In attempting to pull on the heartstrings of the US taxpayer, we often hear about how all of these people will be out of a home.
You don’t start building up equity in your house after the first couple of payments. And some of these exotic mortgage deals didn’t allow people to pay down their principal in the first place. And some of these homes have depreciated in value much so they don’t have any actual home equity. And some home equity lines have been tapped out, so there’s no equity there.
The real homeowners are the banks and other firms that own the mortage, via MBS or otherwise.
Say the roles were reversed. If it was financially advantageous for the banks to say they owned the property due to the contractual obligation of a mortgage, there would be no talk of homeowners, there would be talk of deadbeats who are trying to get a free ride by squatting on a house and gaming the system.
And on top of trying to keep people in housing that they are debt-renting, it seems to be in the government’s interest to preserve the price of houses. They try and do this by taking down interest rates. The National Association of Realtors says that housing is local and now is a great time to buy.
Unless prices drop, then people will not buy more homes. It doesn’t make sense to. So we can either bulldoze lots of freshly-built spec houses, or you can drop the bid of house prices.