Rising Foreclosures are actually BULLISH for the economy - let me convince you in this thread

reply to post by GreenBicMan


ok but you are missing my point either way its still less than the 1200

reply to post by GreenBicMan


so its net +300 or +1200 depending on what stage

The thing is whichever way you state it, you are looking at it from a very limited perspective. because you say this happens then leads to more money spent by a family. Therefore contributing factor to bull market.

However in reality foreclosures have so many ramifications besides the money spent/saved from not having the mortgage that it in the end the negative outweighs the positive. If you consider the net impact in your theory, including the many negative impacts pointed by other members in the thread, I disagree that foreclosures are bullish.


But I agree that they may increase spending to some extent. So I agree with your theory, that there is ONE benefit to foreclosures

reply to post by tedpi


bhahha

4.25 people now agree and one passed out pirate that ate at dennys this evening

whos jumping on board next?

I pick b), I disagree
reason: your example if I understand it is; family has the means to pay 1200 mortgage, by decision does not pay and go into foreclosure.

That is the exception to the rule, therefore imo by using the exception to the rule it is not true to the rule.

The standard rule I'm going by is what I've seen personally from all my coworkers and neighbors: reduction in income(usually drastic) and being unable to meet the 1200 mortgage, any spending during the time awaiting foreclosure was for necessities and the occasional birthday(extremely limited spending then) so that savings could be made to procure a rental.

Unfortunately the cost of rentals is roughly equivalent to the current income , thereby not allowing for much consumer spending.

The one part I do agree with you on however: people will spend on frivolous, unnecessary items for birthdays' and Christmas.

As far as the GDP goes, the rise of the GDP has had an overall negative impact on the US economy. The means in which companies and cooperations have shown an profit bringing the GDP into an upward swing
has resulted in furthering the reduced consumer spending and increasing the opportunity to escalate the situation.

So it seems to me that you have taken the exception to the rule here and used it as a means to put a positive spin on the volatile stock markets.

reply to post by GreenBicMan


People have a tendency to live beyond their means, and due to varying reasons, take out IOUs that accumulate interest that they cannot pay off (usually).

You seemed to have discovered this and told it in an interesting way.

Now if you'll excuse me, I have to go buy something using my credit card!

reply to post by GreenBicMan


Bullish for what country's economy, you didn't say.

I believe, for a variety of reasons, your POV is short-sighted and skewed. If we are assuming that the consumer economy is going to become credit-less and entirely cash-driven then maybe. With caveats.

A major portion of our consumer economy and growth has been fueled by consumer credit. That is being reeled back at a prodigious rate and any of our foreclosure families will lose all of theirs for an extended period of time. Foreclosure is helping to further concentrate real wealth into the hands of the few.

If you want to achieve the same result without people losing their homes then there is an alternative. I reject your assumption ---- and those of similar ilk --- that the problem is a result of 'people getting mortgages they could not afford'. That is simply not true and a fabrication by those who are trying to deflect responsibility. Keep one inescapable truth in mind: it is the BANK'S/MORTGAGOR'S sole responsibility to QUALIFY a mortgage applicant. They chose to falsify and fabricate applications and play fast-and-loose with the rules in order to knowingly qualify unqualified people. Yet they are bearing little if eny responsibility. Some would argue that they have been rewarded.

I would suggest that in lieu of foreclosure, people in trouble have their mortgages placed into a period of moratorium, that period dependant upon the length of time they have owned their home. Mortgage payments and interest accrual are suspended for 6-12mos at which point it picks-up where it left off. During that time the family has all that 'freed-up' cash to pay-down other (credit card) debt and lavish on WalMart and McDonalds. But they keep their homes.

Under this plan at least some of the people responsible for this mess take the hit instead of the victims. There are alot of us out here who have had our jobs and businesses gutted by other people's financial malfeasance and through no fault of our own. And contrary to what you --- or Rush --- may believe, we've been paying our mortgages for 10yrs in homes we most certainly could afford. And we would be continuing to do so had it not been for a banking/investment industry that was allowed to run amok by a government that was derelict in their statutory oversight responsibilities.

Originally posted by GreenBicMan
reply to post by truthquest

 

Did I say healthy economy? I said this will continue our bull rally.

My mistake. You could very well be right on that point. The stock market is a wild beast.

Originally posted by GreenBicMan
reply to post by truthquest

 

dude all i am saying is this family has 300 more to spend a month

you think they will save or spend (avg consumer?)

you have your answer

Right, foreclosures do pave the way for a healthier economy in the future by increasing the savings rate by force. Sort of like how dried blood that stops further bleeding is a sign of healing. While dried blood that stops further bleeding is a sign of healing it isn't a sign of good physical health. And while foreclosures are also a sign of economic healing they certainly aren't a guarantee the patient will live through the recovery process.

Edit - So yes I'd agree there really is something economically good about foreclosures... it does force up the savings rate.

[edit on 1-12-2009 by truthquest]

Also You have to think about that home owner who just got forclosed on now is more than not going to have a judgement on him/her. There is a good chance they will have any wages they may have garnished by court order. So if they were paying 1200 in housing payments they are going to have that amount in garnishment to cover the judgment and it could even mean more money that the original payment. This is what foreclosure does it doesn't just go away because your squating the banks can file a garnishment for that loan amount it it is approved you money is taken from you check before it's issued or cashed so there will be no $ 300.00 extra.......

Good post.
I’m the guy that’s buying there house or some ones just like them. It’s a good time to buy if you have the opportunity and the ability to ride out the down turn in the real estate market. I buy at a discount and rent out the properties for the cash flow, forget about the appreciation for now it isn’t coming any time soon.
The only problem I see in your theory is that what most renters don’t realize is that it is actually in most cases cheaper to buy a home. When I rent a property I make sure the rent covers all the expenses plus profit. That’s mortgage, insurance, taxes, etc.
So what I’m saying is your friends may be able to spend money irresponsibly now while there living in a home and not paying there bills. But when they re-enter the renters world they will have less money available for discretionary spending and if they think they can get away with not paying there rent, there buts will be out on the street in 60 days. Not a year like the banks takes to foreclose on a property. Trust me a good land lord will put you out on the street in the rain on Christmas morning if you don’t pay your rent.
And as far as credit goes, forget it, there not going to get a credit card or car loan for the next ten years. And with no house there are no assets to secure a loan to try and repair there credit.
So the way I see it, all the folks loosing there homes are going to be struggling to stay afloat. And with bad credit they will not be the kind of consumers that will be driving a healthy economy. In fact they will more than likely be a drain no the economy. Because my hard earned tax dollars will be used to subsidize them, in staid of being able to reinvest that money, grow my business and create jobs.

reply to post by murfdog


Interesting

Although in our area of FL it would be cheaper to infact rent a house (could be location) but I am sure not all cases are the same everywhere..

I guess I would be assuming that in these instances the rent or new payment would be either cheaper or non existant (as squatting in house they are not paying mtg. payments on anymore)

reply to post by jtma508


Well actually in this period currently, credit deliquencies are going down while foreclosures are moving higher.

Thats a pretty interesting fact to me, this could be good though in a lot of ways bc not only is Hank paying his credit card down, but will most likely spend on this card again once paid. But at the same time while he is paying his card off it is not going into a retail mkt place

But in reality, all I am arguing is the extra disposable income and I do not think I am wrong.

[edit on 3-12-2009 by GreenBicMan]

[edit on 3-12-2009 by GreenBicMan]

reply to post by Pappa_Bear


I do not know if I can agree.

I also think the uptick in GDP has a lot more to do with our easy money policy right now than anything, but that is a total guess

These mortgages are "securitized" by and large. The Derivatives market is directly tied to these mortgages, and the banks are doing everything they can to paper over these losses as they fear blowing up the Derivatives bubble, which is enough to deal a crushing blow to the whole world's economy. While this is certainly bullish in the stock market in the short term, the mid-long term outlook based on 1.4 quadrillion dollars in derivative hedge-bets could lead us to the path of global financial ruin.

Recently Tax Cheat Timmy decided he wasn't going to regulate "Certain kinds of derivatives'...Hmmm, could these "Certain kinds" of derivatives be all those hedge bets we call MBS and CDS financial instruments? What would happen if they had to publicly regulate them? Hmmm..They have to price them in, and such a move would open the floodgates and we'd all drown in a sea of unpayable debt. Not even a world war would get us out of it.

Bullish? I guess that would depend on who you are. The problem with day traders is that they only think in short term gain.

reply to post by projectvxn


bullish on short term -

or as long as Hank is paying less than his original mtg. IMO

reply to post by GreenBicMan


Agreed. It is very bullish short-term. And I hope you're putting your strategy into practice...But you too must have an exit strategy or you could wind up causing yourself a lot of financial pain.

reply to post by projectvxn


As long as FC keep rising this will continue to be the case. I have no idea how much/what it is affecting, just that I believe it is boosting the retail mkt. I am guesing

reply to post by GreenBicMan


It may be, but it is also adding to the derivatives bubble. People will come looking for their money eventually.