Foreclosure as Stimulus

In a broader piece on why we should allow the foreclosure process to continue unimpeded for the benefit of all involved, Barry hits on something that I’ve thought about myself:  People who don’t belong in the home they’re hanging onto in the first place aren’t doing their local economies any favors:

From The Big Picture:

Increasing Economic Activity: The areas of the country with the greatest foreclosure rates have seen a big increase in real estate activity. Look at California and Florida — they have seen enormous upticks in RE activity versus the lower foreclosure states.

When someone purchases a home they actually can afford, they end up spending quite a bit of money on additional goods and services. They do renovations, hire contractors, make durable goods purchases, they paint and repair, they buy cars, they spend money in the local community.

The people who are hanging on by their fingernails, however, do none of these things. They end up paying a vastly disproportionate amount of their incomes to service their mortgages. This is not productive economic activity.

There is a legitimate case to be made here and it is, of course, a Free Market argument.  Click over to TBP for some other reasons why extend and pretend is not helping anyone but the banks.

Source:

More Foreclosures, Please… (TBP)

Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.

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