Business Week sees “buying and bailing”

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Business Week still sees many reasons to be bearish about housing, reporting, ‘The housing crisis is entering a new and frightening stage.’ Two take-aways from this lengthy and worthwhile report ominously titled ‘The Housing Abyss’:

‘Overshooting’ -- Because prices are falling so rapidly, housing analysts believe it is likely prices will ‘overshoot’ -- that is, continue falling below levels that might otherwise make economic sense. ‘The risk for the financial system and the economy is that the price drop, already horrifying, will start feeding on itself.... That process has already started in parts of Arizona, California, Florida, and Nevada.... Fiserv’s James L. Smith worries that instead of settling at a reasonable price level, ‘we’re going to blow past [it] without even looking back.’’

‘Buying and Bailing’ -- Business Week spots another of those anecdotal but not easily quantifiable trends: homeowners who buy a new house at a low price, then bail on the upside-down mortgage of their older home: ‘Steve Hawks, owner of RE/MAX Platinum real estate agency in Henderson, Nev., says he has been flooded with calls from people interested in ‘buying and bailing’ — that is, buying an additional house while their credit is still good, then walking away from the old one unless they can cut a favorable deal with the lender. So far the number of people who have done so appears to be small.’

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Hat Tip: Patrick.net