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Old October 3rd, 2008, 03:17 PM   #1
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Default Bailout Question...

Got locked outta the pub..... so over to here....

Two separate pieces of info to think about before I ask my question. Please remember when reading that I’m talking nationally. I realize that Michigan itself is different.

First – I read somewhere a few months ago that many economists and housing authorities were concerned that national housing values had father to fall. Basically they were saying that nat. housing prices had to fall to where they would be had there not been a housing boom.

For example, they stated that normal housing appreciation was X% per year over the last 50 years. So if Avg. Joe’s house was worth $100k in 2000, it should have grown by X% per year and should be worth, say, $150k in 2008. So even though Joe might have been able to sell in 2006 for $225,000…. And even though Joe is pretty pissed right now that he’s ‘lost’ $50k in value and it’s only worth $175k…. Joe’s avg. house has to fall to $150k before it bottoms.

That makes sense to me.

Second – people are hoping (right or wrong, doesn’t matter for this) that the bailout will help stem housing value losses and get a handle on the foreclosure rate. I know that specifically the bailout is to help get the gum outta the works so to speak, but it should also help stabilize housing prices.

People are also very worried about how much this will cost taxpayers.

Here’s the question. So based on all that, Mr Avg Joe is sitting on about $25k more home equity then he would be had the housing boom not happened. My understanding is this bailout averages out to a couple grand per American taxpayer. Shouldn’t Mr Avg Joe be quite happy to be on the hook for a couple grand to Uncle Sam if it will allow him to keep an extra $25k in equity he would not have gotten had the housing boom/bust didn’t happen?
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