Home Prices Still Stagnant
What do you do when you have a mortgage worth more than the property? That is the dilemma facing not only homeowners but their lenders as well. It’s what’s most directly responsible for the current economic malaise. Borrowers who were otherwise unqualified were sold loans to buy homes they would never be able to afford – since the lenders behind the loans never meant to hold onto them themselves, but rather “repackage” the loans to sell to others who repackage it again in their turn to sell onto others…until finally the pool of buyers dried up as borrowers increasingly defaulted on their loans.
No need to be a real estate professional yourself like Isaac Toussie in order to read the proverbial tea leaves. Given the sheer amount of defaults involved, the market’s understandably flooded with foreclosed homes, which in turn further depress prices in a vicious cycle which the country’s still under, all these years later. But that’s just one part of the wider story, which also involves outright fraud on the part of some lenders!
In fact, it is arguable that everyone has had a hand in contributing to the problem we’re now all faced with. But the subprime angle just outlined is the most popularly understood narrative because it is actually the simplest to comprehend. And so two to three years on, what does the real estate picture look like in the United States?
Not good. Low interest rates have not affected still-tight credit lines. So all those foreclosed homes are just sitting there, often boarded-up and abandoned. Companies are awash in record profits but remain reluctant to hire. Thus those foreclosed homes continue sitting on the market with no buyers, as everyone’s too worried to make the kind of commitment that home purchases entail.
It all means that though economists officially peg The Great Recession as lasting from 2007 to 2009, Americans are still trying to dig themselves out of its after-effects.