The true Mortgage Crisis

"We must stem the spread of foreclosures and falling home values for all Americans" - President Obama

In response to this quote the New York Post points out that there is no national market for homes and no national price for homes. Instead, most of the United States will pay for the folly of a few misguided individuals in mostly just five states, California, Nevada, Arizona, Florida and Michigan. In Nevada, 1 in 76 homes are in foreclosure and 47% of the mortgages are "under water" (i.e. the mortgage exceeds the value of the home). The national median for foreclosures in 1 in 949 homes; just 1 tenth of 1 percent, hardly a National crisis. NY is 1 in 2,271, Vermont 1 in 51,906 .

So what is unique about the 5 states with high rates of foreclosures? They had the most extreme housing pricing bubble. Even though California home prices fell 20.8% last year, they were still 50% higher than they were just five years ago. Eventually bubbles must burst and extreme prices brought back to reality.

So what's happening now? By looking at sales, you can see the free market is
working very well... Falling home prices are not the problem, they're the solution... If something becomes too expensive, cut the price. Or move.

Bottom Line
Most subsidized homeowners are NOT poor but they took on too much debt, often by refinancing in risky ways to "cash out" thousands more than the original loan. Nearly all subprime loans were for refinancing, not buying a home.