Some Wisdom on the Housing Situation:

Boston Globe:

Owning a home in Boston is about 70 percent more expensive than renting an essentially identical home. Therefore the government should stop trying to keep owners in homes and instead let more people return to renting. Those families could spend the extra money on other needs…says a new study from the National Low Income Housing Coalition. The study joins a growing chorus making the point that home ownership is a misnomer in many cases. Many 'homeowners' are people with little equity, no equity or even negative equity who are basically making monthly rental payments to a mortgage company.

The group argues there is little long-term benefit to ownership because prices in cities including Boston likely will continue to decline…And even if they could, they'd be better off paying half as much and investing the difference in stocks.

Much of the "foreclosure crisis" involves homes purchased with no-money-down loans from which owners are walking away now that they have negative equity. [Not to mention long-time homeowners who cash-out refinanced regularly, ensuring that they never built any equity; I've read of individuals who have spent literally tens or even hundreds of thousands of dollars they received from refinances, and now want a bailout because they can't afford a few hundred dollars a month increase in their mortgage payment resulting from their last refinance into an ARM.] There is no more reason to consider such cases part of a social crisis than if the same individuals has leased apartments well beyond their means and have now been evicted.

On the other hand, some victims of the housing bubble are unlikely to get any government help. I know a woman who works as a cleaning lady, her husband as a maintenance man. They are immigrants who speak little English. They nevertheless managed to save 50K for a down payment on a townhouse, which they bought in the outer D.C. suburbs at the peak of the market in July 2005. That 50K in equity, and perhaps a bit more, has been wiped out as prices return to historically normal levels. Unlike those who put no money down, they can't just walk away, and unlike many others, they didn't buy beyond their means, so they aren't in foreclosure, but have seen their life savings evaporate. Sure, they didn't have to buy when they did, but they are certainly in a sense victims of the bubble, caused by the irresponsible lending and borrowing practices of others. If anyone is going to get bailed out by Congress, I would like it to be people like them [update: though, to be sure, I'd rather Congress stay out of it completely).