Astute Prediction of the Mortgage Mess by Ryan Krueger in 2005

I think this guy needs to run for Prognosticator and Chief. He called the mortgage crisis right down to what is happening with Fannie and Freddie way back in 2005. This part caught my eye.

In my business, I think many of us overestimate voters’ desire to own their own home. Many of them don’t mind living month to month, and our calculations can’t factor in this subtle shift, nor could their parents have imagined it. How much does it cost is less important than what the payment is. Building up equity and handing off a war chest to their heirs doesn’t matter to most folks, and that might not be as dire as some would have you believe.

I have to agree with this statement 100%. I think many Americans view home ownership as just another long term credit purchase like a car, boat, or a big screen TV. That is why you see the curious phenomena of people simply walking away from a home that is underwater and just letting the bank have it.

In markets hit hardest by falling home prices and rising foreclosures, lenders and brokers are discovering a new phenomenon: the "buy and bail," in which borrowers with good credit buy a new home—often at a much lower price—then bail out of the "upside-down" mortgage on their first home.

Homeowners are able to pull off this gambit—which some lenders and real-estate agents call mortgage fraud—by taking advantage of mortgage-lending practices that allow them to buy a new primary residence before their existing residence has been sold.

Obviously this homeowner views their home as a really expensive version of Pets.com stock. They can just abandon the house and buy another similar one down the street for thousands cheaper rather then refinance their current home and wait for prices to go back up.

They obviously view their home as a stock in the red that can be dumped if things get bad and not the so-called American Dream. So maybe all the rhetoric of people feeling foreclosure pain by being kicked out of their home by cold-hearted bankers is not as true as some politicians might think.