Could accelerating all foreclosures actually fix housing?

mortgage delinquencies Could accelerating all foreclosures actually fix housing?

Rising mortgage delinquencies

As the White House seeks methods do save distressed homeowners, a growing number of economists are advocating for the opposite, pushing for acceleration of “the inevitable” to expedite the bottoming out of the housing sector so a natural recovery can begin, according to CNN Money.

“Loans enter into foreclosure, but never come out,” Thomas Lawler, founder of Lawler Economic & Housing Consulting told CNN. “If this keeps going on, you have a continual overhang that never goes away.”

Shadow inventories

Some claim shadow inventories are a myth while others call it the plague of housing that threatens a slow recovery.

“They can’t be a glacier hanging over the market with everyone waiting for it to fall,” Jim Gaines, research economist at The Real Estate Center at Texas A&M University said to Fortune Magazine. “Those properties have to clear the market.”

What is the answer?

It is clear that the current regulated path isn’t working, just look at the difference over two years in the chart above. Could acceleration be the answer? What of the hundreds of illegal foreclosures happening every year and the homeowners who never anticipated being so far underwater? Could aiding homeowners help or would that slow down the inevitable bottoming out of the market so desperately needed before we recover? No one agrees on the way forward, but the graph above better change- quickly.

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