This article on Cnn.com talks about how a $500,000 home is now being sold for $200,000. Now besides the fact that you can't "call" it a 500k home if it's selling for 200k... I think the one thing that these articles fail to point out is how awful it is to have to short-sell or foreclose on your home because the loan you have on it is $300,000 more than your neighbors who just bought the same house next door for $300k less.
We have the same problem here in the metro Washington DC area. Homes that were valued at 500k are now going for 250k-300k. Now people are able to buy those homes at 250k because the person who owned the home previously had a loan for $500k that they couldn't pay so they were foreclosed on. So the first family is forced to leave because they cannot afford the loan they took out for 500k and another family moves in paying on a much more affordable mortgage of 250k.
So my question is this - why can't they find a way for the first family to stay in their home but pay on a mortgage that reflects the market rate for the house?
I know - it's not what we do here in America - it would totally screw up the already screwed up system of lending and borrowing - and it's not our fault that the first family bought over their means - but what good is it going to do to have a bunch of empty run down houses? What good will it do to have another family renting instead of taking pride in home ownership? Or worse yet, be on the street?