.

    But this isn’t who would get the write-downs, is it? Such homeowners don’t need this benefit because somehow they are keeping their heads above water. The write-down will be aimed at places like San Joaquin County, where there is not significant economic infrastructure to support economic growth, in the hopes that those homeowners, who don’t have jobs to pay even reduced mortgage rates, will somehow magically benefit from the write-down. But when your income is $900 a month in general welfare benefits, it doesn’t matter if your mortgage is $2,000 a month or $1,000, because you still aren’t going to pay it. Sooner or later you’re going to default. Then the bank eats it again, the homeowner’s putative wealth is gone, and the write-down didn’t do any good.Report

    • Nob Akimoto in reply to Burt Likko says:

      So essentially so far as I can tell the basic housing crisis isn’t really a foreclosure but an equity crisis. And not just a “negative” equity crisis where people are underwater, but that overall equity has fallen for everyone and as a result has had a substantial impact on the spending habits of people as a whole.

      The more basic, fundamental problem is that we’re not seeing private consumer deleveraging going as fast as it needs to go, because there’s far, far too many obstacles to do so.

      Maybe a write-down in every pot is the only real solution…of course in which case we’re talking probably a devalutation of somewhere from 10-15% of a bunch of assets on the books of major banks…which can in the end create some solvency issues for the likes of BofA or Citi.Report

      • Will H. in reply to Nob Akimoto says:

        This is where I get grumpy.
        In 2007, I had a failed franchise start-up and the outstanding debt that comes with it. This is dealt with in the tax code as a carry-over loss. You can carry it back (which is the smart thing to do) for up to three years and reclaim your federal taxes paid, or carry it forward for up to twenty years and they whittle away at it in the meantime with disallowed deductions.
        I paid off over $18,000 in debt, and a person who was a debtor to me filed for bankruptcy. Their mortgage debt was reaffirmed in the Chapter 7. This was a home whose sale price was $130k (more than double the value of its previous sale only a few years earlier), and the mortgage was written for $140k, because there were some goodies that they wanted to fill the home with.
        In the meantime, I had located an apartment building that I wished to purchase and occupy one of the units. After I had already been approved, though I needed to move some money around to provide for the downpayment, I was bitten by a brown recluse during one of these periodic insurance lapses. Here comes the ER bills. And that wiped out that idea.
        And since then my debt has grown. A 30% gain in the market one year, followed by a 70% loss the next. I was too busy to manage it properly.
        And so, when I see someone who was handed a free ticket the one time (actually twice) on the verge of being handed another, while I am still over here struggling to pay down debt, it makes me grumpy.
        Now, I already know that I’m going to come out on top again. And I know that’s going to take an awful lot of hard work and effort on my part. A lot of going without sleep. A lot of missed meals. A lot of driving for hours at night to make it to such-and-such by some appointment time.
        I’m willing to undertake that effort.
        And I’m not going to say, “It’s a challenge,” or some crap like that. It’s just a way of life.
        But I don’t want to carry someone on my back that done fished me hard three times over while I do that.
        That’s just too much to ask.
        Mark me down as ‘opposed.’Report

        • Nob Akimoto in reply to Will H. says:

          Just for argument’s sake, you’d also be part of the write-down. That is to say, the point of a “write-down in every pot” would be to give EVERYONE some relief, and to particularly spread it to people who aren’t default risks in order to free up their equity for consumption purposes.Report

    • DensityDuck in reply to Burt Likko says:

      The issue is that people who are underwater cannot leave.

      One of the key parts of the American economy is the ability to follow the jobs.  You don’t like the job you’ve got?  Get a better one! …somewhere else.  To make the libertarian concept of an economy work, the workers need freedom to move from one place to another as employment requires.  If you’re underwater on your mortgage then you no longer have that option, because you’d take a big financial hit to sell your property, one which most people could not reasonably be expected to support.

      “home loans that have principal amounts of between $100,000 to $500,000, are underwater by a third to two thirds, are owner-occupied, and — this is key part — are not in default.”

      Maybe they aren’t in default right now.  But that doesn’t mean their owners aren’t living paycheck-to-paycheck with no money in the bank, praying that they don’t lose their job or wreck their car or their kid gets cancer.

      You think:  “Well then obviously they bought more house then they could afford, and should have rented instead so that they’d maintain a cash reserve!”

      And I’m reminded of that guy in Airplane!, saying “they bought their tickets, they knew what they were getting into, I say let ’em crash!”Report

      • Kimmi in reply to DensityDuck says:

        I’m going to hold a gentle mirror up, and I hope you take this gently, cause I ain’t too good at saying things gentle like, but that’s how it’s meant:

        Are you certain that your feelings of sympathy for these folks are not in some way because they feel like they’re part of your ingroup?

        Just a gentle check, mind.Report

      • BlaiseP in reply to DensityDuck says:

        I’ve seen otherwise.  The old adage about owing the back ten grand is your problem, owing the bank half a million is the bank’s problem — comes to mind.   These days, bank officers can be punked quite severely.   Just tell ’em they’ve got a choice:   let you rent the house to someone and sign the rent checks over to the bank, or watch you move out anyway and let them deal with the fallout of a foreclosure.

        They’ll always go for the rent option.Report

        • DensityDuck in reply to BlaiseP says:

          So your solution to the mortgage crisis is to encourage underwater homeowners to walk away?

          How is that different from requiring banks to write down principals?  Either way there’s a financial loss.  Frankly, I’d rather go with the option that doesn’t start telling Americans that it’s morally acceptable to default on borrowing.  It would work, once, but interest rates afterwards will make today’s credit cards look cheap.Report

          • Kimmi in reply to DensityDuck says:

            that’s inflation.Report

          • BlaiseP in reply to DensityDuck says:

            Now, Duck, if I have anything to say, I’ll say it.   Meanwhile, you can work with what I have actually said, not that you ever do.   What a waste of time you are.   Morality doesn’t enter into it.  The bankers who decided to loan all that money are the ones who are going to have to fire up their calculators and decide anything.   They weren’t terribly ethical when they kept on issuing mortgages to folks who bought those overpriced homes so they could live within commuting distance of their now-non-existent jobs.

            Fuck the banks.   I pulled apart a working rules set for Citigroup which once used to turn down loans and rebuilt it so it would just issue loans at a higher interest rate.   Back then, they were telling Americans to come on in, the water was fine.Report

            • DensityDuck in reply to BlaiseP says:

              “What a waste of time you are.”

              Your proposed solution to lying and thievery is to be even bigger thieves and liars, and I’m the “waste of time”.

              I guess your Realtalk attitude isn’t so surprising, though, given that your proposed solution to Afghanistan is to pull out and let all the dirka-dirka sand niggers kill each other off.Report

              • North in reply to DensityDuck says:

                Your proposed solution to lying and thievery is to be even bigger thieves and liars, and I’m the “waste of time”.

                Blaise was harsh DD but lets not be hyperbolic. Defaulting on a mortgage is not lying or theft. The option to default is implicit in the mortgage, that’s why they get the property. Heck, upstanding corporations routinely strategically default on debt and enter in bankruptcy to screw creditors and shed debts. It’s certainly bad to jump out of your mortgage (and you pay for it on your credit score for years after) but it’s not theivery.


              • BlaiseP in reply to DensityDuck says:

                That is exactly my solution, Duck.   Neither a borrower nor a lender be, if you haven’t got a thorough grounding in underwriting and statistics.   As for Afghanistan, my solution is not one whit better:  my solution would work by creating a ferocious little cadre of well-educated, well-fed and exceedingly well-armed boys ‘n girls who would take those dirka-dirkas out behind the barn and beat them into the 21st Century, a decided improvement on our current strategy and tactics, summed up in “Piss off every Afghan”.

                There’s a difference between you and me, Duck.   My thinking revolves around one axis, the efficient use of power expressed in three aspects of control:  Timeline, Deliverable and Burn Rate.   Words I live by, if you do not, sitting there, wagging your bony finger about the morality of Lying and Thievery.   Maybe you’d benefit by a brutal introduction to the 21st century, too.Report

              • DensityDuck in reply to BlaiseP says:

                It’s always funny to see someone who thinks that living a long time means you’re wise.Report

  7. Kimmi says:

    Simple Solution Looms:

    Inflate the living hell out of our currency.

    This does a lot of things simultaneously:

    1) Quashes student loan debt, the main drag on “more people entering the housing market”

    2) Makes houses affordable

    3) Lets people who are underwater sell, and move to places where jobs are.

    Market-based solution — the type Friedman or Mises would line up around — and Krugman too, I don’t doubt.


    One of the big problems is that people have been systematically getting poorer since the 1950’s (stats cited later, I promise). In the last 30 years, it’s become common practice for people “keeping with the joneses” to steal from their retirement (which is chronically underfunded), to steal from their housing equity, and to in general buy really shitty piece of crap things (like new houses and clothes!) in order to keep up appearances.

    Those stupid communities built for no reason aren’t coming back, y’all. My liberal friends want some pineapple greenhouses — but hell, they’re the creative sort.

    Someone said that every suburb saw a boom? Ain’t the case where I live. Hell, our city’s still got a 20% vacancy rate. Couldn’t bubble, cause there were still too many houses.Report

    • Will H. in reply to Kimmi says:

      That “solution” is set to happen anyway. Everything is already in place, and there’s likely very little that can be done to stop it.
      The big problem with that is something known as the “sticky wages effect.”
      Standard Keynesian theory, which has been used by both parties to reduce the standard of living since JFK.
      And it’s coming BIG.Report

      • Kimmi in reply to Will H. says:

        cant’ stop the problem of reducing the standard of living, we were riding pretty high in 1950… Unless we bomb the rest of the world back to the stone age.

        What we can do? Stop misreporting things — see shadowstats for some true inflation stats.

        Also, unions.Report

        • Will H. in reply to Kimmi says:

          It has to do with the factors of production. Labor has a lag effect.
          That’s why stimulus is supposed to be counter-cyclical.
          More stimulus, more lag; more reduction in the standard of living.Report

        • Simon K in reply to Kimmi says:

          Kimmi can you explain to me how Shadowstats derives his inflation numbers? Because as far as I can tell he’s just adding 5% to the BLS numbers while peddling some untruths about how those BLS numbers are derived. That 5% is the difference, roughly, between wages having doubled since 2000 and having risen by roughly 30% – you’d  think more people would have noticed something like that.Report

      • Simon K in reply to Will H. says:

        I would be you a whole Romney that inflation won’t rise over 5% this decade unless the Fed significantly changes its policy  target. I feel safe in that, since bankers voting for inflation they didn’t price in already is about as likely as turkeys voting for Christmas. I think you’re probably assuming that inflation correlates in some fairly simple way with the money supply, or to put in another way that the base velocity is constant. It isn’t – the base velocity collapsed in 2008  as liquidity in the financial system dried up and remains very low. Around the same time the base spiked. Although that’s partly an artifact of the fact the Fed started paying interest on bank reserves in 2009, thus increasing their quantity and reducing the likelihood of the banks withdrawing them, that doesn’t change the fact that there’s no sign anywhere of that vast increase in reserve volume causing inflation at undesirable levels – the 10 year TIPS spread, the closest thing we have to a market inflation forcast, remains just over 2%, implying that’s the average expected rate of inflation over the next 10 years.

        Also, I think you’ve misunderstood the point about sticky wages – an idea from New Keynesian economics that didn’t become current until the 1980s. Wages are sticky downwards, meaning that workers get fired rather than having their salaries cut during deflation, but there’s not much evidence that they’re sticky upwards. Typically people don’t resist pay increases, and employers must offer higher pay when they need to increase capacity in order to attact new worker.s




        • Will H. in reply to Simon K says:

          I find it useful to view velocity as an average over a period of time.
          The only theory of money supply with which I am familiar distinguishes different types of money; M1, M2, and M3.
          It is the sharp rise in M1, liquidity, that I see as having an effect on inflation.
          We see that now as historically large corporate reserves. Rather than purchase of goods, this has produced increased dividends, which I view as a more orderly re-introduction of excess liquidity.

          The Phillips Curve demonstrates an inverse relationship between wages and unemployment.
          The graphs I have seen show the sticky wages effect rather plainly. I am having trouble coming up with any online links; but the data is sound nevertheless.Report

  8. BlaiseP says:

    I can speak to Gwinnett County.  During the 90s, I helped move factories from Japan to that area.   Now many of those factories are gone:  the tax incentives disappeared and with them the factories themselves.   Now they’ve gone to other states which are still playing this idiotic game of Beggar Thy Neighbour.

    The housing boom came when those factories were installed.   If that real-estate Wasteland all along Jimmy Carter Boulevard has not recovered, the answer lies in the first paragraph:  the level of economic output does not support anyone living there.

    Perhaps, if those homes had been constructed like the factories themselves, we would not have this problem.   Those factories were built on cement slabs, big barn-like structures of cheap galvanized paneling which could be rapidly assembled..   Much of the machinery was transported to Gwinnett County and was transported away.   That which can be easily transported and assembled can be just as easily disassembled and transported away.   Hi-ho Alabama, here we come!Report

    • DensityDuck in reply to BlaiseP says:

      It is certainly true that the American assumption has always been “your home is your community is forever”.

      On the other hand, nobody ever expected that the factory would leave or the mine would close.Report

  9. Damon says:

    This issue has hit me.  We weren’t underwater, but we lost @ 200K in Market Value for our house while my ex and I were trying to sell for the divorce.  We were lucky that we got out of it what we’d put in, little more.  I knew there was a bubble when we moved into the place @ 8 years earlier than the crash.  It was obvious.  When you hear radio adds for “zero down payments” mortgages, they are scraping the bottom of the barrel.

    The problem is that the housing prices have not reached the “market clearing price”.  It took two years for us to find a buyer and we dropped the price two or three times.  The banks don’t want to dump the houses and take a loss, but that’s the only way things are going to get fixed.  No, they instead get bailouts to prop their balance sheets up while everyone else suffers.  As long as that continues, this “problem” will continue.

    As for those “under water”:    Choose whether or not you want to stay (if you can afford it) or not.  If you choose not to stay,  WALK AWAY.  The banks are looking out for #1 (themselves).  You do the same.Report

    • Will Truman in reply to Damon says:

      It’s worth noting that not everybody can walk away. I fear a lot of people are heeding the “walk away” advice in recourse states.Report

    • DensityDuck in reply to Damon says:

      Note that if you walk away from two mortgages, the second lender can still burn you even if the first one gives up.  Even bankruptcy doesn’t get second mortgages dissolved.Report

    • North in reply to Damon says:

      Just to make sure useful information is getting out on this subject (it is capital I important):

       The following states are non-recourse states. If you walk away from your mortgage the bank will forclose, burn your credit rating to the ground and then be done. They can’t do anything more to you:

      • Alaska (AK)
      • Arizona (AZ)
      • California (CA)
      • Connecticut (CT)
      • Idaho (ID)
      • Minnesota (MN)
      • North Carolina (NC)
      • North Dakota (ND)
      • Oregon (OR)
      • Texas (TX)
      • Utah (UT)
      • Washington State (WA)

      If you do not live in one of those states consider your options especially carefully before walking away from a mortgage. The banks will take the house, wreck your credit rating and then come after you for the difference between your mortgage and the sale price of the house they took back. You’re on the hook for the entire amount of your mortgage regardless.Report

  10. Jaybird says:

    At a bare minimum, a house is “worth” the land it’s on, the materials to make it, and the labor to put those materials together (and there’s some electrical/sewer/gas associated costs, I suppose).

    I imagine we could add a small premium on top of that to qualify as “profit” for the corporation acting in the role of manager to get all of that stuff together.

    Two houses in two different parts of the continental US should have a price difference based on little more than land value (and, perhaps, labor costs). There ain’t no reason that a house should cost $700,000 here and $160,000 there if the land isn’t worth around a half-mil.Report

    • MikeSchilling in reply to Jaybird says:

      A house is worth what someone will pay you for it.  If it’s surrounded by other abandoned houses, that’s going to be the salvage value of the fixtures.Report

      • Jaybird in reply to MikeSchilling says:

        True dat. The pendulum is swinging the other way and swinging hard.

        I boggle every time I hear discussions about “housing starts” numbers on the morning news. I have no idea why it’s not “effectively zero”.Report

        • Kimmi in reply to Jaybird says:

          Because Pittsburgh!

          Lower unemployment, Higher Number of people in the Workforce, that’s our February numbers.

          (seriously, it’s not actually us, because we still have vacant homes, and a lot of them… from the 70’s bust)

          But somewhere, someone’s headed up, (right, that’s North Dakota! Home of $90,000 workers living out of the backs of pickup trucks. In North Dakota)Report

    • Kimmi in reply to Jaybird says:

      nobody pays the actual price for a house. they pay the depreciated price of the house.

      my land value’s a lot, for my home.

      But land value is basically all about “how much do people want ANY house there” which means school districts and amenities. It’s a handy way to wrap up the value of place.Report

      • Jaybird in reply to Kimmi says:

        This was not the case as recently as 5 years ago.Report

        • Kimmi in reply to Jaybird says:

          well, yes, I’m buying at bottom. Everyone else bought on the assumption that the value would go up. Like stocks, they’re almost never for “current value” but “what I think it’s gonna be soon.” It’s a built-in.

          thing is? people are shit for figuring out that their suburb is gonna turn to shit over 30 years, just like everybody else’s will too. (housing prices tied to school district, which is tied to taxes, which people without kids don’t wanna pay).Report