President Obama is set to unveil a new plan today to stem rising foreclosures by empowering the government to renegotiate loan terms to keep people in their homes. The price tag for the measure is expected to be between $50 and $100 billion.
Obama chose Phoenix, Ariz. as the backdrop for his announcement of the new plan because Phoenix area home values have dropped precipitously since the housing bubble burst (and, perhaps, as a slight stab at former rival John McCain whose vociferous opposition to the President’s stimulus was undoubtedly unappreciated). Home values have fallen more than 25 percent from their peak, and Phoenix is routinely in the top five cities most affected by the housing crisis. Others include Las Vegas, Los Angeles, Miami, and San Diego- all temperate cities with year-round good weather and entertainment that attracted swarms of house flippers and their attendant TLC and HGTV shows, which then encouraged each city’s novice real estate investors to acquire three mortgages with a combination of equity and their children’s college funds. Phoenix welcomed more than 61,000 new single-family units between 2000 and 2006. According to the Arizona Republic, housing prices soared more than 55 percent in 2005 alone, and one of four sales that year was to a speculator. Phoenix real estate bloggers argued with housing bubble bloggers, blithely dismissing those who foresaw the crash as paranoid doomsdayers. The city is home to Nouveau Riche University-not a joke-a real-estate speculation program whose course offerings read like a guidebook to creating the current crisis. Learn to “Fix ‘n’ Flip” or how to buy more property with “Creative Financing!” But the time came when the sun set on the Valley of the Sun. Today, Phoenix is not only home to families down on their luck and behind on their home payments, but people who acted irresponsibly and may be underwater on several houses. The problem is such that there’s an entire blog devoted to “Phoenix Flippers in Trouble.” Eleven of the properties listed there are in Mesa, where Obama is giving his speech today. So, one wonders what type of homeowners the American taxpayer will be bailing out under Obama’s plan. Will he try to save only people in danger of losing a primary residence, or will he consider saving flippers part of the collateral cost of propping up the housing market? Even if he intends to keep flippers off the dole, there’s no reason to have any confidence in oversight that would actually accomplish that. Scott Mintz, the chiropractor who is underwater on four houses, won’t be the anecdote Obama uses when he talks about bringing help to Main St., but Scott sure does think he deserves a bailout. For the greater good, of course, and because he’s facing bankruptcy and a $10,000 monthly shortfall on mortgages he never should have gotten. Click here to watch the Scott’s unbelievable pitch to taxpayers, courtesy of CNBC. My guess is any riche this guy sees in the nouveau economy will come courtesy of you and me.
