With three years of struggle under our belts, are we ready to solve the housing crisis? Are we ready to accept a strategy that could help stabilize housing and begin to get the economy rolling again? Now that housing has become mired in yet another calamity (the the foreclosure scandal), are politicians, economists, pundits, and homeowners ready to take the medicine necessary to get our country back on track? While I’d like to think so, I’ve yet to see any positive action being taken.

 

The U.S. has thrown billions into the failed mortgage modification program, HAMP, the results of which have been pathetic. By the government’s own estimates we’ve made little progress in slowing the number of homeowners losing their homes, and in fact, are now facing a potential onslaught of 5 million additional foreclosures. Add in Foreclosure-Gate and it becomes obvious that we’re not only failing to make progress; we’re falling deeper into a hole in which housing could remain mired for years to come.

 

To ignore this problem is short-sighted at best; and to continue with the same failed “fixes” could allow the crisis to fester into a wound so severe that our very recovery could be in question. And while some may brush off my analysis as unnecessarily alarming, none have yet to offer alternative or less-costly solutions. The choice of many has been to be to just allow housing to crash and to pick up the pieces later. However, it’s now been three years, and we’re still crashing. Foreclosures are increasing; personal bankruptcies are increasing; and the nation has borrowed and spent billions that have failed to stabilize the economy.

 

Housing is the key to a recovery; it has always been so. The graph below shows just how far housing has fallen. As a percentage of GDP, residential investment is now at a record low spanning the past 60 years. Home sales and construction drive the engine that can lift us from this quagmire; without a housing recovery we may not add enough jobs to absorb the millions of unemployed for another decade. I don’t think we’re prepared to deal with the consequences of such malaise.

 

In order to restore housing it will be necessary to have PRINCIPAL WRITE-DOWNS, a solution I described in, “Punishing Foreclosure Victims Only Increases the Pain for all of us,” written earlier this year. At that time many objected to the idea, but the worsening market and economy has begun to make it more palatable to some; and whether or not we find the concept appealing, the issue must be addressed. Of course it’s complicated, and might require one more act of assistance from taxpayers; but doing nothing has already consumed billions and will consume billions more. Let’s put our money where it can have an impact and where it has the potential to produce a result from which we will all benefit.

 

Such a plan will require that banks absorb losses, that government provide some underwriting, and that homeowners commit to sharing future gains with their lender. The development of a workable plan would require compromise from all sides and would probably be best accomplished without forced government intervention. Creating such a plan would require bi-partisan support (if that’s possible) and should include the participation of Treasury as well as representatives of both the real estate and mortgage industries.

 

I see only two options. We can complain about the inherent unfairness of such a move, continuing to disparage those “irresponsible” borrowers who should have known better, or we can implement a strategy from which we will all ultimately benefit. Business as usual hasn’t worked; housing remains on a downward slide. Do we want to risk calamity? Or are we willing to learn from our mistakes and move ahead? Politicians won’t take the initiative unless forced to do so. Are we ready to solve the housing crisis?

 

The Housing Guru: The expert source for all your housing questions—now featuring daily updates of Today’s Housing News

 

 

Glenn Roberts | Ravenna Park | My Seattle | Lake & Co Real Estate

The Stimulous Program

In This Post

A Halloween treat from my Wisconsin brother-in-law.

 

It is a slow day in the small Minnesota town of Marshall , and the streets are deserted.Times are tough, everybody is in debt, and everybody is living on credit.

A rich tourist visiting the area drives through town, stops at the motel, lays a $100 bill on the desk and says he wants to inspect the
rooms upstairs before selecting one for the night.

1. As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.

 2. The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.

 3. The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Farmer's Co-op.

 4. The guy at the Farmer's Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her "services" on credit.

 5. The prostitute rushes to the hotel and pays off her room bill with the hotel owner.

 6. The hotel proprietor then places the $100 back on the counter so the rich traveler will not suspect anything.

 At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves town.

 No one produced anything. No one earned anything. However, the whole town is now out of debt and looks to the future with a lot more optimism.

 And that, ladies and gentlemen, is how Stimulus works.

Glenn Roberts
Lake and Company Real Estate
206-524-3665
Seattle Residential ~ I Do That 

Licensed broker since 1985 offering spectacular service to buyers and sellers in greater Seattle, with particular interest in Green Lake, Ballard, Phinney Ridge, Wallingford, Ravenna, Bryant, View Ridge, Roosevelt and the University District.

Referrals from past clients and other agents always make me smile.  

Glenn Roberts | Lake and Co Real estate on Facebook