Foreclosures and Hope

Posted on March 25th, 2009 by saman

There are thousands of real estate companies, which struggle on a chaotic market, marked by distrust, foreclosures, and lack of any references. On the one hand, we can see the panic of the developers who will have their businesses devastated, on the other hand the despair of the builders who refuse to take over new contracts, as they do not believe that they will be paid, say market experts.

Purchasers do not believe any more in the experts’ estimations, prices do not have any fundament, banks do not offer credit any more as they think that the value of properties will keep oscillating and they want to avoid foreclosures. Distrust is general and its effects are very serious. The real estate area, in the top of the businesses that have contributed to the GDP increase is now affected by foreclosures and most of them are threatened by bankruptcy.

Government, experts, and how long the foreclosure crisis takes, are key words in this global issue. During the foreclosures crisis period, businesses need more than ever stability references, says Bernard Baumohl, executive at Economic Outlook. That is why the attention of the business environment is directed to the state and its help becomes fundamental. From investment in economy to crediting areas considered strategic like infrastructure, to guaranteeing financing lines and the design of a fiscal environment adapted to the foreclosures crisis, businesspersons hope that authorities will help them.

When there is no hope, when measures are hesitating, the effects of the foreclosures crisis are more strongly felt in the economy, said Bernard Baumohl, executive at Economic Outlook.

In the USA, politicians have understood that a unitary message is necessary, as well as a coherent plan of measures against the foreclosures crisis and the spectacular election of the new president Barack Obama, and his plan to recover the American economy according to experts, includes confidence recovery.

Obama induction into office was associated with an unprecedented ceremonial. Hundreds of millions dollars spent on this event, the messages sent by the new president, his image of nation savior in the mass-media have as purpose the Americans confidence recovery, new hope in an economy where feelings are essential, said Paul Kasriel, chief economist at Northern Trust in Chicago.

Unlike the USA, other countries have acted very differently, analysts say. In the first stage, authorities have denied the existence of foreclosures crisis and then, when the economic situation has become alarming they have not known what to do.

The management of foreclosures crisis is very difficult in many countries, irrespective if we speak about the government level or the business environment, say analysts.

Many governments have ignored the foreclosures crisis as they have thought that the next government will be able to solve the problem. However, unfortunately some of them totally lack a vision. Even if they can get inspiration from other countries’ measures or from other countries experience, there is no clear tendency now. Thus, governments will increase the mistrust feeling especially in the case of foreign investors. Especially in the case of Eastern Europe, the European Commission has expressed their distrust in the capacity of many governments to face foreclosure, according to analysts.