Let’s be clear: The housing industry is one of the most regulated and manipulated sectors of the economy. The seeds of the financial meltdown were planted by social engineering by liberals in the Clinton administration, mandating loans by quota based upon income instead of prudent lending standards.
It became so bad that when the current anti-gun zealot Governor Cuomo of New York as head of HUD under Clinton ordered welfare and unemployment be counted as ‘income’ to qualify for a mortgage. The goal of home ownership by all Americans meant radical changes to prudent lending practices had to be made.
To accomplish this manipulation of the housing market the government masters ordered Fannie Mae and Freddie Mac to buy these questionable loans. Printing money by the Federal Reserve to buy these mortgages wasn’t the practice of the day. Instead packaging bundles of these mortgages to sell to Wall Street firms, national, and international banks to keep the money mill churning was the practice of the day.
We all know how that ended. But let us give the Federal Reserve under Greenspan an assist for lowering interest rates which added fuel to the fire of rising home prices. Real estate has and always will be a supply and demand commodity. The social engineers increasing demand through lowered lending standards combined with cheap money kept the scheme alive.
As long as prices were rising the scheme worked. This led to more problems when millions of families treated their homes as piggy banks by tapping what they perceived was real money. Refinancing at low rates and pulling cash out to get that boat, or take that lavish vacation became the norm. The result? Ask any of the 25% of homeowners who remain under water on their mortgage.
What do we have today? A Federal Reserve Chairman Bernanke who attempts to implement fiscal policy when his job is monetary policy. Guess Bernanke is trying to save the nation from the economic disaster of the Obama’s administration’s leviathan laws, taxation, over-regulation, and disastrous deficit spending.
Regardless Bernanke is making the same mistake as Greenspan, lowering rates for too long in an attempt to manufacture demand. It worked in 2012. American’s aren’t stupid, they refinanced in record numbers, however this time not to pull out cash, to lower payments or reduce the term of their mortgage. Those desiring to change homes sensed the historic opportunity.
Combining record low rates with banks withholding millions of foreclosures to keep inventory low and prices naturally went up. They have risen to only 2003 levels however the media would have you believe happy days are here again. What these prices represent to me is a manipulated price bubble that is not real. Any shock to the system and down they will go.
An organic recovery driven by demand emanating from real job growth adding qualified buyers to the market has not happened. We have an Obama administration that touts job growth so anemic it doesn’t keep up with new entrants into the labor force. The sycophants in the media either willingly repeat the story or are incompetent.
The best example was how the media reported the surging housing market because of new home sales. Rising from 309,000 in 2011 to 367,000 in 2012 was all the evidence they needed. Wow what an increase, housing must be surging!
Had these journalists the investigative curiosity of a three year old they would learn that 367,000 new home sales are 74% below the peak, 50% below healthy or average, and the same number as in 1967 when there were only 200 million Americans.
Is the housing market advancing in the right direction? Absolutely, but as with the Clinton administration’s social engineering, the advancing housing market today is predicated upon manipulation.
This time by the Federal reserve’s $45 billion monthly purchase of mortgage backed securities, zero interest rate policy, and manipulation of inventory by big banks.
The housing recovery is not due to organic demand because of an improving economy. It is a human reaction to the actions of government manipulators, similar to the tax credits in 2009 to buy a home providing a temporary bump in sales. Worse is the recovery being reported as real by a liberally biased, and incompetent media.
The opinions expressed here are solely those of Fritz Pfister or identified sources, and not necessarily those of RE/MAX Professionals of Springfield or RE/MAX International.
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