Montgomery County Foreclosures

One of the chasms between modern political liberalism, as opposed to classical liberalism, and conservatism is the idea of what, if anything, the government should do to rescue persons from misfortunes to which they, themselves, greatly contributed.

Take this for instance:

More than 700 homes were in foreclosure in Montgomery County between April and June of this year, up from 49 during the same period last year, said Maryland Labor Secretary Tom Perez, offering a sobering picture yesterday of how the surge in foreclosures is affecting the affluent county.

Now with uninsured kids dying in the streets and old folks eating catfood (this is one of John Edwards’s “two Americas”) this would not be remarkable. But in the America in which the rest of us live, that with an unemployment rate of 3.6% this requires an explanation.

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Last summer my wife and I were driving through Loudoun County, VA, near Purcellville and saw a sign at a new development advertising homes “beginning in the low $700s”. We both had the same thought at the same time. There is no such thing as the “low $700s.” Either you have a ton of cash to put down or you have a two income family, with each pulling in seven figures and using highly leveraged mortgage or you have independently wealthy buyers. I don’t have the data but I lean heavily towards the second option.

In that case, if one person loses their job they can no longer afford the mortgage. With home prices stagnating, those buying expensive homes as a speculation under the Greater Fool Theory will find it impossible to sell the home and make enough to pay the due note and the realtor’s fee. Defaulting and walking away becomes a real option.

The people losing their homes in Montgomery County aren’t the vulnerable, marginally literate folks in Southeast Washington losing their homes to predatory purveyor of subprime loans. The people losing their homes in this case went in with eyes wide open. It is unfortunate, yes, but it doesn’t require government intervention.

Unless you live in Maryland.

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