This morning real estate expert Kenneth Rosen testified before the Financial Crisis Inquiry Commission (FCIC) and said that the residential housing market will have a slow recovery that will last 3 to 4 years. Rosen is chair of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley’s Haas School of Business. The FCIC is a bi-partisan, 10-member panel established by Congress to examine the causes of the financial crisis. Rosen presented the commission with several policy and reform proposals to combat the crisis.
“The embryonic recovery in housing has been highly depending on massive federal government intervention rather than an organic increase in buyer demand,” said Rosen. However, he notes the termination of several federal programs will stunt the market’s recovery. His recommendations included:
• A loan modification plan to address “underwater” mortgages when a home’s value is well below the mortgage balance
• A shared appreciation second mortgage that allocates part of the future appreciation of the home to the government and to the private lender to encourage loan modification
• A government-sponsored “unemployment bridge loan” to address unemployed households who do not qualify for a loan modification."
This comes as no surprise, and is good news for those buying homes now. It will take longer to build equity in a home, but it will not be a false equity that disappears at the first sign of a downturn in the economy.
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