Reuters reports today that in 20% of all home mortgages in America the borrower now owes more than the house is worth. By all rights they should just mail the keys to the bank and walk away.
This shows that property values were grossly inflated, and that a whole lot of home owners made some foolish decisions when they bought their home.
What is the answer? Unfortunately no matter what the federal government does at this point, both the stock markets and the home housing markets will need to continue their decline somewhat longer. General Motors and lots of other famous American institutions will probably go bankrupt.
Once both the stock markets and the housing prices have reached sustainable levels things can begin to stabilize.
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