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Monday, March 02, 2009

MN Liberals Should Oppose Real Estate Bail-Outs

If the DFL really cares about the welfare of Minnesota, rather than the chances for power-grabbing by all Democrats nationwide, it should stand up and criticize President Obama and the leadership of the federal Congress for bailing out a few insane States at the expense of all the rest, who kept a few shreds of sanity. Consider the following illustration, from a Weiss Research, Inc. (investors' newsletter) report:

"Just look at what’s going on in my own backyard, Palm Beach County, Florida. Let’s say you bought a median priced home in the West Palm Beach market in December 2005, around the peak. It would have cost you $408,200, according to figures from the Florida Association of Realtors.

Now let’s be generous and assume you put 10% down, rather than financed the whole shebang (which many people did). You would have had to cough up $40,820 and finance $367,380 — leaving you with a mortgage with an initial loan-to-value ratio of 90%. Thirty-year fixed rates averaged about 6.3% at the time, so your principal and interest payment would have come to $2,274.

But in the three years since then, home prices have plunged — to just $246,000 as of December 2008. In other words, your home has lost $162,000 in value, or 39.7%. During that same three-year period, you would have only paid your mortgage principal down to $353,739 (less than $14,000)."

Only about half a dozen markets have seen numbers like this, CA and FL at the top of the list, with NV, AZ, and NY close behind. Minnesota's real estate market as a whole has seen losses on the order of 15% at most; prized addresses in the TC have seen losses of 3-5%. It's the height of coastal arrogance to ask the middle and north of the country, where common sense can still be found, to pay for the idiocy of the wildest real estate markets. There's nothing liberal about that. That's just theft by the richest areas of the country against the less-rich areas.

Kate, Satveer, Amy and Betty (is anyone else as thoroughly sick of the pretentious casualness of first names for those with whom we have no personal acquaintance?) are missing a golden opportunity to paint themselves as mavericks and gain further trust from their constituents as clear-sighted populists. But then, why am I surprised?

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