What Triggered This Whole Seize-Up
Readers suggested a topic on the election. “Will the housing market impact of next week’s election outcome be major, minor or inconsequential? For instance, if Obama wins, will he stay the course on recent interventions? If Romney wins, will there be any significant policy changes?”
I said, “I see reports asking why the candidates aren’t talking about housing. But there are some big issues: the fate of Fannie and Freddie. Bernanke’s role at the Fed and the QE/zero interest rate policy. A lot gets said about the jobs/economy, right? But how huge is this idea that the central bank has that housing prices will save the economy? Shouldn’t that get a lot of attention in an election?”
A reply, “I think that no one is talking about housing for the same reason they’re not talking about illegal immigration. It’s just too fraught an issue to bring up during the campaign. But AFTER the election? That’s going to get interesting.”
One had this, “Who is Obama’s man at the Federal Reserve? Bernanke. Romney says Bernanke is GONE. And good riddance. A huge difference. There are major differences in ideologies. Obama: everything should be done by more government agencies, and more government debt and spending. Romney: cut back on government agencies. Stop putting the taxpayer on the hook for stupid lending ideologies of Fannie and Freddie.”
A reply, “So who is Romney going to put in charge of the Fed? Someone who will inflict austerity on the banks by slamming the bars on the Discount Window, casting AIG adrift, and sinking the QE? I think not…”
Another asked, “So, Japan has had ZIRP for 20-some years. However, IIRC, they typically run in a mild deflationary environment. Here, we’ve had ZIRP for about four years now. And we run in around a 2% inflation environment, at least (excluding the necessities - food, housing/rent, medical, education, energy, and even it seems to me, clothes).”
“How long will the populace, and the 800 lb silverback in the room - seniors - accept this level of wealth erosion?”
Finally, “I personally think that the prior 4 years were masked somewhat through the recovery in the stock market. If we have 4 years of stagnant stock market, ZIRP, and 2%+ inflation, we will see a big shift in sentiment toward a candidate who runs on a ‘fix the deficit’ platform.’”
The Atlantic. “As hard as Florida’s swing against Obama seemed, there were actually just two counties in the state that went from voting for him to voting for Republican Gov. Rick Scott: Volusia, which contains Daytona Beach, and Flagler, its neighbor to the north. Driving down the main streets here, it’s not hard to see why. It’s still the tail end of tourist season but so much is closed for good. Restaurants boarded up. Dilapidated motels. A former car dealership; a furniture store in the last throes of a going-out-of-business sale. When people aren’t buying houses, they don’t buy much new furniture.”
“The median home price, which peaked in 2006 at $175,000 and now is less than $80,000 and still declining. Even as the rate of foreclosure has slackened in most parts of the country, in Florida, it’s double the national average and rising. The unemployment rate, 8.7 percent, is 13th highest in the country. The growth that powered the state’s economy in the boom years — jobs in tourism and construction and real estate, along with a no-income tax policy — was essentially a Ponzi scheme that collapsed, leaving everyone holding the bag.”
“Many economists argue that the Obama administration’s failure to act more aggressively on housing is the No. 1 reason the recovery has not been quicker or more complete. Obama himself in a recent interview called the effort on housing ‘modest,’ in the course of attacking Romney for having said he would do even less. And so in Florida, on the central economic issue the state faces, Obama finds himself with nothing much to sell.”
“‘I voted for Obama. Everything sounded so lovely. We needed a change,’ said William Archiello, a 55-year-old van-service owner who votes in Florida but still spends half the year in his native New Jersey. ‘He fooled me.’ Archiello sees evidence all around that things have never been worse. ‘Every three days, someone knocks on my door — ‘Can I clean your pool? Can I cut your palm trees?’ he said. ‘I own four rental properties — that was my retirement. Now the value is down 65 or 70 percent and I can’t retire. I’ll be working until it bounces back.’”
“And then there was Debbie Clark, a 58-year-old retired paralegal. ‘I think Romney is a puppet, an idiot, not up to date,’ she said. ‘He’s so out of touch with the 21st Century.’ She voted for Obama four years ago and was determined to do so again.”
From Cincinnati.com. “The costs of the housing crisis remain steep in Greater Cincinnati and across the nation, yet the presidential candidates barely touch on the topic. ‘I find it absolutely remarkable,’ said Bill Faith, executive director of the Coalition on Homelessness and Housing in Ohio. ‘If you look at what triggered this whole financial market seize-up, it was housing.’”
“Since 2006, Greater Cincinnati homeowners have joined families nationwide who’ve lost $7 trillion in home equity. One in four local families – 111,397 in all – are ‘under water’ on their mortgages. That cripples their ability to refinance at today’s historically low rates or sell their homes, leaving them vulnerable to foreclosure if their finances take a downturn.”
“With all this at stake, then, why isn’t more being said on the campaign trail – especially in Ohio, a key swing state? Obama’s recent speeches in Ohio suggest housing is not top-of-mind for him. He talks about the automakers’ bailout. He talks about struggling middle-class families’ search for jobs and their tax burden. But the literal roof over those families’ heads? Not so much.”
“Obama’s Republican challenger hasn’t taken up the cause of struggling homeowners, either. In fact, Romney had this to say during his primary campaign: ‘Don’t try and stop the foreclosure process. Let it run its course and hit the bottom. Allow investors to buy homes, put renters in them, fix the homes up, and let it turn around and come back up.’”
“Romney recently released a white paper on housing that includes a two-page plan. It says he will reform Fannie Mae and Freddie Mac, which guarantee most home loans, and ‘bring clarity’ to foreclosure alternatives. Details are nonexistent. The plan says that putting people back to work is the best solution to the housing crisis.”
“Roger Davis of Fairfield, a retired police officer, is one of millions of Americans looking for answers. He has pinched pennies to keep up payments on the house he and his wife bought five years ago. Their home has lost so much value in the years since that the family is now underwater. Davis is disgusted that his bank hasn’t met him halfway by allowing him to refinance. ‘People are walking away from their homes – we’re not doing that, and we’re getting penalized,’ Davis said. ‘We’re trying to be good Americans.’”
“Shaun Bond, director of the University of Cincinnati’s Real Estate Center, said banks are in the business of making a profit. He and others point out that there’s a question of ‘moral hazard’: Writing down the principal would reward those who bought more house than they could afford.”
“Even some underwater homeowners agree government shouldn’t be in the business of bailing them out. Allan and Jody Hensley of Sharonville, who married two years ago, are trying to sell her former house in Price Hill. Even though they’re going to take a loss on it, Allan Hensley wants only one thing from the politicians: ‘I think the biggest solution is to get this economy turned around.’”
