from Google Maps
By Mike Colpitts
The classified advertisement reads: “Immediate opening for an expert negotiator with serious finance credentials. Master’s degree in economics or related field required. Real Estate background a must, especially in residential area. Scope of experience should include working with and understanding bankers.”
Apply to: President Barack Obama,
The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500
The position above is what the White House needs filled these days A Housing Czar to deal with America’s biggest economic problem since the Great Depression.
The Obama Administration has quietly assembled an arsenal of other experts, numbering 130, but no where in the administration is an expert on real estate. Economist Lawrence Summers is the president’s special economic advisor. However, the housing problem America faces with record breaking foreclosures needs to be dealt with by someone with the specialized expertise to handle the crisis.
The housing depression drove the world into recession. The mass media is reporting that the signs of a bottom are materializing. In an ideal world the housing bottom would be forming, but this is far from an ideal world. Don’t leave it to Congress Barack. We see how well they’re doing!
When it comes to analyzing housing markets it comes down to sheer numbers. An over-whelming $4-trillion in home equity has been wiped out. The decline in mortgage debt in 2008 was the first time since the Fed started tracking the number in 1945 that it actually fell. Home prices edged up slightly in some areas as sales grew in June, but when adjusted seasonally values still show a decline. The road in this crisis is hardly at the end.
According to government figures, home mortgage debt represented 73% of the gross domestic product last year, the third highest annual number on record. The figure reached 75% in 2006 and 2007.
Reducing the number will take millions of more foreclosures or mortgage modifications. Otherwise, a weaker economy will linger for years. A growth in savings by Americans to strengthen banks capital and balance sheets will help restore the economy, but that will take years longer.
In our new economy it’s difficult to tell just what magic number would put the U.S. economy back in balance. But the over-hang from the real estate boom does have to be cut in order for the economy to renew growth. In the 1990s mortgage debt levels were under 50%, which means nearly another $4-trillion would have to be sliced from the $10.5-trillion the Government Accounting Office says existed at the end of 2008.
Common wisdom dictates that the number is somewhere in between.
We all know that too much borrowing, loose lending practices, antics on Wall Street, new creative mortgage products and fraud got us in this mess. We’ve been dealing with the fall out for more than two years as housing prices fall and millions of Americans loose their homes.
It’s a depressing sight to see so many people lose their homes. It’s also depressing to hear reports that more people are committing suicide as a result. Some people just can’t take it anymore.
The stock market is close to following the gyrations it did prior to the Great Depression as investors pursue avenues to make a buck. Borrowers are overstretched and fewer and fewer homeowners are able to make their monthly mortgage, which will equate to additional losses for bankers. You really need the Housing Czar Mr. President.
Mike Colpitts is the Editor of Housing Predictor, and has been a real estate analyst 20 years.