We Americans think of ourselves as problem-solvers, but the housing collapse has so far eluded all solutions. Perhaps 10 million homes have gone into foreclosure since 2006; millions more will follow. From their peaks during the real-estate bubble, home prices are down 30 percent, new housing construction has dropped 75 percent and existing home sales are off almost 30 percent. Housing’s collapse is one reason the economic recovery is so weak. Construction remains depressed, as are the appliance and furniture sales spurred by home buying.
It may be that patience is the only cure. Home prices have to find bottom; only then will more buyers return. Almost all efforts to accelerate that process by stemming foreclosures have come up short of promises. The Obama administration originally hoped that its Home Affordable Modification Program - lowering some homeowners’ monthly mortgage payments - would help up to 4 million borrowers; at last count, the number was 850,000.
Housing’s collapse is usually laid to too much unsold supply, which depresses prices and construction. Normally, the inventory of unsold homes equals about six months of actual sales, says economist Sam Khater of the market research firm CoreLogic. Today’s inventory exceeds 14 months. This includes homes already for sale and CoreLogic’s estimate of “shadow inventory” - homes in foreclosure or headed that way. Mortgage relief aims to help individual homeowners and prevent more houses from being dumped onto the market.