Over the weekend, I read a housing news report in the New York Times. The article was based on an interview with Laure Goodman, who published a paper entitled: “The case for Principal Reductions.”
Based on her housing data, here are two shocking observations:
1. Of the 55 million mortgages in the United States, more than 10 million are “reasonably likely” to default, in large part because homeowners are underwater.
2. Another calculation based on her data is that the supply of homes will exceed demand for the foreseeable future by as much as 6.2 million homes in the next six years. She based this on the fact that young adults are living with their parents longer (see blog post below) due to the economy. What’s more, nearly 20% of the current homeowners wouldn’t even qualify for a loan in today’s mortgage environment.
So how do we end this national housing crisis? According to Laurie Goodman, the best way would be to have banks lower the principal on those who are in default with their housing loans.
Read more: “>New York Times