For the recession to truly be over, economists insist —despite a hopeful drop in unemployment, the Dow surpassing the 11,000 threshold, consumer spending on the rise, and other positive signs of recovery—the housing market needs to stabilize. Right now, the housing market is still shaky and in need of serious fixing.
The housing market’s performance can heavily impact how consumers and analysts alike view the state of the economy. A home is typically the biggest asset a consumer owns, thus declining values can cause immediate financial turmoil for homeowners suddenly at risk of their homes going underwater; as these insecurities become widespread, it becomes a huge financial pitfall for the economy, as the housing market accounts for 15% of the national economy.
Recent housing market reports look bleak. Foreclosure rates jumped in the first three months this year as a record number of U.S homes were lost to foreclosure. The number of foreclosed homes jumped 35% in the first quarter from a year ago, representing the biggest jump in 5 years. Associated Press reports that at this pace, the housing market is poised to lose 1 million homes this year. Right now, 7.7 million American households are already delinquent and are at risk of foreclosure.
Earlier efforts to slow down the pace of foreclosures were helping. Mortgage protection plans for the unemployed were helping to protect at-risk homeowners, even banks were helping troubled borrowers with mortgage forgiveness programs, higher trends of short sales were moving inventory on the market, and the emergency mortgage assistance program of Pennsylvania was so successful that other states began modeling it. All these efforts are insignificant compared to Obama administration’s $75 billion dollar plan to assist 4 million troubled homeowners. This program has suffered heated criticism for only helping a small fraction of those in need, with estimates that it may only provide assistance to 1 million of the 7.7 million households in danger of foreclosure.
Though interest rates remain relatively low and home sales have been rising, the threat of rising foreclosures can cripple the housing market as one every 138 homes received a foreclosure-related notice in the past three months. In California, the hardest hit state, one of every 62 properties received a notice. California has the largest chunk of homes facing foreclosure at 23% of national total facing foreclosure, followed by Florida, Arizona, and Nevada.
For more housing market updates, stayed tuned to Credit Karma on Fridays.
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