After wiping out real estate property values for tens of millions of Americans, the too big to fail banks have collected their taxpayer bailout, the executives have their annual multimillion dollar bonuses, and now they are likely off the hook for criminal charges for the robosigning scandal. Glad to see the white-collar crooks have been taken care of but what will the $26 billion payout from the robosigning scandal do for real estate property values? Whoops, its not quite over…. according to the Wall Street Journal:

“Federal securities regulators plan to warn several major banks that they intend to sue them over mortgage-related actions linked to the financial crisis, according to people familiar with the matter. The move would mark a stepped-up regulatory effort to hold Wall Street accountable for its sale of bonds linked to subprime mortgages in 2007 and 2008. At issue is whether the banks misrepresented the poor quality of loan pools they bundled and sold to investors, the people said.”

Looks like it’s going to be another financial settlement instead of holding those that destroyed real estate property values accountable. You might accept the diatribe that these financial institutions must be bailed out at any cost. Still, stripping the individuals that created the financial crisis of their power by putting them in prison won’t topple the banking industry. Just the opposite, it will warn those that come after them of the consequences of destroying the U.S. economy and real estate property values in pursuit of ill gotten personal wealth.

But I digress….

Can young people stop worrying if real estate property values will stabilize so they can become homeowners? Photo courtesy of: www.flickr.com/photos/helga/3842225742

Real Estate Property Values for Investors and Homeowners

The real question that matters is how will the settlement affect real estate property values for investors and homeowners? According to the Federal Government, about $17 billion is expected to be used to lower the principle owed by homeowners that are underwater. If the Fed’s analysis is correct, it means about 1 million homeowners will receive an average $17,000 principle reduction on their existing mortgage. The question no one seems to know the answer to is how many homeowners will see their mortgage become aligned with actual real estate property values?

For those that do see their mortgage and real estate property values properly aligned, it means an opportunity to refinance to lower interest rates.

Another factor, as real estate property values realign with mortgages, is a pent-up demand to sell homes. This could put downward pressure on real estate property values if too many homes enter the market at once. The banks have three years to distribute the $26 billion but incentives are in place to realign mortgages to actual real estate property values over the next 12 months.

Are real estate property values tied to the American Dream? Photo courtesy of: www.flickr.com/photos/anne-cathrine_nyberg/5907334768

Real Estate Property Values – More Positive Than Negative

More houses coming on the market may temporarily push prices down but that should be the only negative effect the settlement has on overall real estate property values. This should be off-set by less foreclosures coming on the market as mortgages are realigned with actual real estate property values.

Mostly good news for homeowners but what does it mean for investors concerned with fluctuating real estate property values? Fewer foreclosures resulting in more stable real estate property values should be good news if you’re already invested in real estate. Combine this with the slowwwly improving unemployment rate and it appears real estate property values are beginning to turn around – like an aircraft carrier in a harbor.

Cautious investors should take note that the stabilizing real estate property values and increasing employment mean real estate property values are almost certainly lifting off the bottom. Today’s low real estate property values still present a chance of a lifetime but only if you act soon to take full advantage before real estate property values begin rising once again.

Please leave your questions and comments below about what will soon happen to real estate property values.

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