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Traditional Values September 8, 2007

Posted by Who? in Random.
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What’s the relationship between subprime lending, sky-rocketing prices in real estate, Paris Hilton and Jesus?   

Creative/irresponsible lending products increase market participants  and at the same time increase buying power; result, increase in prices.  Seems simple.  Demand relatively outpaces supply and prices increase.

 A lot of different parties got to feast during the “pre-meltdown party”.  Fewer parties now bear the costs. 

Builders enjoyed increased unit-sales and increased revenue; prospective buyers previously unable to purchase were now able to get in the game and buyers across the board were able to purchase more home with the same income.  See: run in homebuilders around 12-18 months ago.

Builders doing well= economy doing well.  Stock market particpants indirectly benefitted from subprime products through any positive impact the market experienced.

 Up until the point where the shit hit the fan, homeowners watched their equity, if they had any, increase at an unbelievable rate.  Prices in Seattle are ridiculous; in other news, foreclosures in King and Pierce county are up over 150%.

Income-producing property owners received tremendous benefit, and continue to do so.   After your ARM jumps, renting at 75% of your previous mortgage payment doesn’t sound too bad.  Probably sounds great; now there’ll be an extra grand a month to pay of that 99″ flat-panel.  (If only rates hadn’t gone up, he could’ve upgraded to the 100″.  Damn you Subprime Meltdown.)  

 Anyone in the Real Estate Industry benefitted from the increase in activity.  Title and Escrow companies enoy increased unit sales.  Agents get to do the same work and get paid fat commissions.  Lenders get in increase in sales and an increase in fees as loan size increased.  The traditional attitude of “Take it today, pay tomorrow!” ran rampant, but  was exponentially aggravated by the irresponsible lending products that paid little attention to whether or not the latter half of that traditional hook was likely to occur.

 Interest rates increase.  Over-extended buyers, having put zero-down, are now faced with a newly calculated, unaffordable mortgage payment.  Result: walk and foreclose.

It’s easy to say that the lending was irresponsible, which it was, but it’s important to be aware of the fact that we all partied till the keg ran out. 

Subprime lending.  Brought to you by the same people that thought of the Atkins diet.  The solution is simple.  Paris Hilton in the Whitehouse.  As a well-versed biblical scholar, she could ask the tough questions.  Like, “What would Jesus do?”.  Jesus stands for traditional values….and tradtional lending standards.  Amen.

 hilton-jesus.png

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