The Hill-Man's Blog

The Deadbeat States

Since there's been a lot of talk on this blog about my use of the term "deadbeat", I thought it would be interesting to try to define what it really means, when it comes to those facing foreclosure, and getting a 275 BILLION dollar bailout from hardworking taxpayers like you and I.

First, the official definitions:  according to Princeton.edu, a "deadbeat" is a "defaulter, someone who fails to meet a financial obligation".  That is certainly true of these homeowners facing foreclosure.  Wiktionary defines a "deadbeat" as a "lazy person, a person who defaults on their debt".  Now, I can't say for certain how many of these "deadbeats" are lazy, but I know that they are all defaulting on their debt.  And, quite frankly, the reason why is insignificant to me.  I don't care if they lost their job, were conned by a lender, didn't read the fine print, or as Miserable Matt points out, they are dealing with a sick family member.  They agreed to pay a debt, to "meet a financial obligation", and they are not doing it.  Not my problem.  My suspicion is, however, that those reasons are not why most cannot pay.

Those in favor of "helping our neighbors out" will tell you that we NEED to do this so as to avoid our property value plummeting.  On the face, it seems like a great argument.  Who wants to see five houses on your street foreclosed on in the coming months?  It won't help you maintain the value in your home.  However, when I began to look deeper in to this, I began to realize that it is a, shocker, SCARE TACTIC.

Did you know:

-The majority of those being "bailed out" by our President (and democrat controlled congress) live in just five states:  California, Nevada, Arizona, Michigan and Florida?

-In the majority of states, foreclosure rates are relatively low.  For instance, in New York it's 1 out of 2,271 homes.  In Vermont, it's 1 out of 51,906 homes being foreclosed on.  While in Nevada, in January, 1 out of 76 went in to foreclosure!  1 out of 173 homes in California was foreclosed on in January.  Alan Reynolds wrote a great piece on this in the New York Post, if you would like to read more.

-In the states with the lowest 25 foreclosure rates, less than 1/10th of ONE PERCENT of homes were foreclosed on in January.

-Home prices in those states (with the exception of Michigan) are the only ones in the country that experienced double digit loss as of the 3rd quarter of 2008.  (latest figures available).

-Sales of homes in those four states have SKYROCKETED over the last year

What does all that mean?  It means the existing process works.  Houses get foreclosed on, the market adjusts, and people buy.  That means everyone's home value starts to rise again.  However, if you "speculate" in the market, you run the risk of losing.  You own a $750, 000 home in California and get a sub-prime (risky) mortgage, so you can buy new furniture, a new car, put on an addition, and your property value drops, you lose.  It's not my fault! Why should someone in Vermont be bailing out someone in California who took a dangerous risk when it comes to their home?  What else do "The Deadbeat States" have in common?  Unemployment rates WAY above the national average.  So...people who don't work, secure a risky subprime mortgage to take cash out of their home, see their home value drop, and can't pay their contractual financial obligation...seem like "deadbeats" to me.  What's the problem, Matt?