Monday, Jan 28, 2008
Coming soon to a city near you
Breitbart.com: US mortgage crisis creates ghost town
The streets are empty. Trash rustles down the road past rusted barbecues, abandoned furniture, sagging homes and gardens turned to weed. This is Shaker Heights, a suburb of Cleveland and a town ravaged by the subprime mortgage crisis roiling the United States. Faded "for sale" signs sit in front of deserted houses. The residents are gone, either in search of new jobs after the factories shut down, or in shame after being evicted for missing their mortgage payments. A red, white and blue American flag flies over windows and doors which have been boarded up to keep the drug dealers away. Thieves have stripped many homes of the plumbing, the doors, the windows, the aluminum siding.
Posted by lvmreader @ 05:36 PM (905 views) Add Comment
14 Comments
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1. it_is_going_with_a_bang said...
Is that not exactly the point? - the American Dream.
People were not living a real life they were living a Dream.
It's about time the Fed admitted the last 10 years of US life has been built on Bulls**t.
Much the same as Gordon's little Dream Economy.
2. drewster said...
Good post, lvmreader.
The banks are behaving foolishly. They now own a massive portfolio of derelict houses which they can't sell. The bank is losing money in several ways:
1: the cost of legal action and eviction
3: the lost interest while they wait for it to sell (which is taking longer and longer)
2: the agents' fees or auction fees for selling the house
4: the loss of value in the house itself, especially if sold at auction in a moribund market
The banks are bound to lose money if they evict. Why don't they spare themselves the trouble and just re-finance the mortages to more affordable rates? That way the bank still makes a loss, but a smaller one; and the owners get to stay in their homes. Alternatively the bank could repossess and rent back, again sparing people the hassle of moving and reducing costs for the bank.
Instead the banks will find themselves saddled with hundreds of thousands of houses which they can't sell, because those same banks will no longer lend to prospective buyers. Hoisted by their own petard.
3. japanese uncle said...
Yes the those banks' junior employees and shareholders will suffer. But those senior executives have already snatched millions in salary and bonus which allow them to retire in the comfort of a resort island, etc, golfing and fishing, on champaign and caviers for the rest of their lives.
4. Looselips Sink Hips said...
Do you think they really care?
"if the american people allow private banks,. etc to control the issue of currency the banks that grow up around them will deprive the people of their property until their children wake up homeless on the continent their fathers conquered"
Thomas Jefferson 1743-1876
5. Dave said...
"Thieves have stripped many homes of the plumbing, the doors, the windows, the aluminumn sliding....."
This is the collateral that the debt is secured against.
Not worth as much as it was a year ago I guess.
6. talking rot said...
I don't see what the problem is because it couldn't happen in the UK! Gordon Brown and Mr Darling would mely nationalise the banks and use taxpayers money to reimburse the b[w?]ankers who irresponsibly lent money to those who could not afford it. More £ will printed and life will continue as before!
Property values only ever go up, right??? The Government won't allow a banking disaster, right??? Northern Rock didn't happen and if it did, it was the fault of the last Government, right?
Oh dear.
7. lvmreader said...
@Drewster,
Interesting and very true point. This shows that the distressed debt markets are not working. It is the same about having a productive asset or person avoid bankruptcy: the costs to the lender and to the community are higher if they allow the person to descend into destitution.
Credit has been mispriced for far too long on both ends of the spectrum. There is an opportunity here.
8. Debtfree said...
Excellent post and a great article.
Couldn't help thinking ....who has lost out and why would the banks let this happen ?
Strange how the source of the problem originated at the central banks....and now the bank holds the title deeds.
Surely they would be better off lowering payments and having a healthy neighbourhood so the property doesn't lose even more value. Who on earth is going to buy a boarded up place with guards dogs barking at you ?, Half the street is empty with places that have no plumbing.. sounds like 1929 already.
9. planning4acrash said...
Oh, phew, TR, seems that you have started understanding money supply and stopped blaming planners for the housing bubble!!
I am now ducking under my screen! :p
10. drewster said...
lvmreader, where's the opportunity - for someone to buy up those repossessed houses on the cheap?
Or do you mean more generally in pricing credit to specific segments of the market?
11. planning4acrash said...
Simple, turn up to auctions. Tho I wouldn't for another year at least, except if you NEED to buy somewhere, but that is a very rare situation in reality.
12. lvmreader said...
@drewster,
I was talking about both in fact: you could by debt which is asset backed and get the assets.
I think that there is a good market for buying the debt of educated, experienced professionals, putting them into "reverse-ghettos" which are clean, crime free and well serviced and making back the money while preventing perfectly viable citizens from descending into rin.
13. Omg said...
You guys need to read the comments for some balance to this article. Someone who lives in Shaker Heights disputes that the author had even been there.
We spend all the time disputing the press when it comes out with bullish articles, we should not lose our objectivity when the news flow goes our way. You can only see the real picture by questioning EVERYTHING that is written.
14. Clevelander said...
Very interesting story. Too bad its NOT TRUE. This idiot from France wrote an article with fictitious street names, fictitious stores, fictitious statistics and the WRONG CITY! Shaker Heights is one of the most affluent cities in Ohio, there is no such street as Chagrin Street, no such grocery store as Eagle Fresh Supermarket and no tripling of police in Shaker Heights OR in Cleveland. Other than that, Mrs. Lincoln, how did you like the play?