On Current Events – February 2009
The Housing Crisis
We’re getting well into the new year and the holidays are long forgotten, as the nation faces some of the toughest economic times since the Great Depression.
I’ve been doing a lot of information-gathering on the issues of the day, both from the present-day perspective and from 70 years ago. I found that, once again, the old addage that "history repeats itself" holds true. People felt the same dread about the future then as people are beginning to feel lately.
How are prospects around the country? Well in Detroit, the average home price was $18,513 and some 45,000 properties were in some form of foreclosure. A recent listing of tax foreclosures in Wayne County, which includes Detroit, ran 137 pages long in the Detroit Free Press. Just take a moment to picture that.. 137 pages. Most big city newspapers have what–40-50 pages? The Detroit paper has 137 pages devoted to tax foreclosures! Well that certainly serves to illustrate that the local county governments aren’t helping the situation any by taking people’s homes away.
Some say that the percentage of home ownership in America is artificially boosted by government policy of low-interest loans. An interesting theory arises from this: it is said that increased home ownership increases unemployment. The reason is due to the decreased mobility of homeowners. Let’s face it: it takes a while to sell a house and relocate. Renters are more mobile and can follow opportunities as regions ebb and flow in terms of employment opportunities. But there is the matter of leases. What if a renter has several months left on his/her lease? How many renters can just pack up and leave at the drop of a hat? Granted, with the lease, one has a pretty good idea of how soon they can exit the contract. But whether exiting a lease property or selling a home, there are no garantees of time. Can the mobile renter find another place to rent within a reasonable time and for a rate that works with the family budget? Perhaps the notion that homeowners are immobile is not as large a disadvantage compared to renters, as one might think?
The mortgage crisis is worse in the newly-established regions whose growth relies almost exclusively on real estate expansion and less intense in regions whose economies rely on other other, more productive economies, such as information technology.