The Bankwatch

Tracking the consumer evolution of financial services

US real estate market stands alone in the world and not in a good way

There is an increasing disparity between the US economy and the others in the west.  It is particularly noticeable between US and Canada who site right beside each other with one of the longest borders in the world.  The US situation kicked off in 2007 with concerns about US mortgages that contained underlying and unrecognised double risk generally associated with mortgagors ability to service and collateral value. 

Whereas in Canada the real estate market has been relatively uneventful with both ups and downs throughout the 2007 – 2010 period.

The US on the other hand has entered a period of a 3rd risk tied to questionable legal title to the homes under foreclosure. 

U.S. foreclosure mess chills investors, clouds market | Reuters

"We’re like a plane flying around in a holding pattern, waiting to land," said Tony Alvarez, an investor in southern California who is currently renting out 40 former foreclosed homes. "Nothing is going on, and why? Fear has taken hold in the marketplace."

Allegations that banks failed to review foreclosure documents properly or submitted false statements when they foreclosed on properties spurred a joint investigation by the attorneys general of all 50 states and triggered foreclosure moratoriums by some of the biggest U.S. lenders.

This latest drama goes to the core of market basics and will create a freeze in real estate markets similar to the freeze within the banking system in late 2008.  When there is a doubt about the value of mortgages to banks this will freeze all real estate transactions while the matter of title is resolved.

Written by Colin Henderson

October 22, 2010 at 21:26

Posted in Uncategorized

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