6,600 Foreclosures Per Day
by Hiland Doolittle
For months the National Association of Realtors (NAR) has done its best to put forth a positive message about the housing crisis. During this time, the NAR has reported increased sales and improving home values. The Center for Responsible Lending (CRL) paints a very different picture and the proof is in the pudding.
$502 billion will be lost in residential real estate property values in 2009. Yes, that’s right, $502 billion in home values will be wiped out. While the NAR correctly reports increased pending sales, what they do not report is that 50 percent of those sales are either foreclosures or short sales. Fo0r a variety of reasons, many of the short sales fail to close. Across the United States, a stunning 6,600 foreclosures are taking place each day.
The Treasury Department reported to Congress that the numbers will get worse long before they get better. The Treasury Department’s assistant secretary, Michael Barr, informed Congress that more than 6 million families could face foreclosure in the next three years. Barr indicated that the foreclosure wave, which began with subprime loans, has expanded into virtually every market sector and price range.
“The recent crisis in the housing sector has devastated families and communities across the country and is at the center of our financial crisis and economic downturn,” Barr told Congress. Financial experts and analysts, like Warren Buffett, have long placed an improved housing market as the central component in the nation’s economic recovery.
Obama Modification Plan Stalling
In March, the Obama Administration put forth an aggressive modification program that provided financial incentives for lenders and homeowners to re-shape loans. Among other incentives, the lenders receive $1,000 per year for the first three years. Homeowners whose mortgage loan has been modified receives a principal reduction of another $1,000 for each year the mortgage remains current. The federally backed modification program only applies to loans with Ginnie Mae or Freddie Mac.
The modification plan was expected to assist more than 9 million homeowners. Thus far, lenders and homeowners appear reluctant to engage the program. However, overworked and understaffed foreclosure departments have begun to see improvement as the most modifications in U.S. history were created in the second quarter 2009.
In certain areas of the country, the NAR says the housing market recovery is underway. Sales are on the mend and prices are improving. For every market that is improving, three are in turmoil. One in every 5 American homeowners has been delinquent on their mortgage at some point during the recession.
The problem is deeply rooted in Florida, an economy dependent on housing. 23 percent of Florida homes were either delinquent or already in foreclosure. In Lee County, where Fort Myers is located, more than 40,000 foreclosures will take place in 2009.
The FDIC has launched new efforts to keep families in their homes. Last month, FDIC Chairman Sheila Bair pushed the 54 banks under her control to extend six-month forbearance programs to unemployed workers. Bair hopes other lenders will embrace her initiative.
Historically, forbearance programs have failed as unemployed homeowners continue to become delinquent as soon as the forbearance period ends. While the housing crisis is the biggest deterrent to the economic recovery, the elephant in the room remains unemployment. In Florida, unemployment is at a 40-year high and sits uncomfortably at 10.7%.
Jobless Claims Lower
On Thursday, the Labor Department reported improvement in the employment sector of the economy. Applications for new unemployment benefits fell by 33,000 to a seasonally adjusted rate of 521,000 from 540,000 last week.
The number of Americans receiving long-term benefits decreased to 6.04 million. Forecasters had set a mark of 6.1 million. While progress is sporadic, the employment scene is tenuous at best.
For the housing crisis to turn, employment must improve and Americans faced with negative equity need to see the light of day. Discouraged Floridians are packing their bags and walking away from houses. In most cases, the debt level exceeds the home’s value.
A suburb of Miami, Miami Gardens, is a community of 111,000 residents. 13 percent of the residents have endured foreclosure and the suburb is now a cluster of boarded up homes. Miami Gardens has the second highest foreclosure rate in the state.
Tags: 2009 Stimulus Package, Bank of England, Consumer Confidence, Deflation, depression, Economy, European Central Bank, GDP, housing, Inflation, interest rates, recession, stimulus, Stimulus Plan, unemployment, US Dollar, US NonFarm Payrolls, US Retail Sales, US Unemployment
About the Author - Hiland Doolittle
Hiland is a professional writer with extensive entrepreneurial experience. He is a graduate of St. George’s School Newport, RI and the State University of New York at Albany where he majored in history. He has been active in the real estate business for 30 years and has founded and sold several businesses.
Hiland currently writes for several financial sites and is a published author of the novel The Last Parade. He has recently completed a manuscript for a children’s book entitled Sami and The Minnow Man.
