Many of today’s major news sources are continuing to ignore one economic reality that is starring many Americans in the face: the real estate decline.
Most of today’s major banks have for the last several years been encouraged by oversight agencies such as the Fed and Commerce Department holding onto their huge amount of RE delinquent loan holdings. Why so? Bureaucrats are worried that releasing a flood of these bank owned RE properties would significantly depress the RE market. They anticipate that such a move would create far too much supply (of properties for sale) thus adversely effecting RE values.
The Wall Street Journal reports that there are over 7 million foreclosures held back by lenders and banks. You might be asking yourself: what do I mean by held back? Typically, after an owner is three months arrears in his / her payments, their lender will begin the foreclosure process. Traditionally, the process continues after the borrower is three months past due on his monthly mortgage payments. In time past, lenders and banks complete the foreclosure process and take back the property after the loan is 6-7 months past due, unless of course the borrower brings current his/her past due payments.
I know a little bit about this. During an earlier time in my life I worked for Crocker Bank and as a branch lender I sometimes participated in this process. (Crocker Bank, based in San Francisco, was once the 11th largest bank in the country with over 350 branches in California). The whole foreclosure process would typically take us 6-9 months to complete. That process is a far cry from what is occurring now. Today, banks have alarmingly retained a large number of these ‘non-performing assets’ much longer than their accounting offices would prefer.
Today, it is not uncommon to find abandoned residential properties throughout most communities around the country. CNN-Money recently reported that 13% of all residential property is now vacant. Even if the homeowner cannot make their payments, the banks /lenders are allowing some borrowers to stay in the delinquent properties based on the lender’s assumption that the past due borrower will continue to maintain the home.
Sadly, real estate market is in a real crisis today. Over the last 15 months, I have been in 7 states around the country and all of these states are suffering economically in this area. In my hometown of San Diego, commercial vacancies are occurring in areas that I have never witnessed before in my lifetime. In Los Angeles, there are huge amounts of large commercial vacancies along the 405 and Interstate 5 corridor. This reality is a real phenomenon in the commercial real estate market around Los Angeles and other parts of the region.
The same scenario is playing out in other states as well. In February I was in Western Oregon and I noticed that there were massive commercial vacancies in close to a 1/3rd of the many small towns near and on the Oregon coast. Nevada and Arizona have been hit hard too. There are large sections of Las Vegas where huge apartment and condo complexes have been closed, adversely affecting commercial vacancies in shopping malls and retail centers close by. In Phoenix and Tucson there are similar trends in the residential RE markets. Other states such as Indiana and Kentucky are feeling the pinch of the real estate downturn. The community of Evansville, Indiana has been hard hit by the closing of a Whirlpool plant that was moved to Mexico. In Louisville, KY, I noticed a lot of commercial vacancies there also. In several well known tourist towns in Montana there appears to be a high degree of commercial vacancies as well. Even in Hawaii, I was told by several informed locals there that their economy is being negatively impacted by troubles in the local real estate market.
All this does not bode well for small business. Traditionally, it’s small business that provides employment for close to 70% of all new jobs in our country. Commercial vacancies tell us one thing: that small business is having a hard time coping in today’s economy. They are either closing their doors or downsizing during these tough economic times.
It time to tell our political leaders in Washington that: now is not the time to levy a federal tax on RE sales. It’s not the time to levy a cap and trade tax on energy use in our homes or heighten environmental requirements for home sales or re-sales. All these proposals from Harry Reid, President Obama and their allies in the House and the Senate need to die now! These politicians in Washington are completely disconnected from reality and from the people that they are suppose to serve.
Instead these politicians are contributing to the calamity in the real estate sector and the free market economy as we know it. Big government, bloated federal government spending (that is growing by close to $4 billion dollars a day) and a lot of over reaching federal and state regulations won’t help the economy or the RE sector … It will only hurt whatever chance of recovery we may have. Call your political leaders and express your disappointment in them. It’s more important than you think!
James L. Lambert, a frequent contributor to ChristianMirror.net and author of Porn in America, is a licensed nationwide real-estate mortgage loan sales agent and can be contacted through his website.