All the attention of real estate foreclosures is being pointed at the banks and Realtors and preditory lending. Frankly that is all BS....The real Culprit is NAFTA. Why do I say that...it's simple to understand.
Prior to 9/11 starting at the end of 1999, the federal reserve raised interest rates to reduce inflation. The stock market crashed, real estate values started to drop rapidly. In 2000 we still had a Democratic President and we were being told, that we may or may not have a double recession.
Then when 9/11 hit, it took all the attention off of the real challenges. We had major issues, the whole mid west were losing jobs outside the border causing a massive shift of populations from the entire mid west states. Once 9/11 hit and the economy fell further into recession, the fed reduced rates all the way down to 1% to keep the economy alive.
All the time, they knew there were major challenges, like California's real estate values just about doubling in a short period of time between 2000 and 2005. Condominiums in Florida were doing the same thing. And the only reason the fed had to keep the treasury rates so low was to keep the mid west states from depression.
Now we have all these foreclosures for different reasons. California, no problem the values will come back and balance out, in the mean time people got hurt. The financing methods to allow a person to buy a home with little or no money down on short term loans, with the assumption they could refiance later...finally caught up with them when the market dropped.
In Florida it was said that 1/3 of the people who purchase high rise condos between 2002 and 2004 already owned a high rise condo. Looks like a lot of speculation to me, of course when the bottom dropped out, the values dropped rapidly.
A few months ago, I saw a show on television that there were about 20 high rise buildings under construction, so that would be about 150 to 200 units per building or more, times 20, equals 3,000 to 4,000 units or more. The developers werer pretty confident, since the purchasers put down 10% when they were reserved and another 10% before starting construction. But now, the question is whether or not that is enough and those condos are still in construction, but they will recover eventually because they have water front demand.
But what about the mid west, they have been losing jobs and population and when the other more popular states start to recover, look out! Higher interest rates will just make it worse.... sooner or later, somebody needs to figure out that until we bring back jobs to the mid west this whole country will continue to suffer the consequences of a reduced buying power due to a massive depression in this region.
It was the problem before 9/11 and it's still the problem today....and our new president Obama doesn't have a clue as it would appear, since his resolve is to tax more....it's not looking good!
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