Trifecta Keeping Housing Bubble Inflated
A bit of news you may have purposefully missed: the Senate recently voted 60-38 to reinstate the elevated loan limits for Fannie Mae, Freddie Mac, and the Federal Housing Administration. With the “limit” set at $729,750, prices are sure to stay inflated in bubble states like California and New York, though it is a wonder that such a figure is even plausible given that the typical American household makes roughly $50,000 a year. Our politicians are also seeking to extend residential visas to foreigners looking to buy at least $500,000 in real estate, never mind the fact that the median home in the U.S. costs around $180,000. Democratic Senator Chuck Schumer describes his bill, which is co-sponsored by Senator Mike Lee, a Republican from Utah, as a way boost demand in the sluggish housing market. The bill would require foreigners to spend at least $500,000 on residential real estate and at least $250,000 for a primary residence. A similar policy in Canada has proven to drive home prices up, as a near quarter of home purchases are by wealthy foreigners.
Since the housing bubble burst nearly $7 trillion in real estate wealth has evaporated, representing a fall of close to 30 percent from the peak in equity. Part of this is again, due to the fact that many home buyers can only afford lower priced homes. Additionally, nearly 3 million foreclosures have concluded, not counting the shadow inventory of nearly 4 to 6 million properties created by the banks. With the government and the banks working, seemingly in a concerted effort to keep prices artificially high, there seems to be little we can do to avoid the state of housing welfare that currently continues to stagnate our economy. Instead the government should be focusing on fostering an environment to create jobs, taking all hands away from the housing market, though as it stands; it seems the only way this will occur is if their banking overlords order them to do so. We do not need another bail out for the housing market; we need a healthy environment for small business to thrive which in turn creates jobs.
Since the housing bubble burst nearly $7 trillion in real estate wealth has evaporated, representing a fall of close to 30 percent from the peak in equity. Part of this is again, due to the fact that many home buyers can only afford lower priced homes. Additionally, nearly 3 million foreclosures have concluded, not counting the shadow inventory of nearly 4 to 6 million properties created by the banks. With the government and the banks working, seemingly in a concerted effort to keep prices artificially high, there seems to be little we can do to avoid the state of housing welfare that currently continues to stagnate our economy. Instead the government should be focusing on fostering an environment to create jobs, taking all hands away from the housing market, though as it stands; it seems the only way this will occur is if their banking overlords order them to do so. We do not need another bail out for the housing market; we need a healthy environment for small business to thrive which in turn creates jobs.
Comments (1)
This is unbelievable. My daughter just tried to purchase a condo in my complex (Modesto, CA). Modesto is one the highest unemployment and foreclosure cities in the state. The condo was listed at 124K (Fannie Mae owned since June-purchased at 84K). County (property tax purposes) valued the property at 85K. The condition of the condo was horrible, no refrigerator, poor flooring, kitchen cabinets a mess. The 'comp' in the area showed condo's sold ranging from 87k to 95K within the last 30 days. My daughter has over a 700 credit rating, 20% down payment, excellent paying job. Wells Fargo stated she was a "dream buyer" and could qualify three times the amount. She would be using the condo as her primary residence and as a project to remodel. The real estate agent(s)[they laughed] and the lender both stated. "Fannie Mae will turn down any offer less than the 124K (list) since they hold on to properties knowing they will go up in value due to a lack of properties on the market. They are in no hurry to sell...they are very difficult to deal with". Regardless my daughter put in an offer of $92K. Fannie Mae countered with $122K. Daughter countered with $94K. Fannie Mae turned down with no counter. I own my home and went through the whole experience of the market. Wells Fargo help me keep my home although the home is worth a 1/3 of the original value. I am not interested in moving. I have now watch co-workers, friends and now family try to purchase a home or sell a home here in Modesto and it is very disturbing to watch EXACTLY what has been described in the above blog. This is going to bury the middle class.
Mavis, almost 12 years ago