A Solution to the Housing Crisis Could Be at Hand

The housing crash erased $6.5 trillion from the value of Americans’ homes, and the market remains deeply depressed, with prices retreating in November to just 1 percent or less above their crisis lows. And still: Something good has been happening lately. Lenders and government agencies have finally begun to understand how to deal with the crash by efficiently saving the homes of people who can afford to stay in them—and quickly recycling the properties of delinquent borrowers who are beyond hope. That triage, while painful, is a prerequisite for the eventual recovery of the housing market. “I am optimistic,” says Mark Fleming, chief economist of CoreLogic, a Santa Ana (Calif.) data and analysis company. “You can see the wounds ever so slowly beginning to heal now.”

That healing process is good for the economy as a whole. While housing starts are still running at only one-third of their 2006 peak, they’re up from their 2009-11 lows, and residential investment has contributed positively to the growth of gross domestic product since the second quarter of last year. JPMorgan Chase Chief Executive Officer Jamie Dimon told investors and analysts in a January conference call that housing is “getting closer” to a bottom. “We’re going to add 3 million Americans every year for the next 10 years. That’s 30 million Americans who need 13 million dwellings,” he said. “Mortgage underwriting will loosen, not tighten. If you put all those things together, you’re going to have a turn at one point.”