We are officially in the age of Obama now
The market was clearly waiting to hear more from the President on how he intends to fix the credit/housing crisis. And, since he really didn’t address it with any detail in his inauguration speech, investors drove the market way down yesterday.
While many wait to see whether Obama will be a strong supporter, now that he is President, of bankruptcy reform to allow for the refinancing of existing mortgages in or near foreclosure, the New York Times today published a story chilling in its ramifications.
“After riding high on one of the greatest housing booms in American history, the nation’s home builders today face a devastating reversal of fortune,” says the paper.
But it is the headline and subheadline to the article that sums it all up: “Banks Foreclose on Builders; Even Perfect Payments Are No Protection For Home Developers.”
That’s right. More and more banks are apparently calling in loans to builders–not because they have been late with payments (many have not been) but because their income has dropped, spooking the lenders.
The Times highlights an Arizona builder by the name of Dave Brown. He made his payments on time, but that didn’t stop his bank from calling in the chips.
“They treated me like a deadbeat who missed his car payment. They wanted their money now,” the paper quotes the 76 year old Brown as saying.
Speaking about small home builders (who along with medium sized one reportedly comprise 70 percent of new homes built in America), the paper writes, “…a wide swath of the industry could be forced out of business in the next few years.”
Obama begins his term, therefore, having to deal with both home homers who are losing their homes, and home builders who are losing their businesses. A potent mix for any American president to have to deal with.
Photo Credit: pdz_house