Troubled by the mortgage melt down and falling home prices, the U.S. housing market has fallen into a national real estate recession, according to the latest analysis by Housing Predictor.
The over-whelming majority of local real estate markets are either in housing recessions or battling to keep their economies strong enough to keep from declining. Housing Predictor forecasts more than 250 local housing markets and at least 221 are in the woes of recession.
The remaining markets are in fortunate enough positions to have growing regional economies, keeping them out of the real estate recession at least for the time being or have not been affected as much as a result of stronger lending standards in their communities. The subprime crisis, however, is now only partially to blame as the mortgage crisis expands in ever growing numbers into conventional loans.
According to U.S. Congressman Brad Miller, (D) North Carolina, who has proposed a bill before Congress to aid homeowners under foreclosure, there are now 5 million adjustable rate mortgages which face adjustments over a little more than the next two years. The resets will only worsen the housing market as prices decline when borrowers are unable to afford the higher payments or attempt to refinance into new mortgages.
The crisis is unprecedented in U.S. history and could cause the U.S. economy to suffer worse national economic turmoil than caused by the Great Depression in the 1930’s. New laws were enacted to help avert a repeat of the Depression and only further interest rate cuts and infusing more money into the economy may help at this point.
The Federal Reserve has responded by cutting interest rates and is clearly on a route to lower rates further in order to help to limit the catastrophic affects of the real estate recession. However, Housing Predictor analysts are no longer concerned about whether an overall U.S. recession impacting the entire economy will occur, but just how bad its overall affect will be on the nation’s economy.
The losses to mortgage companies, banks and home owners as a result of record all time foreclosures will range into billions of dollars, and with the lack of information from investment bankers on Wall Street the fall out will take at least a year to become clear, according to analysts, who have delved into the growing epidemic of losses being suffered.
Wall Street investment bankers and mortgage houses are only beginning to report the major losses, which run into multi billions of dollars.
The impact is already being felt by the greater U.S. economy as consumers, many of whom used their homes as piggy banks to borrow against in record numbers tighten spending habits on goods and services.
Housing Predictor forecast the recession more than a year ago and it will now take at least two to three years to recover from, but only with the correct actions by the Fed to help avert a worsening crisis.
The impact has already resulted in higher unemployment numbers in the building industries, which has slowed to less than ten percent of what it was during the real estate boom, and does not account for more than one million estimated undocumented workers in the U.S. working for contractors building homes and other properties under the table, who are now out of work.
Former Federal Reserve Chief Alan Greenspan has taken flack for keeping mortgage rates too low for too long. Greenspan openly denies that is what has caused the current crisis. A panel of economists and real estate analysts surveyed by Housing Predictor agrees. For years mortgage companies developed and then implemented new creative mortgages and loosened lending guidelines to the point where they would make a loan to just about anyone who had a pulse.
The greedy lending practices are now having a huge impact on the overall national economy and will continue to cause economic trouble for the national economy for many years to come. There’s plenty of blame to go around from unethical mortgage brokers, lenders and home builders to the lack on the Federal government’s part to institute restrictions on subprime mortgages.
The booming real estate market also produced a group of first time investors, who were willing to do just about anything to get a mortgage and many of them are now paying the price.
Housing markets all over the nation at first slowed after the abundance of money to fill the mortgages stopped flowing as easily on Wall Street. The rate at which home prices are falling in some areas is staggering, and have fallen as much as 40 to 50% from their peak in some markets, much faster than when the U.S. Savings and Loan Fraud Scandal reached its peak in the early 1990’s.