Our political leaders and some well-placed economists believe that the U.S. economy has begun to recover from the recession. All would be well if the country could get its housing market back on track. My view is that while the housing crisis was a major contributor to the financial crisis, the real estate market is more of a symptom than a cause. Our current problems are caused by unemployment, government debt and general economic uncertainty.
The biggest problem is the lack of recovery in real estate. Consider:
* Young adults just starting out are the most likely to purchase starter homes. This is due to not having a job or being paid low enough. There are also high student loans that can get into six figures.
* Home ownership rates for all age groups have declined between 1980 and 2010, remained flat for the ages 55-64, but increased slightly for those over 65. Only 42% of those aged 25-34 are homeowners, while 77.5% own their homes.
* The number of homeowners more than 90 days late in paying their mortgages remained flat (7.02% in November) during the second half 2011. (1/6/12 Housing Wire).
* From 253 days in 2007, to 674 days (almost two years ago) for a foreclosure to close, the average time has increased from 2007. (1/6/12 Dr. Housing Bubble). Gee, why would you pay rent or mortgage when you could live at no cost to someone else?
The government should have the common sense of allowing the housing market to go through its normal cycle in order to allow it to begin to recover. We are foolish to think otherwise, but it is not! Housing continues to fall despite the Fed’s efforts to keep interest rates low. Mortgage rates finished 2011 at a record low of 3.9% for a 30-year fixed mortgage. What has the government done to rescue housing so far?
* Although the Home Affordable Modification Program (HAMP), was intended to reach 3-4 Million Borrowers, it only helped 800,000.
* Major banks still lend very little, even though they have received trillions of dollars from the government. This is despite having access to credit scores that are exceptional. You could argue that banks are not as solvent today as they were four years back.
* FHA loans have been available to borrowers with a 3.5% down payment. The borrowers can then reap the benefits of rising housing values, while those who decline could be left with little financial impact. The default rate of FHA loans that have been in place for at least 2 years is almost 3 times that of Fannie or Freddie. This is due to the lax lending standards.
* Fed Chairman Bernanke suggested that foreclosed homes be converted into rental properties to stop price drops. It sounds logical, until you realize that government involvement would only make it more complicated and more costly.
The core of the country’s economic problems can be traced back at Washington, D.C. Anyone who has ever thought about this must realize that the federal government is more likely to borrow money than they will pay back. The tax increase would only solve a portion of the problem, and cutting programs is a political scourge. This leaves us with a huge dilemma. The bureaucrats will not face the real problem until all other options have been exhausted and tried unsuccessfully. Unfortunately, there is a long road ahead of us.
Adam Mcbrian can help you get a buyer mortgage note for any of the 50 states. Please contact us if you need a buyer mortgage note.