As the President prepares for next month's State of the Union Address, despite the stock market's remarkable rebound, the nation's economy is still struggling. Most notably, unemployment and foreclosures represent huge obstacles to economic recovery that the government must still find answers for. A successful housing rescue plan needs to include a provision to reduce mortgage principals for at-risk homeowners, which will require the cooperation of the bailed out banks that helped get us into this mess. See the following article from Housing Predictor for more on this.
There are no perfect choices as President Barack Obama sits down with his financial advisors to talk over just what they'll do next in the housing mess. Some choices are just better than others. Wall Street greed and bankers blunders got us to this point with the economy, and straightening out the mess is like cleaning up a kitchen after a bunch of short order cooks have thrown hundreds of sloppy dinners at the wall.
Until the number of foreclosures is reduced and employment levels increase there's just no two ways about it - - The U.S. economy won't sustain any sort of real come back. Some sectors won't hurt as much as others. There are always businesses that will do well, despite any sort of downturn in the overall economy.
For some the stock market is the barometer of the nation's economy. The New York Stock Exchange has come back 60% from it's downturn in early 2009. But the stock market has historically proven time and time again to be less than a real barometer of the economy. In fact, the market is often detached from Main Street and the real world.
I don't mean to be the bearer of bad news, but anybody who really thinks that the economy is improving with rising foreclosures is delusional. There's no such thing as a healthy economy without a strong job base. It's fundamental Economics 101. And a growing inventory of shadow foreclosures, estimated at 2.4-million homes drastically weakens the economy.
Before the State of the Union Address in February, plans are for President Obama to outline what the next steps are in his housing rescue plan. Whatever the choices it's certain that he'll get heavy criticism. Pulling a sinking boat out of the water is a difficult job, and you're never going to please everyone. The government hasn't saved many people from drowning in debt. The foreclosure modification program has proven to be a voluntary bust, while the bankers pick-up bigger and bigger pay checks.
There's a lot wrong with a system that was designed to help and protect everyone equally in a Democracy set up by the U.S. Constitution when bankers are bailed-out and millions of little guys lose their homes.
What will it take to make things better? A program that stops foreclosures for people who can pay a mortgage. Principal mortgage reduction is key to solving the housing crisis. Now that we all realize that bankers and Wall Street sold record numbers of securities on mortgages for the sake of making trillions of dollars in profits selling the mortgage paper to investors, who became the Greater Fools we know the system was played by the best in the business to nearly destroy the world economy.
Critics will say that reducing the size of a mortgage for a homeowner at risk of foreclosure isn't fair to others who are paying their mortgages. Proponents of reducing mortgages say it's the only way that the housing crisis can actually be solved. Who ever got the idea that life is fair in the first place?
Principal mortgage reductions would pave the way for an economic recovery. Suffering state, county and local governments would see an increase in property tax revenues, and be able to pay salaries and expenses for services, including critical police and fire department personnel.
Instead of Congress arguing over how to repair the mess, it is more likely that the Treasury Department in coordination with the White House will institute or force bankers to slash mortgage principal.
President Obama was elected on a platform to "Change" America and to a large degree nearly a year into his presidency the battle warn Obama has accomplished little in real terms to halt the housing crisis, which sank the U.S. economy.
The crisis goes on with foreclosures forecast to hit nearly 4-million homeowners in 2010 alone, and millions more in future years. As the real estate research firm that first forecasted the foreclosure epidemic, we realize it won't be an easy pill for the American people to swallow – mortgage principal reductions. But it is the only answer to this crisis that will truly help to pull the U.S. out of this economic mess. Paying for it is an entirely different subject that we all are likely to share.
This article has been republished from Housing Predictor. You can also view this article at Housing Predictor, a real estate analysis and forecasting site.