Federal intervention won't end California housing crisis
By Jim Wasserman | Sacramento Bee
Federal intervention in the financial system could wipe billions of dollars in bad mortgage debt off the books of Wall Street. But will it help end the housing crisis in Sacramento?
Not directly, analysts say.
But eventually it could help curb the defaults and foreclosures at the root of economic problems locally and the nation as a whole.
Housing industry watchers said Friday the plan announced by the White House could lead to easier credit and bring more buyers into the real estate market. That would help stabilize home prices and begin to trim foreclosures by early next year.
The Sacramento region – Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties – recorded more than 21,000 foreclosures from January 2007 through the first half of 2008, according to MDA DataQuick, a La Jolla property researcher.
Some analysts said the government is more likely to modify the troubled loans it assumes, keeping households out of foreclosure.
"I think what we are seeing in this confluence of events could be described in one word: a solution," said Stuart Feldstein, president of SMR Research Corp., a New Jersey lending industry analyst.
Feldstein said that just as falling home prices sparked the foreclosure crisis, rising home values will cure it.
"To the extent that the government takes over the bad debt, banks will have more cash to lend," he said. "They won't have to keep their reserves as high against the bad debt. If a borrower's credit is good and there's a reasonable down payment, it should be much easier to get that loan."
Read the complete story at sacbee.com
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