The major problem is that more and more foreclosures are dumped on the market, which reduces the home prices considerably. The downfall in home prices means that more homeowners are overloaded with impaired mortgages, which means that their houses are worth a lot less than the original price that they bought the house for. Homes have lost already an average of 20 percent in value but, “most experts foresee another drop of at least 15 percent” (Zuckerman, 2008). Also as homes are abandoned by homeowners and are left empty because of foreclosure, it decreases the value of the whole neighborhood not just the one house. The decrease in house prices will obviously harm consumer assurance, consumer spending and will eventually affect not...
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...defaulting homeowners is the origin of this financial crisis. The goal of any bailout is to balance out the financial system and bring it to equilibrium. The financial system will not balance until house prices remain steady or step up, and house prices will fluctuate until the government finds a way to stop the increase of foreclosures. It is pretty obvious that the government is not doing their best to keep people in their homes, because they don't want to use the bailout for homeowners’ mortgage recovery. If the US government will not figure a plan out fast and the home prices will not stop declining, the economy is unlikely to recover. Even though the objective of the bailout bill was to protect the breakdown of the US financial system, the government needs to understand that the only way to stop this fire from spreading is to stabilize the housing market.
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