Dennis Kneale of CNBC made some brilliant comments regarding the housing (and I regret to use the following word) "crisis." His comments were in line with a column that was written some weeks ago regarding good news about real estate, however, he takes it one step further with some poignant facts. He is in concert with Elliot Pollock, the Arizona economist who visited Payson some weeks ago, and gave us insight into the future of the economy and housing. They agree that if the federal government will stay out of the way, and let the free market fix the housing (a word I prefer) challenges, the market will recover faster and the U.S. taxpayer will not have to pay $300 billion for a mortgage bail out.
Mr. Kneale points out that there are 120 million homes in the U.S., of which 40 million are owned free and clear. Another 40 million were purchased prior to the year 2000, and on a national average, they have appreciated 34 percent. Doing the simple math, that tells us that 80 million homes in the U.S. have a mortgage, and of these, 95 percent make their payment on time. What we have at risk of foreclosure is four million homes; however, only 2 percent are in actual foreclosure.
Most of the country is not feeling the pain that we feel in Arizona. Why is that? It is because the bulk of the delinquent activity is in the four states where home prices appreciated the most: California, Florida, Nevada, and, unfortunately, Arizona. California alone has more properties in foreclosure than the total in 40 other states combined.
The price correction we have seen in housing is no different from a price correction in any other type of investment. Housing is a product of supply and demand like any other product or commodity. The price correction we are experiencing now, although painful for some, will in the long term bring normalcy back to the market and make housing affordable once again.
Markets can change quickly, and by the time the federal government "fixes" the housing problem, the free market hopefully will have corrected the situation and taxpayers will not have to be shouldered with the strain of $300 billion of their money to fix something that should not have happened if rational market conditions had prevailed during 2005.
If you wish to view Dennis Kneale's comments first hand, log on to: www.cnbc.com/id/ 15840232?video=780461999
Ray Pugel is the designated broker for Coldwell Banker Bishop Realty. For more information, call (928) 474-2216.