At the Irvine Housing Blog, Irvine Renter kicks it old school with a straight-outta-2003 Fisking of a New York Times article on the Obama Administration's $3 billion flush down the black hole of unemployed, deep-underwater mortgage borrowers.
Unfortunately, Renter is calling out David Streitfeld, who has been among the sharpest eggs in the toolkit since the beginning of real estate's return to earth. But he manages to catch Streitfeld invoking a myth that should have been retired months ago (if nothing else thanks to, ahem, my regular coverage of it). This is the belief that foreclosures need to be prevented in order to protect surrounding neighborhoods. Renter writes:
Did you notice the subtle emotional lie perpetrated in the sentence above? Foreclosures do not weaken neighborhoods. As written, the sentence conjures up images of slums and shantytowns. The truth is that foreclosures lower prices in neighborhoods, but then employed renters move in and buy these houses and strengthen the neighborhood. Lower prices makes existing homedebtors unhappy because their dreams of home equity wealth are revealed as sad fantasies. Loan owners who surrender their dreams of HELOC riches do not weaken neighborhoods. If anything, making people focus on adding value and working for a living will strengthen neighborhoods.
I wish more people were making this point. It is offensive in the extreme to be told that by bailing out deadbeats and preventing prices from finding their natural level, the government is somehow doing a favor for the vast majority of Americans who are still making their payments on time, pumping money into a declining asset just because they pledged on their honor to do so, or, like poor Renter, living in lousy apartments while waiting for the real estate market to hit bottom.
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