Fannie Mae Proposes Bulldozing Foreclosed Homes
To this point, the US government has dealt with the housing problem by throwing hundreds of billions at the banks to write down mortgages. This hasn't, and won't ever, help the housing market. And, as such, the housing market has suffered.
Fannie Mae considers the problem with the housing market to be supply side in nature. What this means is that there are too many houses available at a lower price. Their rationale is that if you bulldoze the houses, or eliminate them from the market, supply will reduce, demand will increase, and prices will go up.
The amount of homes to be bulldozed? Not yet determined but would have to be over 1 million.. The problem with this solution is that the U.S. banks holding these mortgages – and holding trillions of dollars of leveraged housing-derivatives would have to take virtually 100% write-downs on these units.
However, 1 million will probably not be enough With this “shadow inventory” of unsold/unlisted U.S. homes totaling somewhere between 5 million and 10 million units, another wave of foreclosures/defaults is about to explode upon this market – as millions of the infamous “option-ARM” mortgages will be resetting over the next 2 years, with a large chunk of those millions of units representing certain defaults.
The author of the article where I found this information states the following: The pretend-bottom in the housing market is gone. The feeble wave of census-hiring is over. The flood of “stimulus dollars” has slowed to a trickle and bankrupt state and local governments will now either have to formally default – or radically slash spending and raise taxes to prevent such bankruptcies. When the government GSE's who bankroll 95% of U.S. mortgages start talking about demolishing homes, you know that “the party is over”. What are your thoughts?
Would bulldozing foreclosed homes and using stimulus money to pay off the banks help the housing market?
Comments (1)
Somewhere lost in this maze of numbers and financial dark magic wizardry is the fact that there are real people associated with this disaster. Lives wiped out because of the madness of the blind pursuit of excess profit. I remember what they taught me, don't get so greedy that you will destroy the marketplace. Too bad modern financial alchemists don't know how to play the game so everyone wins. Now we will all suffer for a very long time. I guess we deserve it. We were too passive and willing to buy into anything. Any hope for putting families that need a home into these dwellings? Not a chance. No political or financial leaders have anywhere near enough moxie to try that. So sad.
robby, over 12 years ago