It seems all the rage today for parties of a different opinion to threaten or actually lockout one another from the business in hand. The NFL, the NBA, and potentially the US Federal government all seem to believe shutting down business is the means to an end.
I suggest this is the case with the banks as they lockout homebuilders and homebuyers from the housing market.
Let’s begin by looking at how banks are handling short sales and foreclosures, two approaches to home ownership that should see lightning fast closings.
Turning first to short sales.
Common sense would say the banks have an incentive to sell these properties quickly, as they are now holding, or about to be holding, these properties on their books. They have underwritten the purchase of these homes before, so they should be in a good position to do it again. Unfortunately, the opposite is true. Short sales can take six months or longer to close with a fully qualified buyer. This buyer meets the credit score and twenty percent down payment requirements. Yet, no sale. Realtors quoted in an article in USA Today stated they are no longer showing short sale homes because of the uncertainty of the banks to accept offers in any reasonable time, if at all. The article goes on to report that banks earn more from their mortgage insurance than selling the homes as a short sale. If this is the case, allow the homeowners to stay in the house until it is foreclosed upon. The mortgage insurance is paying the bank and there is one less homeless family on the street.
What about foreclosures?
The USA Today article also reports foreclosed homes close on average of 24 days to qualified buyers. Now that’s fast, so realtors should be promoting this avenue to homeownership. Of course, there is a catch. These homes are often sitting vacant and left to deteriorate. A tough sell for the average homebuyer, but a potential boom for remodelers.
There is new construction occurring in a few places throughout the country. This is something like the athletes working out and practicing on their own while the lockout negotiations carry on. For real housing development to occur I suggest it is time for a Housing Collective Bargaining Agreement, or a HCBA.
The HCBA will offer reasonable loan interest rates and requirements, manage sell down of short sale and foreclosed houses in an expedited manner, and set and promote reasonable expectation for home ownership. The banks asking for people with good credit scores and a down payment seems reasonable to me. If it was good enough for my parents and me, it should be good enough for my children. Banks should be proactively working with remodelers and realtors to put the foreclosed houses in sellable condition, offer them at a fair price with reasonable financing, market cooperatively, and close within a timely manner. Now, let’s face it some people cannot afford to buy and own a house. That is fine. A house or an apartment is not a home until you put the people in it. It would make more sense to celebrate the elimination of homelessness than home ownership.
Some people may think or say this is all naïve. It may be but it feels good to think and write positively about the housing market after years of negative talk. The population of the US is growing, the housing stock is aging, boomers are looking for the next lifestyle change, and home ownership remains an important value for the next generation…there is room for both optimism and a HCBA.