Compassion For Those Most Deserving

by digby

Via Atrios and Calculated Risk

“The two groups of homeowners hit the hardest now are investors and those who overextended themselves,” said Jay Butler, director of realty studies at Arizona State University’s Morrison School. “That’s why more people in higher-end neighborhoods are struggling now.”

Also, there are more loan programs to help lower-income homeowners, while fewer lenders are eager to make loans above $417,000. Mortgage giants Fannie Mae and Freddie Mac are restricted to mainly [sic] investing in loans below $417,000.

“Often, people with lower incomes are better prepared to survive tough times and look for help,” Butler said.

“People with higher incomes and bigger homes have a harder time telling neighbors and co-workers they can’t afford their mortgage anymore.”

I think it’s time to man the barricades, don’t you? It’s just not right. Low income buyers have all kinds of avenues to help them out when they are kicked out their houses and become homeless. (Why I just saw a story about movie stars serving up delicious looking turkey for Thanksgiving at the mission and everyone looked so happy and content…) But pity the poor highly educated affluent speculators who have to admit they made a bad bet.

This must be what they mean when they say that income inequality is a problem.

On the other hand, there is something else important to mention in this story, as Calculated Risk points out:

Let us … ask ourselves what constitutes the “upper and middle classes.” If they “moved up beyond their means,” then . . . their means are what, exactly? If 100% or near 100% financing is required to keep these neighborhoods stable (loans over $400,000 for houses in the $400,000-$450,000 price range), then in what sense are they neighborhoods of the “upper and middle classes”? Does our current definition of “middle class” (not to mention “upper class”) include having insufficient cash assets to make even a token down payment on a home? Things seem to have changed since I did Econ 101.

That’s the real conundrum of “the ownership society” isn’t it? Shop til you drop, live like there’s no tomorrow, run as much debt as humanly possible or the terrorists will win. And if you want to buy a house, which everyone knows you must, the only way you can do it is by committing yourself to usury in the hope that what goes up can never ever come down. If the laws of physics don’t turn out to have been repealed after all, well then, you’re just out of luck. It turns out you never owned a damn thing anyway.

It works out badly for everyone but the super rich who wrote the rules, just as it’s intended to.

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