Port Orford, OR

This is Battle Rock Park Beach looking south at Humbug Mountain. It is low tide at 3:15 pm in the afternoon on 10 December 2008. The temperature is 59 degrees and the sun is warm.

This photo speaks to our life style here in Port Orford where the Pine forest on the coastal hills extends down to the beach.

There are no surfers today but our local surfers like to surf here and the migrating whales frequently stop to peruse the waters of Battle Rock cove.

This is Battle Rock. It was named Battle Rock to memorialize a bloody battle between the indigenous people and a expeditionary force that preceded the arrival of early pioneers.

On the 4 of July our volunteer fire dept. does our annual fireworks show at this location to the delight of young and old alike.

This month, the Center for Economic and Policy Research has made two recommendations for stabilizing the housing market.

1. In bubble markets, markets that have experienced appreciation rates that are much higher than the historical annual appreciation rates, CEPR recommended that government-sponsored enterprises (GSEs - Fannie Mae, Freddie Mac, & Ginnie Mae) take actions to deflate these bubble markets by refusing to buy mortgages in these targeted markets until home prices return to a CEPR recommended price for homes.
   
   
2. The CEPR recommendation is that the price of homes should be 15 times the annual rent for an equivalent property in the same market.

The CEPR recommendation states: Since the private institutions have left the secondary market, the GSEs would have total control over the secondary market for purchasing home mortgages. If the GSEs refused to buy mortgages in the targeted markets the primary mortgage lender would be forced into a position where they couldn't issue any new mortgages until the purchase price for these homes conformed to the price that represents 15 times the annual rent for an equivalent property in the same market.

The CEPR believes that home prices would quickly adjust as sellers realize that buyers will not be able to buy their homes until the price is adjusted downward to their goal for home prices in the target areas.

Additionally, the CEPR suggested that the GSEs could simultaneously redirect funds to buy mortgages to non-bubble markets to support the housing market in these areas and prevent the contagion of declining prices on non-bubble markets.

The CEPR recommended protections for the people who will face foreclosure as a result of the loss of equity. They suggested that the best way to help these people is to temporarily change the rules on foreclosures by offering homeowners the option to remain in their house as renters. In their distorted perception and misunderstanding of human behavior and banking practices, they believe that this token gesture would give homeowners security in their home and will also give banks a real incentive to negotiate terms that allow homeowners to stay in their house as owners

I disagree. This draconian approach to establishing a new base price would ultimately reduce housing prices by as much as 30% below current prices. Many owners and sellers would lose all of their equity and quite possibly find themselves with mortgages greater than the market price of their homes. Home owners victimized by this brute force approach would be severely demoralized and inclined to walk away or to just stop making their mortgage payments to save their money for a new start somewhere else.

It is just fanciful thinking by the CEPR to believe that owners would consider any thing more than a short term rental beyond the time necessary for them to make more suitable arrangements; or to believe that lenders would be more inclined to negotiate terms to allow homeowners to stay in their house as owners.

The CEPR recommendations demonstrate a startling lack of understanding of people and of lenders and it would result in more foreclosures, more lender losses, more bank failures, and more downward pressure on home prices