Whose fault is it that housing prices are slashed?

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Today a fellow blogger pointed me to this blog post, which basically shows a 50% price cut for homes in a California neighborhood. One home was sold for $855,000 in April 2006, and now two houses down, a similar one was listed for sale at $400,000 in April 2008.

The writer of the blog says, "Mr. Bernanke, that'll be $455,000 to keep the poor folks at 4565 Casa Nova from foreclosing, thank you very much kind sir."

But whose fault is it really, that there is such a disparity in home prices over two years? What if the real value of each home always was in the $400,000 range? Doesn't that just mean that the buyer from 2006 was stupid and overpaid for his home? Why do we automatically assume that it is the fault of the government that someone's house isn't valued high enough?




I'm a realist. I recognize that real estate values have declined and therefore many homes are "worth" less than they were before. But there comes a point where common sense must play a part in the debate. Plenty of homeowners probably paid too much when they bought their homes, and now the market has reduced those values to be more in line with reality.

Those who overpaid on their homes need to pay their mortgages and sit tight for now. Maybe the housing market will rebound, maybe it won't. If you can't get your money back out of your house, there's a possibility that you overpaid. Learn the life lesson and get over it. Quit looking for someone to blame.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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