Atlanta Georgia Bankruptcy Attorney
Why is the housing mess such a mess?
1. There are a glut of unsold houses and condos due to overbuilding. Banks kept building and building and building and they didn’t really consider whether people would buy these houses or not. They simply assumed that there would always be sufficient numbers of buyers.
2. In addition, there are currently people that own houses that they simply can’t afford. It would be better for them to leave their houses and move into apartments. But if they do that, then those houses go onto the market and add to problem #1.
3. Many people are afraid of buying homes because of deflating home equity – i.e. today the home is worth 200,000, but then in one year it could be worth 180,000. This is a gigantic disincentive for people to people to want to invest in homes in the short term.
4. Bad word of mouth on home buying – when people lose their home, they tell their family and friends what a horrible nightmare it was. This bad word of mouth scares some people not to buy a home.
5. Job losses and wage cuts – people who are renting and who could qualify are terrified of losing their jobs or having their wages cut and being stuck in a mortgage that they might not be able to afford in the future.
6. Bad word of mouth on selling a home – many people who are trying to sell their home complain to their family and friends about how hard it is to find a buyer. This scares qualified, potential new home buyers from purchasing new homes.
7. Banks afraid of deflating home values – similar to buyers being afraid of deflating home equity, banks have the same fear – i.e. today the house is worth $150,000, but in three years that house could be worth $75,000. Banks have the fear that they will give out loans, and their loan will be worth less than the collateral on the note. Meaning they have created more “toxic assets” or “bad paper”.
8. Sellers competing with foreclosures – i.e. a new house in a subdivision is worth 250,000. A foreclosed house in that subdivision that is only one year old can be purchased for 175,000. This is a significant price difference and why new buyers are strongly considering foreclosed properties over new homes. The seller of the new house can’t compete with that price, unless the seller of the new house is willing to take a massive loss.
Atlanta Georgia Bankruptcy Blog 
