Foreclosures have changed the housing industry more than anyone can imagine. They’re the fault of banks; my opinion. They’ve also ended up hurting a lot of banks, and that story is told over and over by the number of banks that have closed because of it. But the overall housing industry is reeling.

Here’s the thing about foreclosures. It seems that banks haven’t even been trying to be fair to home owners. We now know that the scandal of banks having people sitting in rooms just signing papers they weren’t reading or evaluating, called “robo-signing”, has caused banks across the United States to be investigated by the Department of Justice. There have been stoppages in foreclosures, and in the last few weeks of the year it’s expected that all foreclosure activity will probably cease, as it did last year. This time it might not be because of the government; it just might be because even banks need a breather from the bad behavior and overwhelming numbers of foreclosed properties they’ve helped cause.

At first, it seemed like banks would make out like, well, the bandits I say they were. They now had all these properties back that they could put on the market and make a lot of their money back. Lo and behold, they found that not only were there too many properties, which reduced the amount they could offer these homes for, but that the overwhelming number crushed the new home building industry, which they relied on for real monetary sustenance. Wow, a two pronged attack; terrorists couldn’t have done a better job.

Where does it all leave us now? Banks are still being investigated. Some states have banks withholding the number of homes they’re putting on the market, trying to artificially keep home prices up. Companies that were buying up foreclosed properties, fixing them, then reselling them have stopped buying as many of these properties because they don’t want to get caught up in the scandal. Because unemployment is still fairly high sales have dwindled. And banks still aren’t approving people who have pretty good credit at a rate sufficient to move merchandise because they don’t want to get burned again, even though they’re the ones who caused the mess in the first place.

Oh yeah, and now mortgage rates are going up, which will also reduce home sales. One industry is imploding and it’s taking everyone else with them. There never was a true symbiosis between banks and the housing industry; it just seemed that way. The reality is that banks have controlled the industry, and many others, for decades, and they need to right themselves so everyone else has a chance to recover.

Don’t bet on it; greed is hard to give up.

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