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Yeah it's too bad you got caught in the housing slump. Don't give up though, if you can weather four or five years it will recover to a good extent. I got caught in a similar bind in Juneau. I bought a house in '82 and in '84 the people of Alaska voted to move the capitol of the state up near Anchorage. Since the state was the main employer at Juneau people began to bail out left and right. Lots of people just walked away from their houses and defaulted. House values really slumped, for the next three years I owed twice as much as my house was worth. After the election both parties got bickering about exactly where the state would get the money to actually move the capitol. A couple of election cycles went by with no real decision about financing this move which was getting costlier by the year. After four years of this they decided to leave the Capitol at Juneau and house values slowly climbed back to where they had been before the move election.

I think a similar thing is going to happen in this downturn. Houses had gotten way too expensive compared to the rise in prices of all other things and it was only due to people buying what they couldn't hope to pay for got us in this mess. A lot of it was due to pressure by the US government and Democratic programs to make 'affordable' housing for people who normally couldn't have bought an old used car. Instead of renting and saving up a down payment they got roped into buying something they couldn't handle. Betting on the stupid idea that real estate always keeps rising in price, many times proven wrong, the banks and institutions just kept lending and fools just kept buying.

If the government would let the dust settle naturally this would correct real estate prices and make lending for houses a lot more sensible. If the bailout makes it too easy on the banks it won't. We'll just have to wait and see but I'm sure things will improve after a few years. It's just like petroleum prices. It's down now, no one foresaw the drop. It will rise again, how soon and how high will be determined by demand and whether states and the feds tax the hell out of it to make up for lost revenue instead of cutting their spending.
 
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