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Economy, Regs, & Taxes

Trying to Reverse a Homeownership Slide

The rate of ownership is down, so easy lending may come back.

Feb. 27, 2015

Earlier this week the Census Bureau released more bad news for the current regime: The rate of homeownership has fallen to a 20-year low, continuing a slide that began at the apex of the housing market in 2004. Ten years ago, 69% of Americans owned homes, but that has fallen to 64.5% in 2014. As Joe Biden keeps telling us, Barack Obama’s economy is terrible: “The middle class is being killed.”

Unfortunately, the economic conditions that led to the dramatic increase in the decade from 1994 to 2004 can’t be duplicated today. What was once an era of steady, mainly full-time employment and ample economic growth has now stagnated to a point where those most likely to enter the housing market and become owners are saddled with part-time gigs and staggering student loan debt. Meanwhile, older generations have been struggling with issues of their own, as the equity they once possessed in their homes has long since been wiped out, leaving some unable to keep the dwellings they once owned.

After the housing bubble a decade ago led to the economic devastation of 2008, it would make sense to tighten the housing market and have banks ensure that borrowers are more qualified. But recent steps by Barack Obama’s Federal Housing Administration indicate the desire to return to the reckless practices that wrecked our economy in the first place.

Granted, a simple change in lending fees may not be all that significant, but further guidance in the direction of easing credit is likely. Greater demand for housing will bring prices back up, which in turn will reduce the number of homeowners who are “under water” with their mortgages. But since the federal government guarantees much of the mortgage industry, those who are just starting out will again be lured by easy mortgage money. Fannie Mae and Freddie Mac now have a lot of recent experience flipping homes from borrowers who defaulted.

In short, the seemingly laudable goal of encouraging homeownership could lead us down a path we already saw isn’t desirable. As the wise old financial guru Yogi Berra used to say, “It’s déjà vu all over again.”

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