Wednesday, November 7, 2012

Myths=credit bubble

"Sean O'Toole likes to talk about foreclosure “myths.”

The founder of ForeclosureRadar, which tracks default trends, appeared before the Sacramento Association of Realtors on Tuesday and offered what he called a contrarian view of the housing crisis. The first myth: “Foreclosures are evil.”

Not true, O'Toole said. Foreclosures did not cause prices to fall. They don’t cause neighborhood blight, and there is not going to be a tsunami of new foreclosures in 2013.

The housing bubble, he said, was actually a credit bubble, with crazy loans. “It was cool to have a 5-1 interest only adjustable rate mortgage,” he quipped. Those loans allowed people with moderate incomes to afford way too much home, fueling the housing bubble. A price pop was inevitable he said, although he acknowledges foreclosures accelerated the downward slide. That said, the rubble is being cleaned up more quickly because prices are so low, he contends."

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