What Would Bank Nationalization Mean For Young People

I have heard (and please trust me, these numbers may be off) that 1:6 houses in America are underwater.  By this I mean, the homeowner owes more than what the house is worth.  If you have listened to the news, this should not be a surprise.  Experts have projected that in the next 18-21 months 1:3 homes will still be underwater.  The fact that interest rates are low and potentially still coming down will do very little to help this problem.  If someone bought their home for $300,000 and it’s now worth $150,000, what is a 4% interest rate on the mortgage really going to accomplish?  The simple answer is nothing.  So what is the solution to this problem?  Nationalization of banks.  The Government will have to take over banks and eat the spread between what the house was paid for and what it is worth now. 

 

So what does that mean for us as young people?  If you have not bought a house yet, I would say wait until the banks are nationalized.  This is a bold statement because I don’t even know if this will happen.  So a better way to put it might be to say wait 18-21 months and see how this is played out.  My guess is that home values will not go up in this time and there is a great chance they will continue to come down.  Remember that these are unprecedented times and it calls for unusual actions.  We are young and have our entire lives ahead of us, and 18-21 months is not a long time in the big picture. 

 

I must tell you that I have got burned on real estate deals before because I did not look at all the warning signs, so I may be a little more cautious than the next person.  All I am really saying is that waiting a few more months to see how this all plays out might be a smart move, because there are a lot of warning signs.  Furthermore, I believe that for the next 5-7 years there will be unbelievable buying opportunities in the housing sector after this debacle plays itself out.  We as young people should feel somewhat fortunate to see home values at their lowest levels in decades.  Good things come to those who are patient.