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if the owner has been told for years that their house is worth $500,000, they are likely to believe it regardless of whether or not it was ever true. If no buyer is willing to offer any more than $300,000, that house will never be sold

Housing, or anything else for that matter, is only "worth" what someone is willing to pay for it. If no buyer is willing to pay more than $300,000, than it is only worth no more than $300,000. If the present owner needs to sell, they will not get $500,000, no matter how long they wait.

This illustrates the game that the banks are trying to play. They claim they have assets in the form of mortgages (or mortgage-backed securities) worth X dollars, but the problem is, no one would ever pay X dollars for those assets. Therefore, they are not worth X dollars. If the bank valued them at their true worth, the bank would be insolvent. That is why they need trillions of taxpayer dollars to stay afloat. And why the government is trying to artifically keep the price of housing high, but it is not working because if people can't afford to buy on the salary they make, then they are not going to buy, no matter how much the present owner really believes his house is worth $200,000 more than it is.

by Vicente Fox on Sep 29, 2009 11:58 am • link • report

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