Is this a great country or what? At the start of last year, a friend of mine, the proprietor of a small business that has suffered badly in the recession, entered a trial mortgage-modification program. A few months later the bank told him that his application for a government-assisted refinancing rate had been turned down -- his house was too far underwater. He had bought it during the boom for $220,000, putting down $30,000, and then spent another $45,000 doing it up. Now it's worth about $100,000. Once his monthly payments were set to go back up (his mortgage rate is 6.5%), my friend stopped paying them and waited for the foreclosure and eviction notices to arrive. A year and a half later he is still inhabiting his own home and watching the mail.
Whenever I hear somebody saying that growth is about to pick up, I think about my friend and the roughly 11 million homeowners whose mortgages are worth more than their homes. Some of them are still making their monthly payments. Some, like my pal, are living for nothing. The drip-drip foreclosure crisis shows how, six years after the bursting of the real estate bubble, the U.S. residential real estate market is still a mess. And without a genuine revival in housing, it is hard to think we will ever get a self- sustaining recovery.
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