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Luxury sales are crushing it in pricey neighborhoods in LA and NY, but lagging where jobs, incomes, and wage growth remain weak and credit for most households remains tight (rising mortgage rates are a factor here as well). And remember, there’s still a non-trivial share and number of underwater mortgages out there, specifically 17% (about 8 million). That’s down from 25% in 2011, but it ain’t nothin.’ Home price appreciation will help get some of these mortgages back to the surface, but there’s a good rationale for not giving up on principal reduction policies. Particularly important in this space is for the GSE’s to allow principal reduction on the home loans they back.
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This has been reposted from Jared Bernstein’s blog.
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