Homeownership Rate Falls to 13-Year Low; Gov't. Created An Unsustainable "Homeownership Bubble"
Conclusion: The political obsession with homeownership raised homeownership in the short run to an artificial and unsustainable level of 69% by 2006, but failed in the long run to stimulate homeownership at a sustainable level, and in the process government policy turned good renters into bad homeowners, created a housing bubble, waves of foreclosures, and a subsequent housing meltdown and financial crisis. In other words, the chart illustrates how government policies (monetary, mortgage market, GSEs, CRA, affordable housing, etc.) created an unsustainable "homeownership bubble."
8 Comments:
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How do you know they were good renters?
Home ownership has risks like any other investment, but overall it is the surest path to at least some wealth for most folks. Despite the downturn, my real estate investments have done as well or better than others I own. And I don't get to live in all of them.
I believe that it is possible for government to overemphasized home ownership. But lacking other metrics, how would we know if the best level is 90% ownership with 15% subsidy or 30% ownership, cash only sales?
The government takes a risk when it promotes home ownership, and banks take a risk when they lend. Either way, if they make their bets right, they profit. If they fail, some stockholders or voters will be upset.
I don't see the problem here, or the philosophical difference.
Corporations work for their shareholders, and sometimes they fail. If they succeed, they grow faster.
Same for government.
I still argue that the PRIMARY cause of the housing crash was that the ratings agencies facilitated the sale of securities without sufficient investigation of who owned what.
They did not do their job. Some will claim government interfered with their job.
They could have said no.
But, absent any other metric concerning the wealth home ownership generates, all we know is that home ownership is lower now than previously. We have no way of k owing if this is good or bad.
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> I don't see the problem here, or the philosophical difference.
Governments muck up the economy by fiddling with things they have no grasp of in many, if not all, cases. They demand things by fiat and back those demands by force of Rule.
> Corporations work for their shareholders, and sometimes they fail. If they succeed, they grow faster.
Same for government.
No, because the corporation can't "fix" its financial problems by taking still more money out of my pocket without my permission.
Corporations don't attempt to ignore market forces -- at least not without clear direct penalties to themselves -- or to use raw force to obtain compliance with their own immediate interests.
That one needs to actually EXPLAIN the difference between corporations and governments to you is a sign of a seriously clueless outlook.
Perhaps you should refrain from commenting on things as though you have a clue, until you actually get one, and just confine yourself to asking questions and reading to the replies...
> They could have said no.
Really? REALLY?
Are you actually THAT stupidly ignorant? Or just lying?
"We think your loan/mortgage outlays fail to include enough African Americans. If you don't increase the number of such to A/As, we'll have the Justice Department investigate you for racism and civil rights violations".
Yeah, they're going to "tell them no".
Imbecile.
Or lying jackass.
Which is it?
The ratings agencies (and the banks) DID fail to do their jobs, yes, and part of it DOES fall on them. But not less than 65% of it all falls on the Democrats in the Legislature, via committee positions and actions (with about 20% of the remaining amount on the GOP -- they don't get off scot-free, either!).
About 10% of it can be applied to "business greed" (the banks and ratings agencies).
The remaining 5% can be applied to "consumer greed" -- people stupidly looking to get money for nothing.
hydra-
when government programs force banks to lend to those with bad credit and low income and then facilitate such lensing by buying up all the loans (and they are still doing it. freddy and fannie are >90% of the mortgage market) it can only end one way.
mortgages are just like any other product - under price them and people will consume more than they should. price below cost and you will lose a ton of money.
there is a huge difference between corporations and government - corporations that lose money go away (unless they are in the UAW) but only the shareholders suffer and they took those risks voluntarily.
when the government loses money, it just spends more and runs up debt (now bought by the fed). this means it has no disciple imposed upon it. making this worse, they then pass on the costs to all taxpayers who have no choice about taking such a risk.
those are enormous differences.
"They could have said no."
you are dead wrong about that.
citibank tried this. they were sued (by obama's old law firm FWIW) and forced to comply.
there was nothing optional about this. fail to comply and you lose your banking license.
this whole system was based on a flawed report on lending and race that did not control for income level and therefore made it look like there was huge discrimination when in fact it was just a function of income brackets.
the net result was that to meet racial quotas, you had to make massive subprime loans at very near prime rates.
that can never end well.
Dr. Perry:
It would be interesting if you re-posted your chart along with the charts from page 3 and 5 of John B. Taylor’s book Getting Off Track.
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