The easiest way to get out of our current and pending economic problems is to get the real estate industry back on its feet. Why would I say this, other than the fact that I am a card-carrying member of this industry? Or maybe because I’m worried for my livelihood as a mortgage professional and for my real estate investments? It certainly would be better than worse for me.
But I am not out in the public carrying my banner. I am genuinely trying to point out what the obvious to the vast majority of politicians, business leaders and the public who haven’t a clue. I say that because as I have said before, Washington likes to point fingers and not fix problems. The pendulum is swinging and it whizzed passed “the midpoint” months ago. It now could fly off so far in the wrong direction that it may never return to a realistic centrist position.
We as a country need to fix the problems quickly before they really start mounting. Foreclosures can create more foreclosures by artificially bringing down areas where the only sales are foreclosures. When an appraiser does a new appraisal in such an area, he has no choice but to use the foreclosed sales as comps for all of the other houses. When someone needs to refinance, they are stuck with an artificially lower value—which in normal times would be disregarded or given a lesser weight in the report—and finds out that he can’t refinance. Now this homeowner is facing problems because his mortgage is going up $600 a month and he may be next in line to lose his house.
Is this what we want? Many will say that water is only seeking its level and it is what it is. What they don’t take into account is that 92% of the homeowners are making their payments but are painted with the same brush as the 8% who are not. If a large amount of the 92% had sold their houses, and the foreclosures were at normal level of 1% or 2%, home prices wouldn’t have fallen as far and more people would be able to refinance if needed.
Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.