Free Market Lends Federal Housing Stimulus a Hand
Most experts in the field are in agreement that, prior to the United States financial crisis finally ends the decline in housing prices must be stopped so that the real estate market can again offer enough security for lenders to be able to lend comfortably. The threat of imminent declines in home prices has stopped banks from making loans due to the growing anxiety about defaults by borrowers, coupled with the steadily decreasing value of properties that serve as security for loans has caused banks to lend less freely and have kept credit extremely tight. Home buyers who are interested in buying are prevented from purchasing as the fear of their new home dropping in value immediately after closing escrow has them on the fence. Visit:- Consequently, the United States Federal Government dedicated to spending more than 1 trillion dollars to the housing and financial industries in the beginning of 2009, with the hope that it would stabilize home prices, increasing the liquidity of the market for credit. Thus, with more than one trillion reasons for home values to improve, how could the widely heralded and respected S&P/CaseShiller National Home Price index report that shows the decline in home prices was actually more rapid in the beginning of 2009 by declining an additional 20% in comparison to the first quarter of 2008? The answer is simple: although well-meaning, the federal government's efforts in aiding the housing market were frequently misguided and not effective. For example, the foreclosure hiatus coordinated by a number of lenders as well as federal authorities at the beginning of 2009 only served to deter a large waive of foreclosures from going on the market. This delay of pain resulted in a slowing of the nation's housing inventory and expand the supply of homes that are available for sale - which ultimately led to prices to drop further. The federal government had hoped to stop foreclosures from happening by releasing new federally sponsored loan modification programs prior to the outset of the foreclosure slowdown. Unfortunately these loan modification programs have been ineffective as relatively few borrowers have attempted to modify their loans and many who did try claimed that the process of obtaining a loan was difficult because of the stringent qualification standards and the decreased values of their homes. The federal government's efforts to stimulate consumer demand have fortuitously been more effective than the attempts to regulate housing supply. Different departments of the U.S. government have coordinated efforts to keep mortgage interest rates artificially low through the purchase of hundreds of billions in mortgage-backed securities. Furthermore, many homeowners have benefitted from recently implemented tax incentives, both state and federal, and lending regulations for purchasers of new houses. Fortunately, the free market has been a great help of the government's stimulus efforts despite the multitude of recent media depictions of market-based capitalism as unregulated criminal havens where only greed and sin are allowed to run rampant. A combination of low home prices and the steadfast effort to REALTORS(TM) across the country in advising their clients on the ever-changing market conditions, values for homes regulations, financing programs and regulations have caused a significant increase within U.S. home sales throughout early 2009. The National Association of REALTORS(TM) reported in June 2009 that the Pending Home Sales Index, which is a popular indicator of home sales based on the number of sales in the escrow or under contract increased by 6.7% in May of 2009 and has shown steady increases for the past three months. In California, where much of the housing crisis beginning and the most severe in the state, it was reported that the California Association of REALTORS(TM) stated in May of 2009 that median cost of a home was up for two months and that home sales increased by an astounding 49% over the previous year. While these encouraging numbers may appear, the recent reports of continuing decreases in the national cost of housing demonstrate that, even though minor conflicts are being won with the increase in demand for housing from consumers, we are still losing ground because the number of homes for sale increase faster than the demand. If you believe that the U.S. government is fortunate enough to have retained the trust of U.S. voting citizens and is again authorized to expend federal funds in order to help us overcome our economic problems, the infusion of funds should be done efficiently, effectively and swiftly. The future focus of federal stimulus should be the mission of reducing the supply of housing inventory, and therefore should be focused on effectively preventing further foreclosures from re-occurring in a pattern of cyclical occurrence. This cycle of foreclosures keeps the housing supply in a constant state of flux ahead of demand, gradually reducing median housing prices when each foreclosure is put back up for sale at a price that is affordable. In order to accomplish this feat, federal funds must be used to compensate banks for the purpose of reducing principal loan balances of all borrowers in the United States. This would effectively stop the foreclosure process in its tracks, correct balance sheets for banks and help borrowers get their heads above water, all the while costing less money to taxpayers than the shotgun approach to fiscal stimulus which is completely ineffective in stabilizing the housing market and economy as of now.

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