Federal and State Officials Move to Combat Real Estate and Economic Crisis

by Simon Lindsay on Foreclosure Crisis, Real Estate Investing

As the crisis in the real estate and foreclosure markets deepens, it’s becoming clear that both state and federal lawmakers and officials are beginning to take the problem very seriously. The slump in the housing market has been going on for roughly four years now, and as property values and sales continue to plummet, the entire economy seems to be reeling from its effects.

Traditionally, most economic recessions in the United States have occurred after downturns in the housing market. For this reason, many economists and government experts tend to see the housing market as something of a litmus test for the overall health of the economy. While many believed that an economic slump was imminent due to the rising rate of foreclosures and the virtual halt in the real estate market, it seems now that the situation has gotten dire, and government officials are reacting.

Perhaps the biggest news in recent days has been the cuts in the interest rate made by the Federal Reserve. In just over 9 days, the benchmark interest rate has been cut several times at a total of 3%. This marks a 1.25% drop in that time period, which is fairly significant. It shows that the Fed is serious about trying to stave off the threat of recession, but it also shows how serious the situation is. This was a pre-emptive move, and it leaves room to wonder what options the Fed will have left if things to get progressively worse or more severe.

Another interesting development was the recent move in the California Senate to pass legislation to fight the rising tide of foreclosures. California has been hit especially hard by the foreclosure wave, especially in the areas surrounding Sacramento, San Bernardino and Bakersfield. However, the bill was defeated by only one vote, after many Republicans disapproved of the measure requiring lenders to personally contact homeowners and talk to them about their default before pursuing a foreclosure.

Sadly, many homeowners simply have no contact from their lenders at all before a foreclosure occurs, and many are left wondering what happened. Unaware of any resources or outlets for help available to them, homeowners are going into foreclosures submissively. As a result, many people are losing their homes, property values are falling even further and the market is flooded with both foreclosure and open market homes.

However, this surge in foreclosures has also brought out a new kind of real estate investor, those who buy foreclosures at auction or pre foreclosures from homeowners before their properties go to sale. With so many properties coming onto the foreclosure market, prices for these properties are way below their actual market value, as homeowners and lenders alike are simply looking to sell them off to get something back for them. Many buyers are finding savings of up to 50% in especially hard hit areas. These sorts of deals can be very lucrative, despite the sluggish market. Hanging on to them with low monthly cost mortgages can be a great way for homebuyers to win great properties for their families for low prices, or for investors to get a rock bottom deal with the potential for huge profits in the future.

And what’s more, buying homes in the pre foreclosure stages is helping many homeowners to keep from becoming statistics of the foreclosure epidemic. Selling early and avoiding a foreclosure allows them to not only preserve their credit, but also to walk away with some extra cash in their pocket. If the market is going to turn around, foreclosures are going to need to be bought up, and with their growing popularity among buyers, this could be the beginning of a big wave of smart foreclosure investment by savvy buyers.