President Obama will be in Phoenix, Arizona tomorrow to announce the plan his administration hopes will boost the dilapidated housing market. The country has been anxiously awaiting the details of the proposed $50B that will go toward a plan to help the housing sector. Reducing the number of foreclosures and defaults on mortgage loans will be a primary goal of the plan. Many real estate analysts expect foreclosure rates to increase dramatically in the next few years, as over 2 million homes went into foreclosure in 2008. Arizona was ranked number three in the nation for foreclosures. The state is also struggling with the economic downturn, as unemployment was nearly 7 percent at the end of the last year. Announcing the housing relief plan in the state will speak directly to people struggling with the very issues this stimulus package is designed to help.
The President signed the new $787 billion economic stimulus bill today in Denver. At that press conference, he stated that the goals of the housing plan would target foreclosures on mortgage loans and declining home values to help responsible homeowners. The drop in values has affected homeowners in most areas of the country. Zillow.com, an online company that provides real estate statistics, estimates that one in six homeowners owed more than his home was worth in 2008. Zillow estimates that the housing market lost over $3T the past year. Shrinking home values make it more difficult for homeowners to refinance mortgage loans and sell their properties. In addition, there is an inventory surplus of houses for sale currently, which makes for an ugly combination. Most analysts anticipate that the housing relief proposal will encourage lenders to lower payments for customers whose mortgage loans are out of balance with their incomes. The plan will aim to reduce monthly payments on mortgage loans, rather than reduce the principal on properties. Another objective of the relief plan will probably be to simply make home loans more accessible to consumers. That would happen through various means such as lowering interest rates and offering programs through Freddie Mac and Fannie Mae to let consumers refinance mortgages that are now more than their homes are worth.
The housing relief plan will not mean that everyone who is in trouble with their mortgage loans will get to keep their homes. But the goal of the housing aid package is to help conscientious homeowners keep their homes, in an effort to help the battered housing market begin to recover. History will be the judge of whether or not the plan will work.