The real estate market encountered Halloween way before we celebrated last October 31.
The current financial crisis spawned stories of good things gone bad, bad things gone worse and worse things that are still unraveling. What harrowing stories about the property sector shocked us the most?
Wall Street bankers who are paying their mortgage on high-end condominiums in Manhattan got blindsided by the housing boom two years ago. After a series of bankruptcies that caused upheaval in the markets, more than 12,000 employees were laid off. Only a re-absorption in the job market with matching base pay and benefits can allow them to reclaim their $4 million luxury abodes.
Bank mergers also caused a number of employees to move out of their offices to avoid duplication of duties and dismal financial statements. To avoid further career crumbles, some found their way to other industries, including small enterprises just to make ends meet and, yes, to pay the mortgage.
Irked taxpayers who faithfully paid their mortgage are losing hope of fighting the government bailout plan, which will reduce monthly payments of delinquent homeowners. It’s fair to argue that using taxpayer money is unjustified to relieve irresponsible homeowners from their plight. The $700 billion could be appropriated for other national programs in health care, education and energy research.
Foreclosed home sales in California raise brighter expectations for the market, but homeowners who purchased houses two years ago have paid two or three times as much as those who have purchased a house in the same area this year. Average sales prices have fallen since then. What’s even more shocking is that we’ve not arrived at the bottom of the business cycle yet.
The housing boom brought increased revenues to local governments. Now, state governments are slashing funding for public services due to lower revenue collection brought about by lower real estate sales. This translates to less welfare assistance for Americans in 29 states. If that’s not scary enough, wait until you hear your kids’ teachers complain even more about their measly wages and underfunded instructional materials.
These days, high-earning individuals with a clean credit record and jobs in stable industries are eligible to take a loan but with the strictest credit screening by banks. This is a clear indication for the rest of Americans: don’t expect to own that house anytime soon.
There’s no one-size-fits-all solution to the housing debacle. The government bailout must work now that it is nearing its implementation with a strong oversight by the federal government. Wall Street needs to restructure its management practices to include corporate ethics. Private corporations should also adhere to rules set by supervising commissions to eliminate excess greed.
These won’t happen overnight, but it’s nice to think it’s still possible.