For several years now, the residential real estate market in most areas of the country has been severely constricted. In some states, where the pre-2007 housing bubble had truly run rampant, numbers of mortgage foreclosures and property abandonments have been extremely high, and market conditions are the worst.
In a few, highly blessed communities, Jamestown being one, there has been a far lower impact. The automatic increase in value may have disappeared for the time being, but most well informed owners who choose to sell, or who must sell, eventually find buyers for their property.
Nevertheless, there is, even here, a level of “constipation” in factors affecting the real estate market that are negatively impacting many homeowners.
Due to incredibly easy terms and record low interest rates set by the government for loans to banks, most mortgage lenders have plenty of money available to make residential mortgage loans. But these lenders are not making refinancing available to the folks who really need it.
Why not? One reason has been the adoption by lenders of more stringent underwriting standards, something that flows from an understandable desire by lenders to avoid the excesses that produced the housing bubble.
Another reason is that many homeowners have an existing mortgage in an amount in excess of the current value of the mortgaged property, the so-called “under water” syndrome.
The result: Banks, but not homeowners, are able to borrow funds at record low interest rates. Citizens crushed by mortgage debt, rising energy costs, and, in many instances, under-employment or unemployment, are unable to borrow. People who must sell their homes have to wait longer to find buyers.
It’s a vicious circle. But there is a way to break the circle of negativity. It may seem obvious to some. The federal government needs to get the money it is using to jump-start the economy into the hands of those who need it. It can be done with discipline, prudence, and without a huge bureaucracy. Perhaps a simple approach would be a federal guaranty for refinancing that meets a certain standard. A program like that might end up costing a lot less than TARP.
The fact that such a thing has not been done is a cause for wonder. And disappointment!