Hey Everyone, sorry it’s been awhile. I get lazy like that sometimes.
I want to talk about this whole notion of principal reduction. Diana Olick was on CNBC again yesterday touting this as the best way to get our housing market back on track. To that I ask this question: What good is a principal reduction on my home if it still continues to lose value, if the “American dream” of homeownership has forever been altered, and my country’s economy continues to struggle indefinitely?
There are two significant, unconsidered piece of data that always fail to get considered in any conversation I’ve heard about principal reduction. They are
1) What about all the people who have already lost their homes, and
2) What about the 2 million vacant homes that haven’t even been listed for sale yet (so-called “Shadow” inventory)?
Some interesting pieces of information you’ll need to consider before I proceed with my answer:
1) A study released yesterday places America at # 28 on the list of the world’s healthiest economies.
2) Fannie Mae & Freddie Mac used to allow a new purchase four years after a foreclosure. That number has been increased to seven years.
3) Housing has ALWAYS led this nation out of recession. Every single time. Look it up.
My answer really is quite simple. MAKE HOMEOWNERS AGAIN OUT OF ALL THESE PEOPLE WE’VE KICKED OUT OF THEIR HOMES!!!
How do we do this?
Well, we forgive everybody who has ever had a foreclosure or a bankruptcy. We tell them “If you can work hard enough to get your credit score back up to 600 and if you can qualify by all other standards of a full-documentation loan, you can go buy your family a new home.”
My supporting data:
We have foreclosed on nearly 10% of the homes in America. Yes, literally, 12 million out of 112,762,000 single-family homes. That means 1 in 10 homes in your neighborhood has been foreclosed on in the last 41 months. And, that 1 in 10 homes has cost you 20% of your home’s value – or more. It has also cost more than 3 million families the right to buy a new home any time in the next 4-7 years.
How can this not be win-win-win? Those of us who have already lost homes win because they can buy again, Those of us who still have homes win as supply & demand work to stop our freefall, and our economy wins by restoring the pride and value that has historically come through owning your own home.
Seriously. I’m very interested in comments. Let me know what you think.
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