by Susan Suthers

The term “housing crisis” currently relays thoughts of subprime mortgages, housing scandals, the current interest rate, and the horrifying thought of millions losing their homes to foreclosure. The current housing crisis was foreseen by many, and yet nothing was done to stop its downward spiral. However, the blame can’t be placed on any specific aspect of the real estate field, such as the lenders, the investors, the agents, the appraisers, or the builders. There are no quick fixes or easy go-to solutions to solve all of the housing market ills that are currently taking place. Many homeowners are still sitting back wondering what happened in the first place and if their piece of the American Dream is just as quickly taken from them as it was received.

Housing in the United States is seen as a source of profit. Every aspect of housing demonstrates a perfect example of capitalism at work. In Baltimore City, for example, the need for affordable housing is always prevalent. During the Housing Boom, investors flocked to places like Baltimore City and Washington, DC, with the intent of purchasing investment properties to either flip or renovate and lease out. Depending on the area, and the investors themselves of course, this would prove to be both positive and negative. Many welcomed the new source of housing and were glad to have areas, once desolate and unlivable, renovated and habitable again within a short time period. A drawback being that many areas surmounted the old housing values, making a rise in rent unavoidable and too tempting for many landlords to pass up. Areas that were inhabited by lower income families became unaffordable as rents slowly began to rise with the increase in value in many homes.

Then there were, of course, the investors that saw the profit that came from flipping houses. The idea that you could hold onto a piece of real estate for a month, or so at a time and then profit just off the resale value of the home, would of course to anyone prove to be easy money. This led to more houses in cities all over the United States remaining uninhabited and, in many cases, uncared for until they were sold unto yet another investor. As these properties remained dormant and steadily increasing in value, those without homes, remained as they were; homeless and without a way to attain affordable housing.

In addition to the growth of investors to the cities, the housing market boom proved harmful to new homeowners nationwide. In the new housing market, hundreds of thousands of borrowers were able to qualify for loans that lending institutions normally would have deemed infeasible. Subprime lending allowed borrowers with deficient credit history to qualify for loans, no matter how screwy the terms of the loan. Many of these loans had high interest rates, which the new homeowner couldn’t afford to begin with. Still, other loans were not adequately explained to the borrower, so a loan that began with an affordable mortgage payment would increase significantly within a short time period of a year or so, causing the fledgling homeowner no other option than foreclosure.

In an attempt to avoid foreclosure, many of these homeowners decided to refinance their homes. They were able to apply for new loans with lower interest rates and practical mortgage payments. It came to the surprise of many homeowners, however, that their homes were not worth even close to the original purchase price. Many companies are currently facing charges for harassing appraisers to increase values to make loans work. The appraisers, in most cases, complied, causing housing values to increase throughout the country. Houses that appraised for the higher dollar than their true value are now proving to be one of the bigger problems new homeowners are facing. In addition to these woes, the closing of the subprime lending market and the closure of many lending institutions (such as American Home Mortgage), has made qualifying for a loan difficult for the majority of borrowers. In our current situation, those capable of qualifying have enviable credit scores or have enough money to put towards the house that the current market situations do not affect them in the least.

As the media hype over the “housing crisis” dies down, there is still yet to be a solution for the millions facing foreclosure. The Federal Reserve recently lowered the interest rate and there have been several proposals in Congress that would urge mortgage companies to work with borrowers facing foreclosure. Even with the lowered interest rate, we have yet to see a turn in the housing market. The thought of families losing their homes from a moral standpoint should be seen as a degenerate state of affairs. More realistically, current debates about the housing crisis argue semantics of the term “crisis” and discuss whether there should be any aid at all to those losing their homes. Advocates against government aid or legislation for those facing foreclosure feel that many at risk of losing their home are at a fault of their own. The consequences of the housing market’s boom, and eventual fall, prove that a change in the real estate field is incontestable. The main stumbling block that occurs with any type of housing aid or change for the better in the field is simply that housing is seen as a profitable commodity rather than a necessity of life.

From "The Insubordinate", Issue #1