Housing is the Forgotten Crisis
WASHINGTON (MarketWatch) — The U.S. economy has made a lot of progress since the dark days of September 2008 — investors are happy, bankers are secure, markets are functioning and businesses are flush. No depression here.
The stock market has finally climbed back where it was on that fateful weekend when Lehman Bros. filed for bankruptcy, but there has been little relief for the average family.
Policy makers may have rescued the banks, but they haven’t figured out a way to bring back the jobs that were lost, nor have they found any answer to the problem that was the nucleus of the crisis: housing.
Housing is the forgotten crisis.
It wasn’t always so neglected. Early on in the downturn, the government dug deep into its policy tool kit to find answers for the collapse of housing.
They lowered interest rates in an effort to boost affordability. They took over Fannie Mae and Freddie Mac, and they told the Federal Housing Administration to lend freely. The Federal Reserve purchased more than $1 trillion in mortgage-backed securities and bonds to support housing. They approved tax credits for buyers, and extended those credits several times. They tried to get lenders to modify loans.
Nothing has worked. At least, not well enough. The housing market is still dead, and worst of all, prices are falling again.
For a while, it seemed as if housing was at least bottoming out, if not improving. The low mortgage rates and tax credits boosted sales, but only temporarily. And when sales fell back, so did prices.
Nationally, home prices are down about 30% from their peak. In some cities, such as Phoenix and Las Vegas, prices are down more than 50% from the high point, according to the Case-Shiller home price index.
According to the CoreLogic home price index, home prices fell 1.8% in September, the fastest decline since early 2009. Other price measurements tell the same story of falling prices since mid-summer. Recently, Fitch Ratings projected that prices would fall another 10% in 2011.
According to the Fed, the decline in home prices in the third quarter subtracted about $584 billion from the equity Americans have in their homes.
No comments:
Post a Comment