Feb 29 2008
More Say ‘I Told You So’ Now That the R Word Is Out
The people who own apartments and multi-family housing told the Senate Finance Committee yesterday that the nation’s housing policy of "home ownership for everyone" is the cause of the current housing finance woes. They also are urging the Congress to rethink federally insured zero-downpayment loans. Such loans are pending as part of an FHA reform measure (H.R. 1852, S. 2338).
"The marketplace has made it clear that zero-downpayment mortgages are extremely risky," said Jim Arbury, NMHC/NAA Senior Vice President of Government Affairs. "The largest PMI (private mortgage insurance) firms are already exiting this market because of losses reaching more than $1 billion. One large PMI firm is now requiring at least three percent downpayments and another is requiring five percent down in 30 markets around the country. Yet the government is still pursuing zero-down as a housing policy at considerable risk to the Federal Treasury."
The National Multi Housing Council and the National Apartment Association stated that warnings of the current housing dilemma were evident as long ago as in 2004 when housing experts, former HUD officials and consumer organizations started raising questions about policies that encouraged home ownership at all costs. Aubrey summed it up by asking lawmakers to acknowledge that "home ownership isn’t the right housing choice for all households at all points in their lives." These organizations say that just about a third of all Americans rent their housing.
But when you consider what’s really going on in the housing market, those actions by the Congress may be just more band aids on a leaking artery.
The Portland Cement Association (PCA) came out with a rather bleak assessment of that market. It cited a glut of homes in inventory as evidence homebuilding won’t get fired up again until mid 2009. It also predicted a 25 percent drop in new housing starts for 2008. That means prices for new homes will be down eight percent in 2008 but PCA says that won’t spur sales since "tight lending standards, weak economic conditions and slower household formation" will be in the way.
"Even though buyers can get better priced homes in 2008, they must now have good credit scores and as much as a 20 percent down payment to qualify for loans. With job and income gains expected to slow during the next four quarters, most potential home buyers will back away from such a major purchase until the economy is more stable," said Edward J. Sullivan, PCA chief economist.
There is more and more talk about the recession thing. It could just be that we will talk ourselves right into it. And we probably deserve it for pursuing policies that allow our governments to operate in the red, our businesses and industries to pursue profits at all costs, and our citizens to owe more on their homes than the homes are worth. What’s most amazing to me is that we act shocked when it’s time to pay the piper.
