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by Don Azarias
November 13, 2010
The employment crisis is now putting one in every ten Americans in the threshold of homelessness. Those American homeowners with mortgage are at risk of losing their homes through foreclosure. The jobs crisis is putting more Americans at risk of losing their homes. The great American dream of owning a home has never looked so impossible to achieve. One in 10 households has missed at least one mortgage payment, and more than 2 million homes have been repossessed since the recession began. Few people expect the outlook to improve until companies start to hire steadily again and layoffs ease.
For your information, roughly 1.65 million homes are in the foreclosure status. Housing prices are at an all-time low, and nearly 7 percent of mortgage holders are more than 60 days late on their monthly payment.
Losing a job or having health problems that lead to high medical bills are among the reasons many people fall behind in their mortgage payments. And nearly half of the 1.3 million homeowners who have enrolled in Obama administration program have been cut loose through July, according to the Treasury Department. The program is intended to help those at risk of foreclosure by lowering their monthly mortgage payments. Now it turned out to be one of Obama’s political failures.
It’s just one of the problems confronting Federal Reserve chief Ben Bernanke when he spoke recently at a closely watched conference in Jackson Hole, Wyoming. The Fed has mostly exhausted its ammo to give the economy a jolt. But many experts say the situation is getting worse. Last July was the worst month on record for new home sales and the worst in 15 years for sales of previously occupied homes.
The supply of unsold homes on the market keeps getting bigger. At the same time, the growing number of foreclosures keeps pushing down home prices and scaring potential buyers and sellers from the market.
More than 2.3 million homes have been repossessed by lenders since the recession began in December 2007, according to foreclosure listing service RealtyTrac Inc. And 6 million more will be lost to foreclosure over the next three years, by some estimates. If that happens, home prices will probably sink further, and the economy will suffer. Builders will keep construction to a minimum, and Americans will be less willing to spend because of their lost home values. “Housing is certainly not going to help the recovery. It threatens to hinder it” said Michelle Meyer, a Bank of America economist.
A major problem is that many people have homes that are now worth less than they owe on their mortgages. Approximately 11 million homeowners, or 23 percent of those with a mortgage, were “underwater” as of the end of June. Nevada had the highest number of any state, with 68 percent. The number of “underwater” mortgages was down from the previous quarter———but only because homes are being repossessed by lenders.
The number of Americans missing payments and falling into foreclosure has gone up along with unemployment. The jobless rate has remained near double digits all year.
Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.
“We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,” said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. “California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage.”
A home may not be listed because the bank is in the process of putting all legal documents like the title, repair or owner right of redemption issues in order. (Several states such as Michigan and Wisconsin give the previous owners the chance to buy back a home that’s been foreclosed on). Banks may also be holding houses off the market because selling them now would lower prices even further.
Foreclosures typically sell at a 31 percent discount to similar homes whose owners aren’t in distress. Listing all those homes now, Sharga says, “would have a devastating impact on inventory and pricing.”
Whatever the reasons are, those greedy financial institutions must be ordered to clean up their mess because they were the ones that started this economic crisis in the first place. And now those poor American homeowners, some of whom are partly to blame for their predicament, are facing homelessness.
Can you imagine this sort of nightmare happening in the richest and most powerful country on the face of the earth? Come to think of it: Does the United States still hold that distinction?