On average, unadjusted home prices have fallen for the first time since WWII and will continue to decline according to Doug Duncan, vice president and chief economist at Fannie Mae.
That was not the only bleak economic news Mr. Duncan shared with members of the Rotary Club of Baileys Crossroads at their breakfast meeting on June 30. It used to take 6 months for a house to sell. Now, it takes about 10 months.
Foreclosures are at record levels. Twenty-five percent of home mortgages are in foreclosure or at least 90 days overdue. Also, the home vacancy rate, normally 1.7 percent, is at 2.9 percent one million houses nationally.
Mr. Duncan observed that everyone is to blame for the home mortgage crisis including lenders, home buyers and policymakers. Lenders enticed home buyers with teaser mortgage rates and complicated mortgage schemes neither buyers, investors, or credit ratings agencies understood.
Home buyers failed to engage in the due diligence required to understand the ramifications of the mortgage agreements they signed. Policymakers, overzealous in their encouragement of home ownership, paid little attention to the long term effects of no money down mortgages.
Mr. Duncan, an economist who communicates his ideas with great clarity, had advice for all those participants in the home mortgage process.
Regulators should encourage standards that make it reasonably certain purchasers will be able to fulfill their obligations. Lenders should craft written disclosure agreements that are understandable to the lay public. Home buyers should favor standard 30-year mortgages.
Rotarians who attended the breakfast meeting praised Mr. Duncan for describing clearly the complexities and implications of a home mortgage crisis that shows little signs of short-term improvement.
Guests are welcome to attend the Rotary Clubs breakfast meetings held each Friday at 7:30 a.m at the Athens Restaurant. There will be no meeting on July 4. Cong. Jim Moran will speak at the Rotary Clubs next meeting on July 11.