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Housing Crisis in 2010
Monday, January 25, 2010
According to NYTIMES:
"The financial crisis and Great Recession have their roots in the housing bust. When it comes, a lasting recovery will be evident in a housing rebound. Unfortunately, housing appears to be weakening anew.
Figures released last week show that after four months of gains, home prices flattened in October. At that time, low mortgage rates (courtesy of the Federal Reserve) and a home buyer’s tax credit (courtesy of Congress) were fueling sales. That should have propped up prices. But it was not enough to overcome the drag created by a glut of 3.2 million new and existing unsold single-family homes — about a seven-month supply.
The situation, we fear, will only get worse in months to come. Rates already are starting to rise as lenders brace for the Fed to curtail support for mortgage lending as early as the end of March. The home buyer’s tax credit is scheduled to expire at the end of April. And a new flood of foreclosed homes is ready to hit the market.
It is increasingly clear that the Obama administration’s anti-foreclosure effort — which pressed lenders to reduce interest rates — isn’t doing nearly enough. High unemployment rates also mean that many borrowers who did qualify for aid have been unable to keep up with even reduced monthly payments.
As a result, an estimated 2.4 million foreclosed homes will be added to the existing glut in 2010, driving prices down by another 10 percent or so. That would bring the average decline nationwide to about 40 percent since the peak of the market in 2006.
A renewed price drop could usher in a new grim chapter in the foreclosure crisis. Already an estimated one-third of homeowners with a mortgage — nearly 16 million people — owe more than their homes are worth; in industry parlance, they are “underwater.” If prices drop further, ever more borrowers will sink ever deeper. Research suggests that the greater the loss of home equity, the greater the likelihood that borrowers will decide to turn in the keys and find a cheaper place to rent.
1 comments:
I think with the end of the ‘Great Recession’ in sight, experts believe the worst is over. Positive signs are many. More than a year since the launch of the Troubled Asset Relief Programme, American megabanks have started repaying the state. The Net may still be flooded with ads of luxurious homes for sale in the US, but asset values have not yet reached the predicted (and feared) lows. The timely intervention of the government (tax credits and the President’s Making Home Affordable program, to name a few) is touted the main reason behind this rosy picture.
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