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Anonymous
March 19, 2012
There are 130 million homes in the Unites States (2009 AMERICAN HOUSING SURVEY). Many are owned free and clear and are not in jeopardy. However, 11.1 of the 55.1 million homes with mortgages are in jeopardy of default over the next five years (Laurie Goodman, Amherst Securities Group LP, New York). About 1.7 million U.S. homes were in the foreclosure process and expected to hit the market in 2011 - 2012 (CoreLogic Inc.). Estimates of the shadow inventory are higher. About 3.8 million U.S. homes are “vacant and held off the market, part of the large, so-called shadow inventory,” (Assistant Treasury Secretary Mary Miller) But, this number may be as high as 5.7 million (RealtyTrac).
Real Estate represents 28% of the GDP. Housing starts represent a significant portion of that number. New home construction generates demand (and jobs) for grading, concrete, plumbing, electric, framing, drywall, windows, cabinets, fixtures, appliances, carpet, paint, landscaping and many other trades. Until housing starts increase to a normal level, we will not have an economic recovery. Housing starts cannot return until the housing crisis has been resolved and people have the confidence (and jobs) to buy homes again.
Annual Housing Starts (thousands) (ForecastChart.com)
Last Year . . . . . . . . . . . . . . . . . . . . 563
Last 5 Years . . . . . . . . . . . . . . . . . . 917
Last 10 Years . . . . . . . . . . . . . . . 1,395
Last 20 Years. . . . . . . . . . . . . . . . 1,416
During the real estate recession of the early 1990’s, the FSLIC swept up the “toxic” assets in failed Savings & Loans. Between 1989 and mid-1995, the Resolution Trust Corporation closed 747 thrifts with total assets of $394 billion (The Cost of the Savings and Loan Crisis: Truth and Consequences – Shibut). By 1995, the RTC was able to shut itself down having disposed of all of its real estate assets.
This downturn is different. If the FDIC swept all the toxic assets off their books, it would mean shutting down the nation’s small and regional banks – a price the government deemed too destructive to enact.
Enter PRETEND & EXTEND, the FDIC policy of kicking the can down the road and ignoring the problem in the hopes that the market would recover by itself. It hasn’t, and it will not, until the millions of homes waiting in shadow inventory are resolved.
The politicians in Washington have failed to tackle the housing crisis. The nation’s economy will not recover until they do.
Robert J. Cristiano