Tuesday, October 19, 2010
Largest Bank Will Resume Foreclosures in 23 States
Due Friday Oct22,2010. We all know that if people can't pay then they shouldn't live in the house. What are the backend COSTS of massive foreclosures on the macroeconomy? How will these foreclosures affect the job market? How will these foreclosures affect lending by banks? What solutions do you advise?
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The massive foreclosures have resulted in a lot of property on the market, but it has also decreased the demand for large expensive homes. As we see in the article, the increased foreclosures is actually good news for realtors, improving the job market. Because of such a low pay-back rate of loans, the banks will probably hesitant to lend money. At the same time, many consumers are equally, or more so, afraid to trust the banks, so that banks may have to offer incentives to restore people's trust. The closest thing to a solution may just be to place regulations on banking practices so that this foreclosure crisis doesn't happen again.
ReplyDeleteThe backend costs are that many people will be without a home and banks will be left with devalued assets, the foreclosures will cause people to leave their jobs to move to a place where they can afford housing and banks will have to be careful who they lend to. I have no solutions to this, if I did I would probably have a job with the U.S. Government or my own blog. However I advise that banks slow foreclosures down and make sure they are done correctly or else they will lose more money in lawsuits.
ReplyDeleteFirst off, foreclosures were suspended due to the banks handling the foreclosures improperly. Bank of America decided to halt foreclosures due to the huge amounts of complaints. They are now resuming foreclosures and have stated that by Monday, they will begin filing new paperwork for 102,000 foreclosures. This huge amount of foreclosures means more people on the street and more houses in the market. In addition, foreclosures negatively affect the job market because without homes, people will not be able to sustain a job. Furthermore, lending from banks will increase due to people wanting to pay off their bills. This would lead to more people going into debt which would just cause the situation to go around in a circle. What I would advise the banks to do is handle foreclosures properly. However, knowing the nature of banks and their intentions, this is highly unlikely.
ReplyDeleteObviously the banks are hurt by foreclosures. In the macro-economy everyone is hurt. To start off homeowners will be hurt. A single foreclosure can hurt the entire communities value at a monetary level. For the neighbors a foreclosed home is an eyesore, often with unmaintained pools and lawns, foreclosures become targets for vandals often causing damages and moving in unwanted guests. The values of the homes with the foreclosures will hurt the values of homes outside the community. As part of the same market (the real estate market) homes for sale all compete for buyers yearning for a bargain on a dream home. For whatever purpose they want the best deal. The fallen property values of the first neighborhood will hurt the second one without a foreclosed property because of the cost difference of the homes. The cheap homes in the first neighborhood will look like bargains to consumers who are hunting making it much harder to sell a home in the second community for the ask price. Eager to rid of their investments they sellers in the second community will lower the price and thus deflate their homes. On a widespread scale the foreclosures can (and are) forcing the price of homes down fast, cutting values in half in some cases. This is only one branch of a tree off a million but in many cases this is happening. Zachary Lee
ReplyDeleteBasically when a massive foreclosure is issued it gives some great benefits to people because they can then purchase these homes at a cheaper price but because a home purchase is highly elastic in that there are alternative options for buying a home, the more expensive homes will barely be bought. it improves the job market substantially and the banks will also be less likely to lend out money. some possible solutions of this is to offer rebates or incentives to entice potential customers and also to do a more thorough credit check and background information to ensure that those people can afford the house that they are purchasing.
ReplyDeleteThe back has devalued assets, it lends a lot less money. It damages the job market because with the loss of homes and banks lending less people cannot start their own businesses or have to look for new places to work because they lost their home. To solve this solution I would make sure, if I was dealing with mortgages, that people can actually afford this home they are buying.
ReplyDeleteThe consequences of resuming foreclosures in the market will be detrimental for all individual consumers and the value for the properties. People will be financially scarred and potentially homeless if their property is foreclosed on. These foreclosures will also limit the lending that banks will provide to consumers. I advise that individuals be cautious of the value/price property they wish to purchase and evaluate the factors that are involved in owning specific property.
ReplyDeleteThe consequences can be far-reaching for many people. With an increase in foreclosures, more people will become and become homeless and consequentially jobless. The job market will deteriorate since people will be fighting just to find housing let alone other basic necessities. The banks will have to adjust their policies to deal with the increasing amount of home foreclosures. They will be more reluctant to lend money to home buyers and people looking to create a new business. I advise potential home buyers to purchase mortgages on homes they can afford. In addition, we need to find more jobs to decrease the unemployment rate.
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ReplyDeleteThe banks continuing to forclose homes has multiple effects. The individual will become homeless and the value of the property will be undermined. It also causes banks to lend out to select individuals and also a less amount of money. I would recommend the buyer to be aware of the cost to own the house, by doing so this will save them a lot of money and time in the long run and possibly save them from being forclosed on.
ReplyDeleteThe foreclosure catastrophe's most potent and least understood backend cost is the massive rise of supply in the housing market. As more and more houses are foreclosed and come on the market at lower and lower prices, the market just gets driven further and further down, initiating a vicious circle that can only be resolved in banks are willing to take a loss on their toxic assets and stop signing sub-prime mortgages.
ReplyDeleteWith the banks issuing out foreclosures again the supply of cheaper houses increases dramatically. Bank of america will add another 100,000 cheap homes to the market starting on monday. The buyers of those homes are buyers that won't be buying the regularly priced homes, causing house prices to lower even more. An alternative would be to add an incentive to buying the regularly priced homes, like a government rebate. Similar to the one put on energy efficient appliances. Banks also need to do more thorough credit checks to make sure that these home buyers can actuaally afford it.
ReplyDeleteMassive foreclosures can create a decrease in the demand for expensive homes. More people would be out on the street while more homes are being put on foreclosured. The supply for cheaper houses increases while the demand for them doesn't change by much. People who are buying a house won't be able to afford the current price and that would cause prices to lower more. If people don't have a house to live in, it would be even harder for them to maintain a job. The demand for employment would decrease while the supply for employment would increase. I advise that the banks should check people's backgrounds first before they give out loans to make sure that those people could afford to pay the money back. Banks need to do more a more thorough credit checks.
ReplyDeleteA downturn in the market of houses, people left without good credit, and banks in lawsuits are all backend costs of foreclosures on the macroeconomy. One effect the foreclosure costs will have is that the lower wage workers like landscapers, lawn mowers, pool cleaners, will have less house work availiable. Another is bank lending will be harder to obtain while they're in lending lawsuits. The employers of such banks will also employ less people to make up for the money they lost and that will raise unemployment levels. My solutions would be that everyone accepts their losses in order to start over. I know this isn't as easy as letting go a stock when its compared to your house or company but I believe all the foreclosures will end and the problems will pass with time. As for now, I do not see a solution because bank heads are not able to accept losses like they need to in order to help people losing their houses because the bank itself can't afford it in this economy.
ReplyDeleteUnless banks restructure the foreclosure and mortgage processes then the market will continue to decline. As Emily said, banks must accept their losses. They must work on the issue from the ground up, no shortcuts. Number of lawsuits will continue to rise as the banks resume foreclosures creating even deeper losses. The buyer and the seller must make realistic and intelligent decisions when it comes to the housing market. People who work at Walmart for example, shouldn't be become Parkland homeowners and banks shouldn't expect these people to be able to pay back their loans.
ReplyDeleteThe massive foreclosures will put a lot of people out of their homes. From what I understood, the freeze of foreclosures had given the homeowners more time in their houses, and if Bank of America is to foreclose on a large amount of homes at one time that will put a lot of people out of their homes at one time. These people will be looking for jobs, and homes, and finding either of these will become a major problem for all, since there won't be enough to go around. Also, banks will be taken to court, and many people will be losing more and more money. By foreclosing on so many houses the supply of cheap houses will be increasing, while the demand for them won't change as much as it would be needed to, to keep at equilibrium.
ReplyDeleteThe most obvious back end costs are the change in the housing market- the price of houses are cheaper, and there is a much greater supply of available houses. The entire market will depreciate and the value of houses that aren't foreclosed will go down to compete with the cheaper ones sold by the bank. Builders will not want to build new homes or communities because the supply is already to great and the price is not worth it. If anything, they will build condos and apartments. Banks are losing a lot of money, and some of the smaller ones will have to be bought out by either the government or larger banks.
ReplyDeleteIt will influence the job market because there will be jobs lost in the banking industry, and definitely in the construction/architecture/housing business. People aren't investing in buying homes either.
The solutions will hopefully be reform in the business of buying houses. There needs to be tighter regulations with banks giving loans and mortgages. People who cannot afford houses shouldn't be allowed to in the first place.
Obviously, the foreclosure issue is going to dramatically decrease the value of homes. Supply of homes will greatly increase and the prices of these homes will be quite low. Also, consumers will start going for smaller and cheaper homes since they cannot afford the more expensive places. Many people will lose their jobs, since no one is needed to build homes when there are already more than enough in the market. Banks will lost the trust of the people and also lose much of the financial revenue they were used to getting from the general public. Banks will be lending less and less unless they somehow draw people back in, perhaps by lowering fees and interest rates. Overall, the only solution I see to this would be regulation of banks by the government in order to prevent these situations.
ReplyDeletePretty much, this is a classic S&D curve. There is a large supply of homes because people want to get out and there are the foreclosures of course. People who want cheap homes, or need to move because of employment, usually don't have their coffers full enough to buy a house with cash. Hence the need for a bank. Now with the banks either going under or having no money, or spending the money they got from the bail out on caviar and smoothies, you got a screwed up curve. Heck, in 2007, my house was worth 690000 dollars. now its worth 354500 dollars. As for the reason why we have this situation in the first place, I pin it on corruption. Corruption is often a reason why bad stuff happens. Look at Russia and Haiti! Governments have it and so does Big Business. These guys with their practice of lending out to anyone and everyone. And they screwed us over. So what do we do? Waterboard them? control them? Make them pay? Alas, I dont have the answer.
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