If you buy a house for $400k, and suddenly it is worth $300k, you don't need to be "bailed out" for your purchase decision. You should have been certain that the house was worth $400k to you at the time of purchase. Otherwise you're a speculator, and we shouldn't be bailing out speculators.
It's called buyer's remorse. We accept it when it's a car or a TV, but suddenly when it's a house we're supposed to give massive government support to correct the buyer's mistake?
https://en.wikipedia.org/wiki/Greenspan_put
More pointedly, you're not in a position to block equity capital markets reforms in the way homeowners are in respect of housing reform.
Also, making the public hold the bag in a bubble is perhaps the most sinister form of theft imaginable.
so you know: most localities do treat the house you live in very differently from a tax perspective than they do any additional properties you might have, because everyone is born short housing, until they own 1 place to live.
so yes, the proposed bailouts up thread would be for people who bought a house because they didn't want to be short housing; a hedge, not an investment.
also if the house has hedges then your hedges are a hedge. I'll see myself out
And let's not even get to your point about hedges. I don't know many people that can define it let alone consider housing as a hedge.
These are two distinct things that are coupled through life choices. It's a real pity that tax regulations are different just because you make individual life choices.
It isn't always, but sometimes it is. Through regulations, through monetary policy, through other policies.
Now if the government decides that you, you personally, standardUser, are going to lose $100k, I don't think the government should bail you out. It's called "moral hazard". You lost $100k. Deal with it.
If the government decides that I, me personally, am going to lost $100k, I would say that I am old and I vote in every single election, and despite my failing memory, I will remember that lost $100k until the day I die and no politician who voted for that will ever get my vote again. I will remember who did that to me.
I think it always is, frankly. The price of pretty much every single house in the US[0] is a function of decades of government housing policy. And I don't think it's particularly fair to say, "oopsie, our housing policy since before you were born was kinda bad, we're going to fix it right now, but it's going to put you underwater on your mortgage... sorry, but you'll have to just deal with it".
[0] Sure, maybe this isn't the case for an off-the-grid cabin out in the woods, far from any town, but that describes a teeny tiny portion of the housing stock.
A car or a TV are much smaller investments relative to a house. Over a decade of savings is tied up in my home. If the ass drops out of the market, myself, and others like me, who have broken into the market without assistance at the peak of housing prices will be virtually permanently financially set back. And to call buying a house around this time a mistake is crazy. I would be as much a speculator if I continued to rent and pay someone else's mortgage, hoping that prices dropped so I could get a good deal. It's a home and this attitude of treating homes as investments or mere purchases is why we're in this mess in the first place.
(¹I don't want to get too much into the sidetrack that is "but if you're underwater you could lose your home" — yes… that's possible. The example here is a 20% fall in prices — which would be astounding to those of us wanting a home, the thing of dreams — but you put 20% in the down payment, so a single mortgage payment & you're no longer underwater. In reality, the price drop (in rent, but let's work with what we got) was 3.7%. (Don't get me wrong, I'd take that too, as a renter.))
Even regardless of that, I don't love the idea that a change in housing policy could make people feel trapped in their current home, unable to move. Granted, current housing policy (e.g. California Prop 13) has that effect on some people already. And I bet it sucks. Now, I'm not sure the government should be bailing out people who can continue to pay their (now underwater) mortgage but would just like the option to sell it and move. But I think this requires a bit more thought than just wielding that axe and letting things fall where the are. I mean, hopefully we're not advocating for more of the DOGE method.
The median isn't even 20%, it is a bit less than that. Median first-time home buyers put only 9% down. Even the median repeat buyer, who just sold a house and had probably been paying mortgage payments for a while, only put 23% down.
https://www.nerdwallet.com/article/mortgages/average-down-pa...
But you are right though, a 3.7% drop probably wouldn't put even most first-time home buyers underwater.
I'm not saying we shouldn't make housing affordable, but it's worth considering the impact for everyone.
Isn't that missing the forest for the trees? There's an all-out class war between the haves and the have-nots. If it controls supply like a cartel, and if it pursues rent-seeking like a cartel, then maybe the real estate moguls and speculators that treat everything like an investment instrument should be held accountable and liable.
You hope conditions won't change. You can look at the current market trends to try to value it. But things will change in the next few years probably. You can guess, but you'll never "know with pretty good accuracy". The economy can go down, interest rates can change, major employers can come and go, there can be an earthquake or cancerous ground discovered there.
A mortgage is a loan that gives you money you don't have (yet). If you are spending money you don't have, do it wisely or suffer the consequences.
I think no special treatment. Everyone else in the same space has the same rules/uncertainty as every argument you offered.
Also, if continuing the building ends up requiring some policy change (supported by changing laws and regulations)… it seems reasonable to protect normal people, doing normal things, from massive financial chaos that is explicitly caused by the government changing policies on them. At least for people actually using the houses as intended, that is, living in them.
Why? If it makes society as a whole much poorer.
The convention is fairly recent and the cause of enormous problems.
And I agree with you, it's a bad convention, and it causes tons of problems, and it's the result of recent decades of bad mortgage/housing/zoning policy. But we can't just wipe it away and pretend it was never there, and let the chips fall where they may. That's just heartless, and, well -- you talk about making society poorer -- that will make society much, much poorer, nearly overnight.
And that is a big part of the problem. You cannot have it both ways, if housing is an investment, it will eventually lead to poorer outcomes for anybody that needs a house and does not inherit one.
It's not that we shouldn't desire cheaper homes, but we should realize that people who paid $400k are largely not speculators. They bought what the market was willing to offer.
The difference is order of magnitude as proportion of net worth and the necessity of the purchase.
Being underwater does not cause a liquidity issue.
It's the government's fault that this bigger-fool game even exists, because the buck always stops there. They might want to consider compensating people for the misery they caused.
A $400k home is probably a starter home. Owners are probably a young couple (millennials). They probably want to have kids.
Forgiving 100k of their debt means they (and their kids) will have a fair chance at success. Earning more money. Saving more. Paying more taxes (over their life times).
For the person who ownes multiple houses and buys simply to rent and flip a profit well I have very little sympathy for them. They are the true speculators.
That's not how mortgages work (in the US, anyway). If the value drops, nothing happens, you still have the same house and same mortgage.
I've been underwater twice, in the same house, as prices go up and down over the years. As long as you still like the house and want to continue living there (I did), being underwater doesn't mean anything.
When you have to put an "If" in front of "being underwater doesn't mean anything", then that means sometimes it really does mean something.
I feel a little sorry for them but they are not missing the money total of "the whole house". They can sell the house, have a shitty $100k debt, a tale of woe, and hopefully a better idea of how to go about spending money they didn't have.
I feel there are too many people who "borrow as much as they can for the best house they can get" rather than being sensible about their money and using a mortgage as a hedge against paying rent and future rent raises. Some of them make it, some of them don't.
this sounds more like a suicide pact than a plan.
I don’t understand this point. If you’re paying the mortgage, the bank dgaf. Is there some sort of margin call a bank can claim on a house that is worth less than it was when it was purchased?
Don’t you just pay the mortgage you agreed to pay the bank?
The problem in this eventuality is mobility: if you buy a house for $400k, live there for, say, 5 years and the resale value of your house is at $300k, that's going to be a big problem if you have (or just want) to move. If you sell at $300k, you'll have about $50k left over (after repaying the bank) for a down payment on your new house, which means you can only afford a $250k house, which may well not meet your needs.
If someone is planning to live in that house long enough such that when they do want to sell it, they can move to a new place that meets their needs, at a price they can still afford, sure, great. We shouldn't be bailing those people out.
> You should have been certain that the house was worth $400k to you at the time of purchase. Otherwise you're a speculator, and we shouldn't be bailing out speculators.
That's absurd. Aside from people who buy too much house ('00s, anyone?) and regret it later, people pay the price they have to pay for the amount of space and location they believe they need. Most people -- very understandably -- don't know the dynamics of the housing market to the point that they'd be able to predict that their resale value might go down by 25% at some point in the future, because, historically, that's just not what home prices do. (And don't parrot the "past performance is no guarantee of the future" crap... yes, true, so what. Most people unfortunately can't plan their lives around that.)
These people aren't speculators... speculators are buying to flip, or to hold and resell, as investment properties. These are just regular folks who need a place to live and have -- regardless of prudence or correctness -- bought into the idea that owning their home is the next life stage, a proof of success and well-being. Calling people like that speculators shows a severe lack of understanding and empathy.
> It's called buyer's remorse. We accept it when it's a car or a TV, but suddenly when it's a house...
A car or a TV costs nowhere near as much as a house. Losing a car or a TV is not going to make someone homeless. Housing is a basic need, and housing security is essential in a healthy society. (Granted, in many places in the US, losing your car can lead to financial ruin as well, sadly, considering how crucial a car can be to many people for basic things like getting to work.)
Your house losing 100k$ in value isn't going to make you homeless either (quite the opposite actually). If you buy a house and it depreciates, so what?
Not to mention if everyone's house depreciates, your new house is cheaper to buy. You lose _nothing_, except imaginary dollar values.
> Calling people like that speculators shows a severe lack of understanding and empathy.
I don't know what you call preventing young people from buying, or even renting, at affordable prices so 'people like that' don't have a possibility of losing some money, but you sure as fuck don't call it empathy either.
I think it's pretty normal for rational purchasers to consider the resale value of something that they purchase, and hand-waving that away doesn't make for a very serious argument.
Making any guarantees as to the future worth of these items is craziness.
That's dumb. But that's the reality we live in.
Viewing a home as some kind of investment vehicle is everything wrong with the housing market today. It’s so wrong it makes my head spin.
When the speculators vote, yes, you need to bail out the speculators.
> It's called buyer's remorse
It's called building consensus. At the end of the day, if it costs making homeowners whole to gain their buy in to solve the housing crisis, that's money well spent.
I'm not saying what I'm proposing is fair or even palatable. But it's functional. If solving the housing crisis is more important than aesthetics, it's a good move.
In non-recourse states, you'd expect to see defaults as people leave the keys in the mail to reduce their housing costs by moving next door at the reduced price or rent. More broadly, people don't like seeing their wealth go down.
> Is a tax dollar better spent placating grumpy homeowners
If it gets you the reform, yes. The point is you don't get housing reform with grumpy homeowners barring a massive shift in voting patterns.
Also, let's keep scope in mind. You only need to bail anyout out if you reduce home prices. If you hold them constant in nominal terms, that shouldn't generate pushback. (If you hold them constant in real terms, people can continue feeling wealthier.)
There really isn’t an easy and elegant way out where you neither pay off the haves nor pitch the have nots majority against the haves.
The first order consequence of treating housing as an investment vehicle is high prices, sure, but the second order consequence is that you dramatically increase the stakes when individual people buy any house whatsoever.
I would much rather give checks to every homeowner whose home value falls than to force even a single laid-off autoworker or whatever into bankruptcy (good luck buying a home after that) if they elect to move somewhere else for a new job and can't sell their house for enough to pay off their mortgage. If the consequence of a government policy to build more housing is that more people become homeless, then its failing.
