In Phoenix, Scottsdale and the other cities we are flooded with short sale, bank owned real estate (REO), lender owned homes, foreclosure sales and foreclosed homes.

The glut of homes in Phoenix area market have caused Phoenix home prices to drop as much as 30% for Maricopa County (greater Phoenix). In Scottsdale, North Scottsdale, Carefree, Fountain Hills and Paradise Valley, towns in the Phoenix area once immune to home price declines are experiencing price declines greater than 10% and some could argue 20%.

I have been one to write article after article asking the Government to help. I applauded when the FED stepped in made the bailout out of Fannie Mae and Freddie Mac. (maybe Ben Bernanke and friends were listening).

This week After the stock market saw declines of more than 1,000 points (intra-day) trading on Thursday, news was leaked (purposely, by accident as the old saying goes) that a bold and massive initiative proposed by the Bush administration to create bailout fund for banks and other lending institutions.

The cost of the fund ??? $500 Billion dollars. That’s 1/2 a Trillion (trillion with a “T”) U.S. dollars. Wow !! – oh wait, that was when I went to sleep last night, only to awake to (and this was before my coffee which makes me unhappy in the first place.), that the proposed plan will cost $700 Billion (almost 3/4 of a Trillion dollars, still with a “T”), the largest financial bailout since the Great Depression. Of course, that means it will ultimately cost more than a Trillion dollars (give or take a few Billion).

The biggest biggest bailout in U.S. history will include 

Why am I not happy you may ask. After all, I have been on my soapbox asking for help for months.

Here is the problem. (in my humble, but firm opinion). The bailout  plan does little to help Phoenix real estate.

The bailout plan is good for the stock market, this is definitely good for banks, and it is good for consumer confidence.

However, the plan seems to do little for Phoenix housing; the only thing we will see as a result of this bailout, is the government buying worthless loans from banks.

Ultimately, as we have seen, these loans will default and the government will be the proud owner of REO real estate. OR in this case GEO (Government owned real estate). This real estate will eventually hit the market with the government having less concern for pricing than the banks. Banks do have shareholders to answer to.

The outcome will be a flood of GEO or REO homes at deeply discounted prices, further hurting home prices in Phoenix, Scottsdale, Peoria, Glendale, Mesa, etc….

Can  you say buyer’s market!! However, most of the great people of Phoenix, Fountain Hills, Gilbert, Chandler have much of their net worth tied up in their homes and I have always said that

. In case, I am wrong (which I have been once or twice before) , I will mention what one Wall Street economist said,

 “When the alternative is the entire financial system going bankrupt, we guess these costs are acceptable.

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