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IPFS News Link • Economy - Economics USA

Housing Lockdown

• arclein
Leading the market down to find a bid or two is vastly damaging. The inventory is carried on the books as worth a certain market price. Selling a house below that price means that you write down the entire inventory. How stupid is that?

2 Comments in Response to

Comment by William1950
Entered on:
If you understand the market for housing, when you are going to sell they find a market value by finding a home or homes in the area and what they sold for. It is a bit more in detailed then this but this gives you and very shallow idea of what happens.

Today the banks and realators have to use the same degree of finding as they did when the value went up. This means you put your home on the market. The banks say that last month the same type sold for x at so much percentage points. You have thee bids all well below that value. When you sell that become the factor for the next home, that real value that you recieved not the inflated bank value that was in effect the last twenty five years.
Banks give money for sales. They want and have been making it happen that each year the value of the loans they hold was worth more then the note they hold. If you bought a home twenty years ago and the increase was ten percent a year your home is worth twice what you bought it for and the note you signed is also now worth much more. On paper both of you look great. Now, with values, meaning what people will spend is down both you and your bank are hurting. You because you only may make twice as much as you bought it for and the bank because they have to write off, on paper the worth of their holdings. Banks then have to show more money in reserves instead of an inflated amount of real estate. A note my sister works in a very safe bank that is private and just bought another bank that was failing. Banks, private banks that used the old formula to sell real estate packages are in good shape. She stated that the number of loans has fallen but there are sales being made.

Comment by Barry Hess
Entered on:

It would be nice if this writer had the courtesy to at least reference what it is he is talking about or commenting on. A simple reference or link inserted somewhere so we could see what it is might get some of us to bother clicking on his posts.