Steve Marcus / Reuters
GOP presidential candidates, including Mitt Romney, left, and Rick Perry, have been relatively quiet about how they would attack the nation's housing crisis.
By John W. Schoen, Senior Producer
They?ve debated over how to create jobs. They?ve argued over how to cut spending. They?ve battled over whether to raise taxes. But five years into the worst housing crisis since the Great Depression, there?s been very little discussion from the presidential candidates on the real estate crisis that?s battering millions of American families.
Nearly 3 in 10 U.S. homeowners with mortgages are now underwater, owing more on their loan than their home is worth. Now that house prices have apparently resumed their downward trend,?that number will continue to rise, putting?millions more Americans just one job loss away from foreclosure. Despite those numbers, the issue so far seems to be getting little traction on the campaign trail.
Fresh data released Tuesday brought the problem into sharper focus. Of the roughly 50 million U.S. homeowners with mortgages, more than 28 percent owed more than the house was worth, according the real estate data provider Zillow.com. That works out to about 14 million homes.
In the hardest-hit areas, including Miami, Tampa, Orlando, Detroit, Phoenix and Sacramento, more than half of homeowners with mortgages owe more than their home is worth, according to the data
Since the housing market imploded in 2007, more than 5 million homes have been lost to foreclosure. Though the pace has slowed somewhat, the delay has been largely the result of a backlog of cases and a glut of unsold homes on banks' books. ?Another 4.3 million houses are sitting vacant or headed for the foreclosure pipeline, according the Capital Economics housing economist Paul Diggle.
After leveling off this summer, house prices appear to be falling again, which will force even more homeowners underwater. Those new foreclosures bring ?distressed? sales, as bankers unload properties or homeowners work out a pre-foreclosure ?short sale? with their lender. Those distressed sales, in turn, forces prices even lower. Unless that cycle is broken, the housing market could remain locked in a downward spiral for some time.
Toon-Off: Underwater mortgages?
There?s more than the fate of underwater homeowners at stake. Without a recovery in the housing sector, most economists believe, the broader economic recovery will remain weak.
One central reason the issue hasn?t received much traction on the campaign trail: Republican candidates have apparently concluded that government policies to stop foreclosures have done more harm than good.
?Don't try to stop the foreclosure process,? former Massachusetts Gov.?Mitt Romney told a Las Vegas newspaper last month. ?Let it run its course and hit the bottom. Allow investors to buy homes, put renters in them, fix the homes up and let it turn around and come back up.?
Other GOP candidates have echoed Romney?s remarks.
"We need to get government out of the way," Herman Cain said at a GOP debate past month in Las Vegas, where, according to Zillow?s data, houses have lost roughly two-thirds of their value since the peak in mid-2006.
Perry didn?t address housing directly in that debate, but a spokesman told The Associated Press the Texas governor's "immediate remedy for housing is to get America working again. ... Creating jobs will address the housing concerns that are impacting communities throughout America."
In the same debate, Minnesota Rep. Michele Bachmann said the White House "has failed you on this issue of housing and foreclosures. I will not fail you on this issue." But she offered no details.
Republican candidates have remained relatively silent on housing even as it remains one of the Obama administration?s big vulnerabilities. Near five years after the housing bubble burst, the White House has barely made a dent in the foreclosure wave. ?
Unveiled with great fanfare two years ago, and backed by $50 billion authorized by Congress as part of the bank bailout, a series of alphabet programs have done little more than raise hopes.? The centerpiece of the administration?s foreclosure relief efforts, the Home Affordable Mortgage Program, or HAMP, has fallen far short of its goal of refinancing millions of high-interest rate mortgages that homeowners couldn?t afford.
Though the issue has taken a relatively low profile in the president's campaign appearances, the administration continues to look for solutions to head off foreclosures. Last month, the president proposed easing Federal Housing Finance Agency guidelines to allow homeowners who are still current on their mortgages to refinance, no matter how much their home value has dropped below what they still owe.?The White House is also in talks with banks to try to convert as many as half a million bank-owned properties into rental units. That could ease some of the downward pressure on house prices by taking those properties off the market.
Broader solutions, though, remain mired in the same sharp political divide that has all but frozen government action on policies ranging from job creation to balancing the budget. One major logjam holding up housing policy is the debate over the fate of the two government mortgage companies, Fannie Mae and Freddie Mac, which were seized by the government in September?2008 after logging heavy losses on hundreds of billions of dollars' worth of bad mortgages.
Both parties agree that the two agencies need to be ?wound down.? But with little private investment flowing into the mortgage market, those two agencies remain lenders of last resort for home buyers.?
The biggest problem in today's housing market is that nearly 11 million borrowers owe more on their mortgages than their homes are worth, with CNBC's Diana Olick.
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