Continuing from last post on Double Dipping Home prices – Who is to blame? – I , we will see the rest of the participants who also bare the blame on the current housing disaster.

Financial Institutions:
Banks and lending insitutions are the 2nd in line to be blamed for this big mess in the real estate industry.

1. Wacky Foreclosure Process – Foreclosure is a long and tough for the home owner and as well the lender. Last year there was compliant about lenders taking advantage of the homeowners and foreclosing homes which are not eligible because of the mishandling of foreclosure process. It is caused because there was no oversight from government. After the complaint, government has to call to hold the foreclosure process and start another investigation and couldn’t find any big mishaps. But holding the foreclosure process created a snowball effect. Many banks stopped their foreclosure and tried to be more careful and started processing them with caution. This slowed the foreclosure properties coming to market and it will take a year for all the disstressed properties to clear which will haunt the housing market as per Realty Trac.

2. Tight Credit – As per Fed, QE2(Qualitative Easing 2) which just about to end in few weeks really puts lot of money in the market. Bank should take advantage and try to lend them out. Also low interest rates still a good things for banks to borrow and lend money. But many banks are still wary of the economy condition and not willing to open up their doors to lend out Business loans and mortgages even to the reasonably qualified borrowers which takes us to the next point.

3. Low Mortgage Approval rating – Many agents complain about deals falling through because buyers are failing to get their mortgage approved even though they are prequalified. As per a report, Mortgage approval rating fell in recent months because of banks trying to approve mortgage loans even to much qualified borrower for some unknown reasons.

4. HAMP Failure – Two weeks ago, Government stopped issuing incentive payments to 3 major banks Chase, Wells Fargo & Bank of America and ask them to boost their HAMP program participation and do more to avoid foreclosures. It is little late but never late than ever. They are just trying to tighten the belts of the bank which will help but it should have done long time ago.

Agents
Agents play an important role in every home transaction. With lots of foreclosures and Short sales, they are happy to list them but they are bogged down by the paper work needed and efficiency goes down. Unless its a HUD auction, most of FNME, Fraddie Mac, REO properties has to follow the normal sale offer process which is lot of transaction and calls to handle and they are bombarded with calls from investors. Many foreclosure listings are awarded to big brokers in big cities, who call their own shots and make their rules on how to submit offers to sellers and sometimes really rude/harsh on handling their fellow buyers agents. This really turns down many agents who really wants to recommend foreclosure properties for owner occupants but hey are staying away from it.

It is all investors who clogs the market now and they are not ready pay or even so less than listing price. Seller agent is forced to consider it since there are too many investor with similar offer price and not enough owner occupants. As per the last report from NAR, 2011 first quarter pre-owned sales are mainly by investors and out of which 30% of them are cash buyers. It is not encouraging because real estate industry needs first time buyers and owner occupants to really get it going which is going to take time.

Buyers
Everyone knows its buyers market as per current real estate condition goes. With that in mind, many prospective first time buyers are really looking for damn good bargain. They want .50 cent for a dollar whether they are buying foreclosed home or resell property depending on the location. Investor buyers compete for foreclosed properties more than ever and putting it on rent which is not good for many neighborhoods. It creates unstable community and destroys the reputation of the area and eventually brings the prices down.

Sellers
Sellers are the victims of this whole ordeal. They are stuck in their home even if they want to get out real bad for some personal reasons. It is bad sellers market but some sellers don’t want think that way. They want what they want and don’t want to understand the current market situation. It will work out to their favor if the location and market condition in their area but thats only very less percentage compared to other areas which are seeing lot of foreclosures sales. These disstressed properties are bringing down the property value and if the seller has to get out and no other choice, he/she is forced to take the hit which worsen the situation more. They are unintentionaly taking part in this home slump by reducing the prices to just get out of their homes.

All the above players play important role whether the market goes up or down. They cannot just wash their hands if the market goes south when they want to be the first one to claim victory if it goes north. They have to take responsibility and try to help to get this real estate market revived. Stopping more foreclosures and trying to get rid of current foreclosure inventories will give way to new home sales which will eventually stablize the housing prices, more than anything else, would make it easier for private lending to return. This will inturn start the employment growth. It’s all connected as economist say and something has to be done at some point to stop the down trend and start the up trend.

Let’s do what we do the best and try to help many Americans realize their American Dreams!!

Last week S&P/Case Schiller published a report about their survey conducted on home price in 20 cities around the nation. The result of the survey really brought in chilling effect to many economist and more importantly to the real estate industry stake holders like Sellers, Realtors and Builders. The report said, we are seeing price drop in home prices which are witnessed in 2003 when the housing bubble started. It details out how the real estate market is in worse shape in 20 cities.


In response to the report, NAR(National Association for Realtor) said that the survey didn’t took into consideration all the communities around the nation which are doing well in this current economy. Whatever the NAR says, the survey did show weakness in the real estate market which is not improving much. For this current double dip, uncertain condition, Whom do you think is to blame for this double dip? I don’t think we can just point fingers at one single entity like Government or the financial institutions. It is a chain reaction and has cascade effect. Everyone who plays role in the real estate transaction has role to play and surely impacted this housing market. Let’s start from the big fish to fry,

How about Government?

Yeah, sure why not. Everybody blames the Obama government for this bad economy and real estate market as well. Government surely has a important roll to play for the double dip in the housing market. When government jumped to save the real estate market 3 years ago, many analyst said, every bubble has to heal on its own and government shouldn’t be saving it. Helping by boosting the market to reach to normality is just a short term fix. That’s what exactly happened. Government thought they should give the helping hand to the struggling housing market and it worked during certain period like a steriods injection. After the credits are vanished, housing has gone to a really worse situation than it was 3 years ago. Let’s see some government programs and other topics which played a part in the double dip.

1. Firsttime Home buyers Credit – This was enacted as part of Recovery act and started in 2008 and extended to 2009. According to preliminary data from IRS, as of August 22, 2009, over 1.4 million taxpayers have claimed the FTHBC for homes purchased in 2008 and 2009. This represents total foregone tax revenue of about $10 billion through August 22 . There is not doubt it helped to boost the housing market for certain period but we are not experiencing the after effects of the steriod type boost. Every comparison report is now considering last year sale when the market was doing great with credit. It shows a big drop and market is going to react for the drop. If it would have been a normal recovery, this wouldn’t have happend. The magic of credit did work for Auto industry but its totally different sector all together compared to Housing which deals with thousands of dollars and too many formalities and paper work.

2. Loan Modification Program – This program was announced by Treasury department with the possible helping hand to save many American’s home going into foreclosure. For each home loan modification application that is eligible and qualifies for the program, the lenders and providers get $1,000 as an upfront fee. If the borrower remains current in their monthly payments, the lenders and service providers will get $1,000 per year for up to 3 years. The mortgage service providers who represent the lenders also get an incentive of $500 if they help the lender focus on the mortgage holders who try to be consistent and on time in their monthly payments. The mortgage lender will get $1,500 if the borrower modifies the loan prior to falling behind on the monthly payments.

It was estimated to to save 4-6 millions americans but the recent reports says the modification program is a failure. Out of millions, only 600,000 loans were modified. The Treasury Department has continued to defend the program, arguing that while the program has fallen short of its goals, it has still helped modify about 600,000 mortgages. Ending the program, Treasury has argued, would hurt the housing market. The main reason for failure is no penalty to the lenders, too much paper work and too many hurdles.

3. Financial Regulations

With the subprime mortgage crisis, we surely need to regulate the financial institutions but is it right time? As per economist, Regulation and economic advancement never goes very well together. Because, regulation slows down the recovery process and puts lots of road blocks to move forward. That’s what happened. Too many regulations and rules to be followed by the banks and financial insitutions and they really stopped lending money out unless the borrower is too trust worthy. As the lenders deny to give mortgage, houses cannot be sold and inventor gets stacked and chain reaction starts.

4. Mortgage Rates
Usually when the mortgage rates fall the home sales goes up but at the same time refinancing numbers also goes up which is a good sign for real estate market. But currently even the mortgage rates are too low compared to prior years, homes sales and home prices are stagnant and even going down. The reason, people are not willing take a chance. They don’t know whether the real estate has bottomed out or still has long way to go. Also mortgage rates have gone down and came back out in Nov 2008 and gone down again. Many analyst say it is because of the Federal MBS program. If mortgage rates were kept a steady increase, it could have help with the home sales.

5. Unemployment

Last but not the least and more important of all, unemployment is the biggest culprit of all for all the real estae. Without a steady job, no steady paycheck to even feed the family, how many americans will think about buying a house. Employment opportunity is the base for any economic growth, with almost 10% unemployment rate, it is long way to go for any sort of steady real estate market growth.

Let’s look at the other players in the next post…