I believe that the housing crisis is acting as a ball and chain on the general economy. An alarming 25% of the homeowners in the united states owe more on their mortgages than their homes are worth. America has way too many borrowers losing their homes to short sales that take months to complete and foreclosures that in some cases take years.
Some experts estimate that we have between four and five million distressed properties flooding the market in the next couple of years. The incoming foreclosure and short sale inventory needs to be absorbed at a much quicker rate than we have seen in the past.
According to the National Association of Realtors approximately 5 million homes are sold annually in the United States. Those numbers include short sales, foreclosures and traditional sales. If 50% of those sales are distressed it would take an estimated 2-3 years to absorb those incoming properties.
Market stabilization could be expedited if the lenders would simply reduce a portion of the principal on upside down borrowers loans while marginally upside down borrowers should be able to refinance at today’s lower rates.
The borrowers that have lost their jobs and can not afford their homes must have the arms length transaction restriction lifted. Friends, relatives and business associates should be free to purchase the property through a short sale transaction.
One of my mentors once said “If you always do what you always done you’ll always get what you always got.”
If we continue to handle the mortgage crisis in the same way that we have been we will continue to see abandoned homes, blighted neighborhoods and declining values. There’s an estimated 10 million vacant homes in America today. Many of those homes will end up being bull dozed by lenders that don’t want the liability.
Home values will continue to decline. The equity in residential real estate in 2006 was estimated to be 12.8 trillion dollars. Today’s estimate is 6 trillion dollars. Zillow estimates a $700 billion loss of equity in 2012.
Loan modification schemes and other fraudulent practices will persist. The cost of policing and prosecuting these scammers will only increase.
We can’t afford to let this drag on. Until all of the short sales and foreclosures are absorbed the economic crisis will drag on and on.
A wise man once said, America always does what’s right, after it’s tried everything else.
