There’s a story in the Washington Post about Pres. Obama’s latest initiative to help underwater homeowners (Government announces new program to help ‘underwater’ homeowners), following an earlier story — anticipating today’s announcement — about failed, past efforts (Obama’s efforts to aid homeowners, boost housing market fall far short of goals).
The former story pours cold water on the benefits of the new program:
But the program might not have a major impact on the economy. There are about 11 million underwater borrowers in the country. And under an illustrative example provided by FHFA, borrowers might reduce their payments by just $26 per month; the Obama administration is touting savings of up to $200 per month. It will depend on the fees charged to borrowers for taking part in the program.
But, the nationwide significance of the problem is unmistakeable. Not only are so many millions of homes underwater, but that number amounts to one-in-four of all homeowners (as the earlier Post story notes):
Millions of people are deeply indebted, owing more than their properties are worth, and many have lost their homes to foreclosure or are likely to do so. Economists increasingly say that, as a result, Americans are too scared to spend money, depriving the economy of its traditional engine of growth….
Doing more to address the housing crisis may be crucial not only for an economy flirting with another recession but also for a president running for reelection.
After watching their homes’ values collapse in recent years, a quarter of all homeowners are “underwater,” owing more than their homes are worth.
This situation – both as cause and effect of an ongoing stagnation – is one that persists mostly silently, but as long as it persists, prevents a powerful recovery. It’s also why declarations of an all-clear, or claims that it’s back-to-business, are simply nonsense.
Cities and states should continue budget as though we were still in recession, because we effectively are.