Take a good look around the United States of America, and you may just get the impression that all housing markets are not created equal. In housing as in the justice system, there appears to be two sets of rules in operation: one for the wealthy, and one for all the regular folks.
Consider this: in the city of Detroit that has been devastated by foreclosures, a beautiful, 3-bedroom brick tudor in the historically rich area of Green Acres sold for $6K. That’s right, $6K! However, travel just 15 miles up the road to the up-market suburb of Birmingham, mansions that sell for many millions of dollars are selling with speed, and home sales were 21% higher in August this year than they were in 2010. Even the country club in the area has stopped offering discounts in order to attract new memberships. Nope, not much sign of a housing market crisis in Birmingham.
Some have used the term “bipolar” to describe the current housing market in America. In the lavish, minority luxury sector, housing market woes are a foggy memory. That is, if they were ever experienced in any significant way at all. Take a look at the vast majority of the country however, and you will encounter a housing market that is inching sideways at best, and actually slipping further into ruin in most cases. In the world in which most average Americans live, home prices have plummeted by as much as 30% since they hit their heights in 2007. What we’re talking about is a more drastic decline than what occurred during the Great Depression. Many people have had their homes on the market for well over 12 months without any hint of an offer.
Almost 25% of all homeowners across America are living in homes that are officially underwater. A further 25% don’t have 20% worth of equity. As many as 50% of all borrowers would not qualify for a home loan if they applied today, according to Paul Dales, the chief economist for Capital Economics. By contrast, according to statistics released by Zillow.com, the housing market on the flip-side of the coin is enjoyed by a mere 1.5% of the country’s population. This is the housing market featuring outdoor kitchen areas, indoor spas and private health centers. It’s the market with lavish “his and her” walk in closets, some of which are as large as many people’s first homes.
This latter housing market is not local, but international, and it is comprised of a select few global investors who buy their homes in cash. This is the housing market in which the stormy seas of the current financial crisis make for intriguing chats at the downtown cocktail bar, rather than the devastating loss of a home which results in immeasurable heartbreak. Indeed, this is the housing market in which the bursting of the housing bubble has scarcely made the slightest ripple in the pond. Values of homes worth $1 million and more have increased by just under 1% since the beginning of this year. Historically, the values of homes in these two housing markets were pinned. Not anymore. Currently, they are moving in polar opposite trajectories.
The housing market is not the only indicator of the growing rift between the rich and the poor. Just look at Wall-street bonuses versus ordinary family budgets. Measure sales figures at Walmart against those at Saks. Executive remuneration versus main-street wages. The signs are all over the place, and they show no indication of decelerating any time soon. Beyond this, the rich are also increasingly becoming the only ones to benefit from the receipt of credit. House values may be at ridiculously low levels in many parts of the country, but how is that good news for the average Joe who is unable to qualify for a mortgage?
For global investors who live in the realm of multi-million dollar spending sprees, the housing market in the USA is the latest undervalued bargain, and they are snapping up properties as much as they were during the boom, if not more so. What is occurring is not unlike the conditions in many so-called “Third World Countries”. We are witnessing the gradual, yet steady obliteration of the middle class in America, with homeownership being the chief market leveler that is under threat.
Banks should be motivated to help people keep their homes instead of flooding the housing market with more foreclosures. I’ve said it before, and I’ll say it many more times in the future: loan modification is the BEST possible way for a homeowner to save their home and to secure affordable mortgage payments when they do not qualify for refinance. I however also believe that the loan modification process as it is currently being implemented is deeply flawed. This is why I have worked so hard to facilitate the best possible loan modification application process via Mycaal.com.
About Carla Ghosn
|CEO and Founder of Caal (mycaal.com) keen on helping American homeowners save their home. If you need help with your loan modification, visit www.mycaal.com to get help on pre-qualifying your loan for approval, as well as preparing and printing your loan modification package online.|