â€¦ I don’t see â€œbecome a landlordâ€ anywhere the the federal government’s enumerated powers.
Until the Federal Government stops trying to â€œfixâ€ the housing market, recovery is going to be delayed. EVERYTHING they do injects uncertainty, fear, concern and uncertainty into the economy and housing market.
This stuff matters to the Charlottesville real estate economy, not so much because we have a vast backlog of foreclosures (I don’t think it’s vast) but because the housing economy, driven my national policies and lending and processes – real estate titling, real estate financing, robosigning, consumer sentiment is national. The national “# of home sales” are mostly irrelevant, but the systems are national.
But what do I know?
The Fed also suggests having Fan and Fred weaken their standards for loan modifications and expand an existing refinancing program to include private-insurance-backed mortgages participate. But weak lending standards is part of what created the subprime mortgage mess. No wonder the mortgage bankers, the homebuilders and the rest of the housing lobby greeted the Fed’s white paper with enthusiasm. They’d love to see Fannie and Freddie more politically and economically entrenched so reformers can’t slowly reduce their market dominance.
The Fed will no doubt justify all of this by claiming that the larger economy can’t recover until housing does. Yet this confuses cause and effect. Housing recoveries don’t lead economic recoveries; they occur as part of the larger recovery as incomes begin to rise and consumer confidence grows. It’s precisely this “housing must save the day” mentality that caused the Fed to keep interest rates too low for too long after the dot-com bust and 9/11. This promoted the housing bubble and led to the mania and crash. By force-feeding a housing recovery, the Fed is misallocating resources that will make the expansion less durable.
Despite its efforts to muster data, this Fed is badly blinkered by the fact that it operates inside a club. Anyone who has done research in areas where the data stinks (and it does in the housing arena) will tell you you have to do primary research, but economists are allergic to that (Nobel prize winner Wassily Leontief found that less than 0.5% of the articles published in top economics journals were based on data developed by the authors). The Fed is unduly influenced by the view of people who are part of the problem, and it shows in this paper.