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So Home Prices Never Fall, Eh?

From the Wall Street Journal


Kendrick Brinson/WSJ

This Atlanta area home, with an original principal amount of $236,000, was bundled for securitization. It was later foreclosed and sold for $30,000.

That is a decline of 87%!

And then there is this interesting snippet from Michael Lewis's article on AIG in Vanity Fair, which I highly recommend for reading.

He simply claimed that the fact was irrelevant: for the bonds to default, U.S. house prices had to fall, and Cassano didn’t believe house prices could ever fall everywhere in the country at once.

Simple assumptions and beliefs, especially when they are taken as "common knowledge," can have massive consequences. 

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