Here is a good article summarizing the housing bust. The housing downturn is going to be longer than anticipated. It is worth reading the entire article. It is funny how no one, still, takes responsibility. Lenders were lemmings and relaxed their standards, borrowers thought home values could only increase and did not worry about payments, and builders did not pay attention to economics or demographics (or speculators buying homes). Here are a couple of standout points from the article:
“Owning a home is the American dream,” says Jamie Schrole, a Merced real estate agent. “Everybody was just trying to live out their dream.” The belief that this dream could be achieved with no risk, no worry and no money down was at the center of the American romance with real estate in the early years of this decade, and not just in Merced.
As Merced goes, so might go much of the nation. With as many as 2.5 million homes in the United States entering foreclosure this year and, at best, sales of only five million existing houses, the foreclosure price is becoming the rule in many areas. In Los Angeles County, whose 10 million people make it the most populous county in the United States, a third of the sales are foreclosures.
Ouch. Here is one final point that epitomizes the easy finance that lead to the current days of reckoning:
Mr. Seivert is going after a house that the owners bought 13 years ago for $86,000 and refinanced six times, taking advantage of rising values to get cash that, in part, they spent on the house. It has a pool with a small waterfall, a TV room in the converted garage, a deluxe outdoor barbecue setup and a kitchen with all the latest gadgets. The owners, who owe $350,000, can no longer make their mortgage payments. Mr. Seivert is negotiating to buy the house for $170,000 and then rent it back to the couple, who have jobs in the area. (Bold added.)Where is the incentive to keep a house out of foreclosure when all the equity is gone? Hopefully, the people getting deals on foreclosed homes will have some equity in the homes they buy, and a stabilized housing market will help preserve this equity. This will end the housing crisis.