Real Estate and Social Responsibility

The recent Great Recession highlighted the interdependency of the U.S. social structure to the real estate industry. As the real estate market froze to a standing halt, so did the whole U.S. economy. Government officials and regulators should have expected such results as real estate employed more Americans than any other sector.

Prior to the Great Recession, 60% of U.S. assets were tied with it. This occurred due the free market philosophy entrenched within the U.S. economic foundations. The properties are mortgaged to pay for sales or to enable owners to access their equity. Mortgages are bundled and divided up in accordance to average credit rating of total borrowers and other variables. Investment banks and other financial institutions purchase and trade mortgage bundles to acquire more capital. In addition, insurance companies and retirement funds purchase mortgages to increase cash flow needed to cover for monthly payments.

Furthermore, this particular industry employed many Americans. Most individuals are quick to recognize the agents and brokers. In addition, the industry includes appraisers, construction workers, civil servants employed at all government levels and many more. Many other industries are also connected to real estate. Production and manufacturing of construction materials, as well as points of sale and transportation of goods to construction sites from sales locations are few of such connected industries. For example, in order for a house to be build, the builder must purchase a real property, conduct a soil test, contracts an engineering firm for designing and drawing, hires a licensed contractor to build, and purchase all the material needed.

The U.S. real estate industry is very influential in domestic politics. Following the collapse of the prices, many such associations lobbied the government to enact restrictions against foreclosures. The government was split between supporting the frontend (sales and home owners) and the backend (financial institutions and holders of liens). As a result, the government passed special tax credit to stimulate the sales and offered government backed modification through HAMP. As for the backend, the government invested heavily in many of the different banks who operated within the United States. Commonly known as “bailout”, government assistance to financial institutions allowed those organizations to survive the worst recession in modern history of humanity.

By offering a double deal to help both sides of the equation, the government acted in accordance with the principle of social reasonability. Many homeowners faced growing harsh times and needed the government to force holders of mortgage deeds to accept renegotiated mortgage agreements. At the same time, financial institutions are some of United States biggest employers. By saving them, the federal government curbed the down spiral of collapsing economy. In addition, saving such big businesses helped the United States maintain its attraction as a fertile ground for economic growth.

Source by Simer Smith