Two weeks ago I published an article at TownHall.com stating that housing was ignored by both presidential candidates in the debates and on their campaigns. The economy cannot recover until housing recovers and neither has a chance to recover until the labor market recovers. They are inextricably intertwined.
My thoughts were, good, leave the market alone and allow it to recover without government interference. It was government social engineering, mandating lower lending guidelines that regulators enforced to make sure lenders were meeting quotas for loans to low income people instead of regulators enforcing prudent lending practices, combined with the Fed keeping interest rates too low for too long that led to the housing collapse and financial meltdown.
It was 100% government manipulation of the housing industry that caused the meltdown. Proving economist Milton Friedman correct again who said: “The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy.”
I was vehemently opposed to the Stimulus in general and more specifically the tax credits to buyers in 2009 and 2010 that I knew would not pull the economy or the housing market out of recession. All the Stimulus resulted in was a temporary boost in employment that added nearly a trillion dollars to our debt, and all the tax credit did was change the timing of buyers in the market. Housing crashed after the credits expired just like car sales when cash for clunkers expired.
Now this week comes disturbing news once again caused by mismanagement of the private economy by government. As described by the President of the National Association of Realtors Moe Veissi a perfect storm of regulation is about to hit housing just when momentum is building. If allowed to proceed housing sales will decline.
Included in the leviathan financial reform law Dodd-Frank came the Consumer Financial Protection Bureau (CFPB) that purportedly will prevent another housing bubble. What this board is proposing will certainly prevent a housing bubble because it is promoting the unintended consequence of another housing collapse.
The board is writing a new rule called the quality mortgage rule which will tighten lending guidelines further. Dodd Frank has caused lenders to deny many credit worthy buyers loans already. This new rule will exacerbate the situation.
In an open letter to President Obama and Governor Romney CEO and Founder of RE/MAX David Liniger shared this: