The Illusion Of Hope

On my little street here in Elk Grove we still carry two foreclosed housal units. Oscar and Beth smartly drove away from their unit two years ago after purchasing another unit elsewhere. Another foreclosed unit lies eight units down. Across the street, Mark and Melanie have not yet done so and are [presumably] substantially underwater, but the unit is being rented. Perhaps a short sale will occur in the near future to the couple who's been there for a while; that would be good for everyone; they are good neighbors, although I rarely see them.

However, I don't think that foreclosures are as bad to our local economy as are all the other owers (sic) faithfully making payments on their underwater units.

By doing so, they are keeping the banks bottom lines up, they are not able to take advantage of record-low interest rates, and the money they are blowing on a losing economic proposition is not recycled back into the local economy -- the Asian foot massage parlors, the cigarette stores, the electronica emporiums and the temporary Halloween stores that define the Elk Grovian services and retail marketplace.

There are 15,234,552 borrowers underwater in our nation. Of those, 7,787,338 are underwater by 25% or more. Of those, 4,008,451 are underwater by 50% or more, with an average negative equity of $107,000.

Several roof tiles across the street have blown off in recent months. If you're $107,000 upside down on that mortgage, where's the incentive to fix or replace them? There isn't much of one, so the local roofer is deprived of that opportunity, even though in the long run the damage caused by leaking water will be more expensive for someone to address. The owners are borrowing against the future, like everything else we've done in the U.S. for the past thirty years.

The dollars spent on the underwater portion only supports the banking "industry." Gone are those dollars used to upgrade kitchens, to spend at the pool hall, to smoke the products of the cannibis clubs. All these owners will continue making payments and hope for the best -- hope for a rebound in the economy, hope that their unit will someday return to its 2006 value.

A hope that I regard as an illusion.