Attention is now on “jobs, jobs, jobs.” Earlier, the attention was on “economic stimulus.” But many economists are saying that those emphases miss the big problem that is dragging the economy down and preventing consumer spending: the mortgage crisis in the housing market.
Almost half of America’s mortgages are “underwater,” with the amount owed being more than the property is worth. That hurts the banks and other lenders, since the collateral they are holding is not enough to cover the value of the loans they have made. The collapse of house prices might at least help people to buy homes, but the lenders now have to be especially stingy in making loans.
And for homeowners, the loss of their home’s value a loss of their major capital. For many of them, their home was a major part of their retirement plan–sell the big house, buy a condo now that the kids are gone, and live off the rest.
Housing woes impact the job market too, since lots of people are employed in construction and in the manufacture of consumer goods that go into the new houses.
Does anyone have any ideas for reviving the housing market?