How Govt. Meddling In Housing Markets Damages Neighborhoods
Vincent Carroll writes for the Denver Post of former state senator Steve Ward's attempt to buy a property in foreclosure, only to be thwarted by a government scheme to "stabilize" neighborhoods:
"The plan was to submit an offer as soon as the property hit the market," Ward told me. "I was working directly with the listing agent. When I called this morning, I was informed that the bank will make it available to a non-profit organizations first. By 'non-profit,' read some quasi-government entity like a housing authority."Now Ward was on a roll.
"If you want to stabilize prices in a neighborhood," he declared, "let things sell for what the market will allow. And sell to people who have a profit motive to see prices rise, helping all those who have been holding on ... waiting for their values to recover so they can sell, move up, or move on to another job in another place."
I've known Ward since way back when he was mayor of Glendale in the early 1990s, and he's as blunt and sardonic as a retired Marine colonel -- which, come to think of it, he is, too. But he also shares an appreciation of the absurd. And what he finds absurd today is government's continued intervention in housing markets that most of all just need it to back off so they can find their bottom and revive.
..."I bought a condo in 1986 for $51,000," Ward told me -- in other words, just before that decade's crash. "A year later a friend bought an identical place for $25,000. Ten years later I sold mine for $110,000."
Given time, markets work -- if, as Ward says, we "let the pony run."
via @ariarmstrong
I dont see the problem, everyone know loow income govt backed housing projects are the engine which makes a neighborhood safe, properous, and makes home values skyrocket, right?
lujlp at March 19, 2012 7:05 AM
If it's a bad investment now, according to the market, why is the government buying it with our money?
No wonder we're beyond broke.
MarkD at March 19, 2012 10:39 AM
Of course this guy is pissed off. He wants to pick up housing for rock bottom prices, so he has a vested interest in property values falling. Then the government comes in and throws a wrench in his plan.
But that doesn't mean that letting housing prices fall off a cliff is the best thing for our economy. I'm not saying it is or it isn't. But interviewing this guy about the situation is stupid because it presents an obvious conflict of interest.
Back in 2008 and 2009 I was playing the stock market and made a lot of money by shorting banks like Bank of America. I would have made a lot more money if the government had let the banks fail instead of freely lending them massive amounts of money in exchange for bascially worthless CDO's. Letting the banks fail certainly wouldn't have been the best thing for the economy, and probably would have pushed us into a recession. It would have been the best outcome for me though.
Mike Hunter at March 19, 2012 11:28 AM
But we're the government! We have to doooooo something!
Old RPM Daddy at March 19, 2012 12:59 PM
The problem with your argument is that the prices probably would not have fallen off a cliff if it wasn't for the fed being involved in the first place. They started out with Fannie/Freddie/FHA way back when. Then they had the CRA, then various loosening of the loan regs. I bet if you had some way to track the regulations to the prices of houses, you would have a direct correlation. And note that I do realize the difference between correlation and causation.
Now, instead of letting the market correct itself by staying out of it, they are putting another federal/state/quasi-governmental organization in the loop.
There really isn't a falling off the cliff. It is what someone is realistically willing to pay. The people who paid $200K for a 1200 Sq Ft house on a lot, I have little sympathy for. They were suckered, but at the same time no one forced them to sign that mortgage.
What needs to happen is the government to get out of the housing market. Actually the government needs to get out of every market.
Jim P. at March 19, 2012 7:56 PM
"The people who paid $200K for a 1200 Sq Ft house on a lot, I have little sympathy for. They were suckered, but at the same time no one forced them to sign that mortgage."
Hah, clearly you don't live in SoCal or San diego specifically. $200k for 1200sqft hasn't been a reality here for >15 years. I bought my 1200sqft (including the garage) home in 2001 for about $290k and even after the big drop its still worth about $350k today. It hit nearly $600k at one point there when the values were crazy high.
Miguelitosd at March 19, 2012 11:52 PM
I was throwing it out as the 25-30% of income idea. But if Fannie/Freddie/FHA wasn't in the mix, most banks would have looked at it and so no to this kind of shit loan. Because the banks knew 98% of the loans they made with no outright fraud would sell to fed, the banks went and made crap loans. This is the same argument for student loans and rising college tuition.
Jim P. at March 22, 2012 8:54 PM
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