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Foreclosure to Rental Federal Reserve Housing White Paper January 2012

Foreclosure to Rental Federal Reserve Housing White Paper January 2012

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Published by Kim Hedum
We're here from the government and we're here to help...ourselves to your property and everything you think you own.
We're here from the government and we're here to help...ourselves to your property and everything you think you own.

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Published by: Kim Hedum on Jan 09, 2012
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01/09/2012

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 January 4, 2012
The U.S. Housing Market: Current Conditions and Policy Considerations
The ongoing problems in the U.S. housing market continue to impede the economic recovery.House prices have fallen an average of about 33 percent from their 2006 peak, resulting in about$7 trillion in household wealth losses and an associated ratcheting down of aggregateconsumption. At the same time, an unprecedented number of households have lost, or are on theverge of losing, their homes. The extraordinary problems plaguing the housing market reflect inpart the effect of weak demand due to high unemployment and heightened uncertainty. But theproblems also reflect three key forces originating from within the housing market itself: apersistent excess supply of vacant homes on the market, many of which stem from foreclosures;a marked and potentially long-term downshift in the supply of mortgage credit; and the costs thatan often unwieldy and inefficient foreclosure process imposes on homeowners, lenders, andcommunities.Looking forward, continued weakness in the housing market poses a significant barrier to a morevigorous economic recovery. Of course, some of the weakness is related to poor labor marketconditions, which will take time to be resolved. At the same time, there is scope forpolicymakers to take action along three dimensions that could ease some of the pressuresafflicting the housing market. In particular, policies could be considered that would helpmoderate the inflow of properties into the large inventory of unsold homes, remove some of theobstacles preventing creditworthy borrowers from accessing mortgage credit, and limit thenumber of homeowners who find themselves pushed into an inefficient and overburdenedforeclosure pipeline. Some steps already being taken or proposed in these areas will bediscussed below.Taking these issues in turn, the large inventory of foreclosed or surrendered properties iscontributing to excess supply in the for-sale market, placing downward pressure on house pricesand exacerbating the loss in aggregate housing wealth. At the same time, rental markets arestrengthening in some areas of the country, reflecting in part a decline in the homeownershiprate. Reducing some of the barriers to converting foreclosed properties to rental units will helpredeploy the existing stock of houses in a more efficient way. Such conversions might also
increase lenders’ eventual recoveries on
foreclosed and surrendered properties.Obstacles limiting access to mortgage credit even among creditworthy borrowers contribute toweakness in housing demand, and barriers to refinancing blunt the transmission of monetarypolicy to the household sector. Further attention to easing some of these obstacles couldcontribute to the gradual recovery in housing markets and thus help speed the overall economicrecovery.

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