Upcoming Foreclosures

Why have US housing prices been falling? What is the underlying cause of all this?

I have one more doubt but it might sound a bit silly: why can't Federal bank print more dollars and distribute it to the defaulters preventing them facing foreclosures? What is wrong with injecting more money for the sake of a good cause? Pardon me for my poor knowledge on financial industry, someone kindly help me understand this.

Public Comments

1. Housing prices are falling because banks refused to lower values of foreclosed homes on their books where an enormous inventory built up due to bad loans-then they had no more money to lend to people because all of their money was in those houses which they refused to sell at market value (lower prices than they had mortgages on)-it snowballed and more and more houses went into default as the federal reserve raised interest rates but at the same time banks werent lending to new buyers and the inventory kept growing -until today where there is approximately over a trillion dollars(1 trillion is 1000 billion and 1 billion is 1000 million) of bad debt on their books that they cant get rid of without going broke if they were to sell it for its true value (please note these are not all mortgages but I am simplifying as best I can ) . the govt is basically printing up a little under a trillion dollars to bail the banks out as of yesterday which will instantly double our national deficit and will bring the value of the dollar way down causing inflation and cause much higher taxes. If the foreign banks dont buy our new debt to pay off the old debt which is how the govt pays its bills because it is way over budget then the dollar will crash to what is called worthless and people who have dollars wont be able to buy anything with them - the new debt added on by saving the banks is supposedly greater than our GDP(all the money the country generates from business) . I think it is a big risk they are taking because they cant possibly know the consequences -I sincerely hope I am wrong
2. Housing prices are falling because of too lenient lending practices for the past ten years. Anybody with a pulse was able to buy a house with no money down and adjustable rate mortgages. When those mortgage started to default, the bank tightened their lending policies. The 1st time home buyers were suddenly shut out, and the banks were taking big hits on their mortgage portfolios. With lower demand from buyers due to tighter credit restrictions, homes are harder to sell. Banks are also foreclosing on about 500,000 houses each month. These homes are hitting the markets and further unbalancing supply and demand. Prices are dropping to to more homes available than qualified buyers willing to buy them. If the government gave money to people that were behind in their mortgage, I would soon be behind in my mortgage, waiting for my government handout, too. That concept is called communism and it is proven to fail when combined with the human work ethic.
3. Prices fall for one reason: Supply exceeds demand at current prices. The causes of the reduction in demand and excess supply come from two different sources; the first is the scarcity of available credit mechanisms, i.e. loans making the amount of money people are willing to pay for a home smaller; the second is the overbuilding/speculation of the home market. The Fed can print money, but by printing more money they are dividing the pie that each dollar represents into more pieces, making each piece worth less and less. This causes the value of the dollar to fall in relation to other nations making our imports cost us more (just about everything since we have exported all of our manufacturing business overseas) and makes our exports cost others less in their own currency. If the Fed starts printing money at the drop of a hat, the long term economy of the United States is going to be undermined. The rest of the world will not value the stability of our dollar as they have in the past.