Wednesday, October 26, 2011
Housing Market Fixes: Spending Big Bucks or Saving on the Small Adjustments?
Continuing the handful of minor adjustments in the housing market is projected to hasten the already advancing housing market. GOOD NEWS: A major monetary overhaul is not needed!
"I take a great deal of solace in recent numbers. The stability in non-distressed prices is encouraging and suggests an underlying stability in the overall housing market. If you can implement policies that reduce the share of distressed sales of the total market, housing should see a dramatic recovery quickly." says Moody's Chief Economist Mark Zandi.
Zandi’s three core issues within the housing market today are as follows:
Valuation: Values of houses have been dramatically high comparatively to incomes and rental costs. Housing prices are leveling out at a more parallel rate to income although still high compared to rents.
Overbuilding: Excess inventory on the market will take a few years to even out. The current surplus in supply needs to meet up with the rate of demand.
Foreclosure: ~3.4 million first-mortgage loans are in foreclosure right now. Prices are expected to decline until the amount of foreclosures starts to go down.
Simple solutions such as government sponsored enterprises (Fannie Mae and Freddie Mac) can make it easier to refinance and do principal reductions. The attorneys’ general suit against banks which improperly handled documentation on mortgages must reach an end. Distressed sales will go up and short sales/foreclosures held up by such suits will fall in the long term. The last minor fix is with credit. Credit needs to get back to the pre-boom levels. Getting qualified borrowers back into the market to take advantage of the ‘outstanding quality’ of different loans currently being offered.
"Our problems are not drastic," Zandi said. "We don't need to do one big thing to fix all of this. We've gone a long way to right the wrongs in this industry. There are just a few things we need to do around the edges. If you can implement policies that reduce the share of distressed sales of the total market, housing should see a dramatic recovery quickly."