As I predicted when the global housing market collapse in 2008 dragged us all into a depression that despite the left and their lackeys in the LSM’s 6+ year campaign to convince us was ended still is going on, we are right back where we started. That collapse, which the left desperately wants to blame on “evil profiteering by Korporashuns”, all while giving the political class that set up this disastrous framework that allowed this crisis to come about a pass, was yet another in a long string of evidence that you ignore the laws of nature, economics, and reality at your own peril. Irresponsible people, be they the homeowners, the money lenders, or the politicians scheming, will keep making irresponsible and bad decisions, and no amount of “law making” will curb that.
When Dodd and Frank, the architects of the framework that precipitated this economic collapse, demanded they be allowed to “fix it”, I pointed out that the left not only learned the wrong lesson from this terrible debacle that burned up trillions of dollars of wealth, cost the US tax payer a few trillion so the government could fulfil it’s side of the Faustian bargain it made with the “Too big to fail” to get them to go along with their idiotic plans, and ravaged the middleclass and the world’s economy, but that it would double down on the stupid that caused it. I pointed out that there would not only not be any real attempts to address and prevent a repeat of the problem, but that sooner than later these idiot leftists would be back to pushing the same idiotic ideas and follow on politics that caused the problem in the first place. And we are there yet again!
For the majority of American homeowners, their house is their single largest asset. Despite the crash in home values in the last decade, that still holds true.
That crash, however, created a much larger share of renters, and these Americans are not enjoying the new wealth that now-rising home prices afford. Ninety percent of metropolitan housing markets have seen a decline in their homeownership rates, while home values are rising and incomes are flat, and that is widening the wealth gap, according to a new study by the National Association of Realtors, which looked at homeownership, home values and income growth from 2000 to 2013
“Homeownership plays a pivotal role in the U.S. economy and has historically been one of the primary sources of wealth accumulation for middle-class families,” said Lawrence Yun, chief economist for the Realtors.
“Unfortunately, due to an underperforming labor market, insufficient housing supply and overly stringent underwriting standards since the recession, homeownership has plunged to a rate not seen in over two decades,” Yun added. “As a result, the country has become more unequal as the number of homeowners has fallen while the number of renters has significantly risen.”
The argument being made, again in a vacuum, is that homeownership helps people build wealth, while renting doesn’t. So the logical conclusion by the people that continue to misinterpret the Constitution’s premise that we should all have “Equality of opportunity” to mean “Equality of outcome”, is to rig the game to make more of that happen. See, this time they will get it right and make rules that not only will encourage lenders to make loans to people that because that have proven to be bad risks, but magically will make those bad risk people and lenders suddenly become good stewards of this undeserved rewards. Somehow they will find a way that doesn’t defy the laws of economics and human nature, and get lenders not to charge higher interests on riskier loans. At the same time they will make people that are prone to bad decisions when they chase instant gratification suddenly stop doing just that and become responsible citizens well aware of the privilege they have had bestowed on them,
Here is the problem that these SJW seem to either be unable to grasp or simply want to ignore: the majority of people, with that number going up every day, looking at a world where some 50 years of progressive social engineering has created a system where perverse incentives actually encourage bad decisions and behavior, simply will never be disciplined enough to own a home. In fact, the argument has successfully been made – by the very crisis we saw in 2008 – that making homeownership easier will actually result in people having less of a reason to buy what they can actually afford and to then when they buy a home, pay it off as well. Wishful thinking will not change that reality.
Homeownership is actually a privilege and reward, earned by those that show the needed discipline to save the money needed for the down payment and setting up the track record of steadfastly adhering to sound economic principles. Sound decision making and savings, especially when done in an economic environment where government has so muddled and undermined these practices with insane and perverse incentives that reward bad behavior and actually levies penalties in the form of taxation on doing the right things, is not something you can ignore in this equation. When you ignore that reality and simply jump to the conclusion that what you need to push is more home ownership to give people an opportunity to build wealth, you basically set us all up for another costly and devastating round of failures.
Lenders, especially those that paid attention to the last cycle, should resist coercion pushing them to make loans that will eventually kill them without building in some mechanism to guarantee their survival. This means that government will again need to allow them to create higher interest vehicles to mitigate the risk and then back that up with promises of tax payer funded bailouts when the inevitable collapse happens. The bulk of the people likely to step up when we start pushing this stuff again will be those that already proved they shouldn’t be put in a position where their irresponsibility and lack of discipline will leave them holding the bag for a financial debt that shouldn’t have ever been placed on them. Games will be played to hide the inevitable cycle of bad loans made (like the bundled Freddie Mac and Fannie Mae subprime CDS) by these lenders to high risk people. And sooner than later we will see a repeat of the collapse as the whole house of cards comes tumbling down.
But they mean well, so the fault is everybody else’s but theirs…