Tuesday, February 13, 2007

The Tax Cuts were a lie, but you already knew that.

LONDON (MarketWatch) -- HSBC Holdings, the world's third-largest bank and one of the most aggressive players in the U.S. market for low-quality mortgages, has sent a chill through the financial world with news that its bad-debt charges will be 20% higher than forecast.

HBC, is the largest, but not the first, lender to warn that higher interest rates in the United States are starting to take a toll on borrowers -- especially those with poor credit -- who bought homes using mortgages with low introductory rates during the real-estate boom. That trend has spelled trouble for many homeowners who believed the rising value of real-estate markets would enable them to refinance their mortgages after a year or two into fixed-rate loans before rates climbed.

The news on the housing market isn’t breaking news. There was a housing “boom” for a short period, beginning in the late 90’s and reaching a climax in 2001-2002, before declining with inflated home prices and too much unsold homes on the market.

People doing well could borrow the equity out of their home. New homes were in full force; Condos and new urbanism were sweeping the nation. Older Baby boomers who were feeling comfortable were either building new additions or buying second or third homes (or building second homes). Speculators were buying homes and condos just to immediately flip them over. Because, why? Prices were way out of wack (in “hot” areas), and people were WILLING TO PAY THEM. Atleast, for awhile.

But, what SHOULD be breaking news is the deception that people bought their homes because of a tax cut, a Bush tax cut.

We bought our home in 2003, and I had a sneaky feeling that the bubble would deflate soon and I wanted to get in while the gettin’ was still good. Some smarty-pants have been saying that there is no bubble and it is only the freaky housing markets on the coasts, Like Boston, New York, San Francisco, etc, that are throwing things off.

People like me are NOT REALLY SUPPOSED to be buying homes. As an artist with kids, I have an unstable income hovering around the lowest group (just think low) and we bought an extremely modest and reasonable house (I won’t say, but for my argument’s sake, let’s just say under 200k).

Let me just say, FOR THE RECORD, I did NOT buy my house because of a tax cut.

Think really hard back to the past, and recall that Republicans controlled the government, for 5 years. There was a “Bush Economic Boom” advertised to the people for years, and the housing market primarily drove that, as they said. A lot of people were buying homes. A lot of people who don’t have a lot of money were buying homes. A lot of people who don’t have a lot of money were buying a lot of things.

One annoying factoid crammed down our throats was that the Housing boom was evidence of the miraculous success of the Bush tax cuts. We all see, now, finally, that that was another piece of Republican marketing.

Thank god our Mortgage broker steered us away from those ARMS (Adjustable Rate Mortgages). Those are risky and hopefully the Democrats or SOMEONE will get the regulations on those. Do you hear that Libertarians? Some Regulations are GOOD and they protect honest American citizens trying to safely and fairly purchase a miniscule piece of the American dream against predatory lenders.It's called a level playing field. There, I said it; now go back to supporting whatever it is left that you still believe in.

ARMS allowed people making $50,000 a year to buy $300,000 homes. Why are these homes $300,000 in the first place? People bought homes, the rates adjusted, and now many people can’t afford the homes they own because their wages are stagnant. The money you make is not keeping up with all the crap you have to buy. Traditionally, we’re renters, but interest rates allowed us to buy a home that was comparable to renting a 3-bedroom apartment.

A “conservative” (whatever that means anymore) will tell me that it’s all because these low-income people are making poor choices. There’s only a kernel of truth in that as the risk and benefits are stacked against them and any “poor choices” they make are magnified and will be devastating to their lives. If someone who is well off makes a poor choice, they have a softer landing. For some people, if you lose the job or get hurt, wham, you're in big trouble. The Rebublican’s line of thinking, when stuck in a philosophical rut, will be, “Well, those people just shouldn’t be buying homes.” Poppycock. “Those people” buying homes are good for the Republican way of life, the community, and the American economy. If it wasn’t, then why do they brag about our home purchases in their State Of The Union addresses?

I did not buy my house because of a Bush Tax cut
, especially a $100 cut, or whatever piddly little thing it was. I, and many others, bought homes because of interest rates. And personally, we bought our house the old fashioned way—saving all the nickels and dimes.

People may have bought an extra pair of pants because of their tax cut—but not a house.

The “Bush Boom” was buoyed by people like me doing what we’re not supposed to do—Buying homes with almost nothing—despite his tax cut.
The Republicans were busy helping the top %1 and their inheritances.

There, as usual, David Brooks is wrong about everything.



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