Maybe falling homeownership isn't so bad
It's now at an 18-year low, reversing President George W. Bush's push to boost 'the American Dream.' Too bad it was a nightmare for millions of people.
When former President George W. Bush was in the White House, he pushed homeownership to Americans, noting that "part of economic security is owning your own home."
While his economic policies helped boost homeownership to a record high of 69.2% in 2004, many people also pointed to the push as feeding the housing bubble.
That's one reason the dip in homeownership, which is approaching an 18-year low, might not be such a bad trend. Homeownership in the second quarter stood near 65%, the lowest since 1995, Reuters reports, citing data from the Commerce Department.
Yet some people in the housing industry are pushing for new mortgage standards that may broaden the pool of potential homeowners, Bloomberg reports.
Regulators are preparing a weaker version of a proposal that would require mortgage lenders to maintain a financial interest in risky loans, Bloomberg notes. That's something the National Association of Realtors supports, telling the publication the plan would "benefit the American people by ensuring access to safe, affordable options for buying a home."
The regulation in question would apply to the Qualified Residential Mortgage Rule, which included an earlier proposal that would have required banks to keep a stake in mortgages issued to homeowners who spend more than 36% of their income on debt and invested a smaller than 20% down payment, Bloomberg notes. The less stringent proposal would change that to borrowers spending 43% of their income on debt.
"Low-down-payment loans coupled with exotic adjustable rate mortgages helped fuel a massive housing bubble, which ultimately burst and took down the financial sector," George Mason University professor Anthony Sanders told the news service. "So the question now is do we want to do this again."
While it's not clear whether the proposal for the QRM would boost homeownership among people who are unable to support the costs of a home, the fact is that buying a house can reduce an individual's financial flexibility. For many folks, that's not always the right decision.
The "cult" of homeownership is "dangerous and damaging," Adam Posen argued Friday in the Financial Times. Posen, the president of the Peterson Institute for International Economics, wrote that economic policies create incentives for "middle-class households to leverage the bulk of their savings into a highly volatile, difficult to price asset."
Still, with mortgage rates rising and U.S. home prices spiking 12.2% in May, many renters may simply find themselves unable to buy, regardless of whether mortgage standards are relaxed.
Follow Aimee Picchi on Twitter at @aimeepicchi.
The National Association of Realtors has their part in the bubble.. and of course they would want to support anything that would make it easier for them to sell homes. THEY DONT CARE if someone can afford the home and ends up in foreclosure, their realtors get there cut regardless. If it goes into foreclosure, just another chance for them to make a buck.
This QRM is the dumbest thing I ever heard of. The banks ALREADY have a stake I the mortgage -it's called the DEED! If the bank loans $200K for a property later worth $180K and the mortgagee defauts -the bank realizes it's stake by getting an undervalued, often vandalized piece of property back.
Under the Obama administration, we have been trying to pass ALL of the responsibility onto the bank (or US taxpayers) and NONE onto the homeowner that bit off more than he could chew.
Buying a home is a good if you can afford it without being in the financial bind.
The equity builds, fix the house to suit your taste, leave it to children or sell it and buy
condo in old age.
You can rent for 10 years, pack and leave and there is nothing to show for it.
As an example if the rent is $1,500/month,the total payment over 10 year period
( assuming no rent hikes) will be $180,000. You move out, there is nothing to show for
this large amount of money paid. With equity build up, there is money for down payment
for a larger or nicer house.
There is no tax deduction for rent as our laws favor ownership.You can't fix it to your liking.
Rent goes up every year.
Bill Clinton still stands as my favorite President but the fact is financial de-regulation grabbed footing in 1998 with the repeal of Glass-Steagall among other Great Depression era rules that got wiped out from 1997-1999. This all led to financial institutions that were too big to fail. Oh, and the same lawmakers(Dodd-Frank) were at wheel during this time too but somehow were smart enough to not simply reinstate those old laws but rather re-write the entire freakin rule book.
Strange this article could be a little hard to comment on;
Also how some Bush lickers...Will come out of the blocks defending..
Really that part seem to be more about the Financial World and how it fell apart by not letting the Regulators do what they were supposed to do...And no doubt tighter controls should have been in place on Mortgage Lending.
Many shyster Realtors and Banksters in on the deals, allowing it to run amok.
And then on top of all, buyers way over extending themselves on euphoria.
Putting blame on the Bushes, Clintons or Obamas of the World, may only be a scapegoat and somewhat lame..
This has been a drive since WW2 or Korea to help build a Middle Class and wealth in America..
Situations arose in the 50s, 70s and 90s-2000s and in this last particular instance, it caught up with us big time...And was a contributing factor in bringing everything else down with it.
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