Helping the Housing Recovery in Three Steps - Part Three

Today I present part three in my colleague Tamara Lemmon's series on helping the Housing Recovery as published first on foreclosure.com:

"The final step needed to insure financial recovery for the real estate markets is the reduction of the national debt. In the real estate markets, as in life, the forest must not be neglected on behalf of the trees. While a compelling argument can be made drawing connections between the increase in the national debt, and the overall decline of the economy on many levels, it is particularly interesting to note the direct correlation between the rising national debt and the availability of capital within the housing sector. As the national debt has grown exponentially (in the literal sense) over the last several years, several other key economic indicators have plummeted. Indicators such as employment, productivity of debt in the U.S. economy, institutional money funds, and real estate loans at commercial banks have declined sharply. In fact, real estate loan creation is negative for the first time since the Great Depression.

In order for the housing market to recover, the general economy must lead the way and money must flow again into real estate loans. This will only be accomplished, when institutional lenders return to a bullish view of the U.S. economy, and regard the United States government as a secure borrower. To accomplish this, the president as well as Congress, must work together to lower the national debt and balance the budget. Many experts believe that we have crossed the line of debt saturation within our economy. Debt saturation occurs within the macro-economy when total income can no longer support total debt. At this point, every dollar borrowed actually subtracts from the GDP instead of adding to it. According to many economists, we have reached such a

stage. Lowering our national debt, increasing GDP, and balancing the budget is the most important stimulus package the United States government can provide to the struggling housing market. These steps will help to lower unemployment, resulting in higher household incomes, and increased ability to pay existing mortgages or qualify for new ones. These are all factors that will undoubtedly lead to a reduction in foreclosures, and a boost for the real estate market.

Abraham Lincoln made famous the quote, ““You can please some of the people all of the time, you can please all of the people some of the time, but you can’t please all of the people all of the time”. Leading a country requires making difficult decisions, decisions that aren’t always popular. Allowing foreclosures to proceed, results in heartache for the families losing their homes. Incentivizing banks is likely to be received critically versus incentivizing individuals. And, reducing the national debt may require sacrifices in government spending and programs that impact many deserving Americans. In the final assessment, however, policies should be judged based on what they accomplish. Strong economic policies such as reducing the debt, providing incentives to lenders to write new home loans, and allowing foreclosures to reset the housing market will bring the change needed to lift the U.S. housing market out of its slide and prevent the recession from dragging on."