Deja Vu All Over Again

Yesterday’s Washington Post posted an article stating that the Obama Administration is working toward making home loans available to people with weak credit in order to boost the economy. Wow. Just as the housing market is recovering from the sub-prime mortgages of the 1990’s, we are going to add a bunch of risky mortgages to the mix.

The article reports:

In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.

Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

Part of the problem here is the government’s intervention into the housing market. Banks should be left alone to make their own decisions on issuing loans.

The article further reports:

Deciding which borrowers get loans might seem like something that should be left up to the private market. But since the financial crisis in 2008, the government has shaped most of the housing market, insuring between 80 percent and 90 percent of all new loans, according to the industry publication Inside Mortgage Finance. It has done so primarily through the Federal Housing Administration, which is part of the executive branch, and taxpayer-backed mortgage giants Fannie Mae and Freddie Mac, run by an independent regulator.

It really is time to let the private sector be the private sector and shrink to government to a reasonable size.

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The Recovery Doesn’t Seem To Be Recovering Very Well

Yesterday Ed Morrissey posted an article at Hot Air about the latest report to come out on the housing market. The National Association of Realtors reported that the market for both new homes and existing homes went down in March. March was the third month out of the past four months when sales of existing homes have gone down.

The article reports:

Residential real estate remains the economy’s soft spot, challenged by stricter lending standards, lower home values and the threat of more foreclosures. An improved labor market and mortgage rates near historic lows have yet to stoke bigger gains in demand.

The article further states:

The description of an “improved labor market” applied more in February than it did in March.  Last month, the US only added 120,000 jobs, barely enough to keep up with population growth.  Even before that, the previous three months added around 650,000 jobs in the aggregate, which means actual growth above population increase of about 300,000 jobs — which wouldn’t greatly increase demand in the housing market, but shouldn’t result in a decrease in demand.  First-time buyers still only account for a third of these purchases, when the normal level is around 40%, according to Bloomberg News.  That’s an indication of a lack of confidence among younger adults.

I am not an economist, but it seems to me that until people feel they have secure jobs, they won’t buy houses. I also wonder if the fact that it used to cost $30 to fill up a gas tank and now costs $60 might have people saving their pennies in case things get worse.

 

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