Boomer’s Blog

Americans are clearly divided on whether homeowners with distressed properties should receive government-targeted aid to help them keep their houses, as are their elected representatives in Congress.

According to a recent CNNMoney.com poll, only half of Americans surveyed believe that help should be extended to struggling homeowners. These results are derived from phone interviews with 1,008 adults conducted at the end of April. When the same survey was taken in December, 51 percent of survey participants favored special assistance, while 46 percent did not.

The split in popular opinion on the issue also is reflected in the U.S. Congress. Last week, the House of Representatives fiercely debated legislation that would provide federal backing for some at-risk loans and cut the principal owed on some mortgages. The bill passed through the House last week on a 266-154 vote.

The proposed legislation would allow the Federal Housing Administration (FHA) insure up to $300 billion in new loans over four years if lenders agree to reduce mortgage principals. In order to qualify however, lenders would be required to drop the debt to no more than 85 percent of a home’s appraised value. Under the bill, sponsored by House Financial Services Chairman Barney Frank, if the FHA-refinanced loans went into default, the FHA would pay the lender the remaining principal owed.

Critics allege that the legislation is unfair to those who didn’t bite off more debt than their finances could chew, and say it is an inappropriate use of the FHA to bail out lenders and homeowners — all of whom should take responsibility for their business transactions.

Still, due to growing support for the measure in Congress, many expect the legislation to survive bipartisan scrutiny — and predict the bill will gain support from legislators who represent states that have been pummeled by the credit crunch, mortgage meltdown and on-going housing market woes. The White House already has threatened to veto the legislation.

Economists addressing the National Association of Home Builders predict that beleaguered housing and home construction markets will continue to take a beating well into 2009. CNNMoney.com reports that the turmoil will cost Americans $400 billion in lost home value. Economists say that the decline of the housing markets, rising oil prices and the ongoing credit crisis wall will continue to raise materials costs for builders and complicate home financing for buyers. These factors likely will continue to inhibit a speedy market recovery. Builders may take longer to recuperate than the real estate market, economists say, because when the housing market crashed, new housing permits dwindled, and the market experienced a glut of unoccupied new homes with few qualified buyers in sight. These high inventories compete directly with builders, who are forced to limit new projects until supply and demand levels level out.

As home sales and prices drop across much of the United States, many sellers are resorting to fire-sale pricing and bargain hunters are seizing the hot real estate investment opportunities.

The national median home price dropped to $195,900 in February, down from $213,500 for the same period in 2007, acording to RealtyTrac. In the meantime, cities in three of the five states with the nation’s highest total foreclosure rates top CNNMoney.com’s rankings of the best places to invest in housing.

Georgia’s Atlanta Area

• Georgia’s total of 11,047 foreclosures fuels the nation’s fourth-highest overall foreclosure rate, says RealtyTrac. One in every 351 Georgia households received a foreclosure filing in March — ranking its foreclosure rate No. 6 in the nation.
• According to CNNMoney.com, rampant home building in the Atlanta area has stalled, which should start to reduce the area’s large supply of vacant housing and propel prices upward.

Ohio’s Cincinnati and Cleveland Areas

• RealtyTrac’s most recent report says that Ohio’s total of 11,273 foreclosures give the state the third highest foreclosure rate in the U.S.
• One in every 448 Ohio households received a foreclosure filing in March — earning a seventh place spot in total foreclosures rankings by state.

CNNMoney.com ranks these cities as the third and fourth best places to buy houses in today’s market, forecasting that:

• Cincinnatti’s manufacturing-heavy economy should rise as the dollar falls: Commercial construction and high-end developments are on the rise.
• Cleveland’s foreclosure boom seems to be slowing, thanks to programs to help troubled borrowers. Prices have stabilized and appear poised to rise.

Michigan’s Detroit Area

• In February, RealtyTrac reported that Detroit had nearly 5 percent of the city’s households were entering some stage of foreclosure, at a rate 4.8 times the national average.
• With an average price-to-rent (P/R) ratio of 15, a buyer theoretically annually gains almost 7 percent of the purchase, CNNMoney.com reports. The average P/R ratio for Detroit’s 30 biggest markets: 23.

Texas’ Houston Area

• Texas’ foreclosure filings were reported on 10,700 properties in March, marking a 13 percent decrease from the previous month and a 16 percent drop from foreclosures reported for the same period in 2007, RealtyTrac reports. In February, a decline in the state’s foreclosures dropped Texas to the fifth place spot for total foreclosures among the states.
• In Houston, soaring oil prices will support and help to stabilize real estate prices. In Q4 2007, prices here were up 1.4 percent — the fastest of all the metro areas CNNMoney.com analyzed.