subject: Unoccupied Property – A Spreading US Headache [print this page] Unoccupied Property A Spreading US Headache
It used to be said that if the US economy catches a cold, the rest of the world gets flu. Most would say that American now has the flu and many others are on life support. But many of the woes centre on American's appalling housing crisis, and the amount of unoccupied property.
Experts acknowledge that the collapse of the US property market which followed a bout of reckless mortgage lending which could never be sustained in the long term sparked the 2008 recession. And because US home owners can walk away from a mortgaged home and hand back the keys with almost impunity, and because more US banks are now foreclosing on properties than ever before, the amount of unoccupied property will continue to rise.
Unoccupied property insurance will doubtless cover the liabilities of many of the subsequent owners once the mortgagees have walked away, but the situation is not helping any sense of recovery.
And although unoccupied house insurance does play a vital role, the US administration knows that unless this situation can be reversed, then the recession and all its grisly worldwide implications will continue to be felt for many years to come.
The latest news from the US mortgage agency (known as Freddie Mac), suggest things are far from rosy. It suffered a staggering $4.1 billion loss on bad homes in the past quarter alone. And it also announced that the US housing market will suffer "...renewed pressure..."
Freddie Mac chief executive officer Charles Haldeman was quoted as saying:
"We believe it will be a considerable time before the housing market has a sustained recovery. As we near the end of 2010, the housing market remains fragile, and has recently come under renewed pressure from slowing economic growth, weaker employment and foreclosure uncertainties."
On the positive side, the loss experienced by Freddie Mac was lower than it had announced in the same period last year, when the loss was an eye-watering $6.7 billion. And again on a positive note, the company only had to ask for a further $100 million of capital, which was seen as a vast improvement over previous demands for cash.
Freddie Mac has effectively been nationalised by the Federal Government who have agreed to maintain its solvency by injecting new equity when required. Had it gone under, along with Freddie Mae, then the US financial system would have rocked and possibly tumbled.
Experts agree that until unoccupied property becomes less of an issue in the US, then the chances of a major recovery in world's economic powerhouse remain risky to say the least. And that is not good news for the rest of the West, as it looks to the US for signs of recovery.
