President Bush last night spent 45 seconds (including applause) addressing the severe downturn in the housing market. This morning, we were treated to the release of new data on house prices and foreclosures, each of which indicates that a more aggressive role for government is warranted to help solve the current crisis.
House prices have now declined for 11 consecutive months, with November’s annual decline of 8.4 percent a record low. Seven metropolitan areas are showing double-digit declines year over year. Not surprisingly, many of the places with the steepest declines are in states with high rates of foreclosures.
Foreclosures jumped 75 percent nationally for all of 2007 and nearly doubled in December, marking the fifth consecutive month with more than 200,000 foreclosures. In addition, the inventory of lender-owned homes nearly doubled last year. We can expect more sharp downdrafts on home prices in 2008 if the vicious cycle between lost equity and foreclosures is not broken.
Housing markets in scores of communities have effectively ground to a halt, with December’s existing home sales plummeting 22 percent over last year, leaving us with a 45.5 percent increase in unsold homes. New home sales fared even worse, down 41 percent over the same period. Until we implement programs to prevent additional homes from falling into foreclosure and programs designed to buy up vacant foreclosed properties owned by banks, we can only expect the housing markets to limp along.
Debating whether homeowners who tapped subprime mortgages are more at fault than the unregulated mortgage companies that marketed these high-cost mortgages is no more productive now than arguing in the face of a rapidly spreading wildfire whether the negligent camper or neglected forest clearance practices were more at fault. The first order of business is putting out the fire before it consumes more homes, which in the long run is also a more cost-effective approach.
The Center for American Progress is proposing solutions that address the problems plaguing homeowner communities forested with foreclosure signs, where most borrowers were not necessarily subprime borrowers, but are still finding their homes devalued and their neighborhoods at risk. CAP’s proposals also responsibly address the longer-term need to expand ownership opportunities to working families still shut out of the market without inviting a new round of unregulated, high-cost, "ticking-time bomb" types of mortgages.