The Cure for Ailing Housing Market? Maybe It’s More Foreclosures
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As the $8,000 home buyer tax credit dried up, so did housing sales. The number of people buying a new house dipped to the lowest levels in recorded history after tax credit ended in May, causing many people to worry that the recession will be shaped like a W – a perilous double dip.
What’s the cure for the ailing housing market? One real estate analyst says the answer is counter-intuitive: more foreclosures.
Why? Well, analyst Mark Hanson says foreclosures are what people want to buy. The new home buyers out there want (and perhaps can only afford) a good deal. But lately, pressures on banks to halt foreclosures have curbed the supply of cheap houses. Because we’re in a market where people are iffy about taking a big risk, unless the carrot is big and juicy enough, people aren’t going to bite.
Plus, Hanson says, there’s still a huge shadow market out there – homes where the mortgage isn’t in good standing, but they’re not in foreclosure yet. Hanson says we’ve got to clear through all this bad inventory – both the homes in foreclosure now and the ones yet to be – if we want the market to turn around.
The way he explains it sounds sort of like an old rusty faucet – you’ve got to let the water run orange for awhile before it starts to come out clear.
At our current pace of foreclosure, he says, it will take 101 months to clear through the system – 8 years. But if we doubled our rate of foreclosure to 180,000 a month, he says it till take 42 months, or about 3 and a half years.
Housing activists all over the nation are putting pressure on banks to slow the rate of foreclosure. It’s hard to argue with. Who wants to put more people out of their homes?
But then again, Hanson could be right. If the entire economy is spooked by low housing sales, it means less jobs being created, fewer people spending money. Many of those who are dreading a foreclosure can’t pay their mortgage because they can’t find a job or find one that will pay a decent wage.
Is it better to be without a house in the short term paired with a quicker recovery? Or if Hanson’s right, are we just dragging out the inevitable?
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“Plus, Hanson says, there’s still a huge shadow market out there – homes where the mortgage isn’t in good standing, but they’re not in foreclosure yet.”
That’s not including the houses that have been foreclosed on and haven’t been put up for sale because to do so would be to admit that the bank holding the paper is insolvent. This is the whole point of mark-to-model (as opposed to mark-to-market); it allows the banks to assign values to assets based on what the BANKS need those assets to be valued at. Why? BECAUSE THEY ARE INSOLVENT, and they’re trying to re-inflate the housing bubble to hide their insolvency.
I agree with Hanson, but this is just another version of “Too Big To Fail.” His argument for increasing foreclosures is simply a back-handed argument for letting the big boys fail.
[...] The Cure for Ailing Housing Market? Maybe It’s More Foreclosures – Megan Cottrell –… [...]
most of the foreclosed homes went to “HUD”, “FANNIE MAE”, AND FREDDIE MAC”.
CHECK THEIR SITES SHOWING THE HOME THAT THEY OWN AND WANT TO SELL, BOTH BY AUCTION AND ESTABLISHED SALES PRICES.
THE NUMBER WILL SHOCK YOU; AND MOST HOME SEEKERS CAN LIKELY FIND AN ENDLESS NUMBER OF CHANCES TO STILL BUY FORECLOSED HOMES AT UNBELEIVABLE GOOD BARGAINS.
Thanks,
bob
buy forclosed homes from “hud, fannie mae, and freddie mac”
thay still own more than most people can count.
Thanks,
bob