Brainless Barry’s newest escape from reality is to propose that when a home is foreclosed, the defaulting borrower must be permitted to stay in the home simply by paying rent sort of equal to the current market rent for “similar” homes.
First, we must understand that, because in most places home values have declined anywhere between 30% and 60% below the peak, the price to rent has also declined.
Even worse, because there are still millions of home owned by flippers who hoped to sell to a greater fool, these flippers are desperately trying to rent at any price in an effort to prolong their agony. Therefore, rents have declined even more than the price to buy a home declined.
Many of the rental homes are now being rented by deadbeats who got evicted because of foreclosures. If Obama says you can’t get evicted when you lose your foreclosed home, then there will be fewer people in the market to rent homes that are already vacant.
With fewer people in the market to rent, that is lower demand for rentals. Lower demand means the price of renting will drop even lower.
Also, fewer homes will be rented.
Total result of Obama interfering with the workings of the free market? More investors and flippers will be unable to pay their mortgages because they either (1) receive lower rents or (2) cannot rent at all because there are fewer free market rentals.
But wait! Brainless Barry makes it even worse!
We just showed that rents are disproportionately low, even compared to the decline in the price to buy a home.
If somebody has a home bought at the high prices with a 90 or 95% mortgage, plus property taxes and insurance premiums based on the old high price of the home, even these deadbeats will figure out that the so called “current market rent” is half of their mortgage, taxes and insurance.
So many more millions of people will decide to stop making payments on their old high mortgages, taxes and insurance and let the homes be foreclosed.
In most states, the time from when you stop making mortgage payments until the home is finally foreclosed can exceed six months.
Got that? Six months free occupancy of your home! Wowee!!
And then in month seven you have to start paying rent equal to half of your old mortgage, taxes and insurance!
That is six months free AND a fifty percent reduction, and all the time you get to stay in your home!
Obama is the savior. Deadbeats have died and gone to heaven.
The number of homes in foreclosure will more than double.
The price of homes will plummet even further, as will the price to rent.
The economy will plunge into the Second Great Depression, but deadbeats will really love the Messiah.