The biggest problem the nation faces is the housing market. When houses are built the entire economy improves. Housing provides jobs for: designers, carpenters, sheetrock men, painters, cement workers, landscapers, A/C & heating companies, and most important the vast amount of appliances and furniture needed to finish the home.
A new home creates a great number of high paying occupations because each unit injects nearly $300,000 into the economy.
One reason the American economy is on its knees right now has to do with housing sales. For the past several years they are at the lowest sales rate in decades. Foreclosures are on the rise and nearly 25% of home owners are “underwater” which means that they owe more on their house than its current value.
Because of these factors, the number of people unable to pay their mortgage is increasing causing values to decline even more. The glut of existing homes in the market makes it nearly impossible for home builders and associated businesses to profit so they have laid off workers who have no prospects of being rehired in the near future.
The housing crash is a spiraling problem that gets worse with each passing day.
What is never mentioned in the reports is why so many people are having problems meeting their payments. Certainly, it is not the mortgage interest rate because that is the lowest in over fifty years. Surely, some of the problem is related to unemployment, but those numbers are not high enough to account for the defaults.
The problem folks, is INSURANCE!!!!
Presently, the cost of insurance for many homes exceeds the note on the loan. Right here in St. Bernard Parish home owners insurance in nearly tripled since Hurricane Katrina and the Federal flood insurance has tripled as well.
Most interest rates on homes are fixed. People can budget this number. Insurance, however, is always an unknown. Policies are renewed every year and one does not know that he/she is paying until the policy arrives. That cannot be budgeted.
With rising food and gasoline costs added to this already dismal situation, one can expect further degeneration in the housing market as the year progresses.
The problem is no one…Democrat or Republican…seems ready to take on the insurance industry. Why?
Although they raised rates after Katrina because of the amount of damages claimed, most of those losses were covered by flood insurance, NOT homeowners. Nevertheless, insurance companies raised rates substantially while declaring high profits and handing out magnificent bonuses to executives.
If the government wants to improve the economy and help the housing market, the problem lies with insurance companies. Their refusal to write policies makes purchasing with a loan impossible. Those who can afford to pay the rates do so under a burden and funds spent here are not expended on other products.
It is past time that the entire insurance industry come under review. Even local insurance agents must be frustrated as they find they cannot generate policies and service their customers because of restrictions and high costs.
The problem is insurance!
by Ron Chapman