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- Banks Turn Wary of Congress-Controlled Mortgage Backers (BOFI, FMCC, FNMA, JPM, WFC)
Recently, lenders have turned away from conforming loans — loans that qualify for sale to Fannie and Freddie — to cash in on jumbo borrowers. Here’s why.
- When Too Much Housing is Bad for Our Health – naked capitalism
The case against pushing home ownership as a governmental policy:
Yves here. It’s intriguing that “our economic model is based too much on the housing market” is becoming a meme a mere six years after housing bubbles in most advanced economics were a major driver of the global financial crisis. Apparently, the fact that heroic efforts by the officialdom to restore the status quo ante via aggressive efforts to prop up the real estate prices (well, at least in the US, Spain and Ireland have gotten the Mellonite treatment instead) have instead produced zombie banks and a significantly-ZIRP-QE dependent housing recovery have finally led to some long overdue skepticism.
Of course, a big reason housing served as a driver of growth was not just the direct impact of homebuilding. Housing is the foundation of a consumer-oriented society. Bigger houses, after all, require owning more stuff to fill all that space. But the reason the housing-oriented economic model hasn’t been displaced is that numerous constituencies support it. There’s a large group of usual suspects: the “affordable housing” coalition (which ultimately produces less affordable housing by relying on financial subsidies, which raise asset prices), banks, realtors, homebuilders. But there’s also an even older political tradition of using housing as a vehicle for social engineering. Bush’s “ownership society” was that old wine in a new bottle. Right-wing and moderate political leaders felt homeownership was valuable because it would create stable communities and encourage conservative values. The fact that young people, who are finding it hard to secure stable, decently paid employment and buy houses, are polling decidedly left-wing on economic issues, says that the corprocrat’s neglect of the basic duty of capitalism, to generate employment, is going to bite them in the ass, although it may take another five to ten years for this generational shift to change political and economic priorities.
Could Realtors and builders do just as well without the government pushing ownership? Could they allow the market to decide? Could they focus on both buyers and renters? Could the builders build for owners but also for renters? They do. They would simply do more of it. Just how much more would remain to be seen. Is it a left v. right issue? Well, there’s the “classical liberal” “conservative,” as many libertarian capitalists like to define themselves. Are they right or left of George W. Bush’s administration on this issue?
We’d rather simply focus on governmental policies that don’t exaggerate what’s termed the business cycle, in this case, the cyclicality of the housing market.
Read the source article … https://www.nakedcapitalism.com/2013/09/ when-too-much-housing-is-bad-for-our-hea lth.html
- New-home statistics may be generating a false signal | Inman News
Yesterday [Sept. 19, 2013] we learned from the U.S. Commerce Department that the pace of construction of single-family homes increased in August and building permits for new homes hit a five-year high. This data was trumpeted as evidence of “continued resilience in the housing market recovery.”
I am not convinced. New-home starts are still far below their historic norms because the total demand for homes is not robust, as wage and job growth are nonexistent, and in the words and recent actions of Federal Reserve Chairman Ben Bernanke, the economy is weak and would tank if interest rates were higher.
If the economy would tank right now if the Fed were to allow interest rates to rise too much too soon, then so what? If the Fed is prepared to wait for its efforts to lift the economy out of the trench while it matches its tapering to that lifting (meaning without sending the economy down again), then it is irrelevant that the economy would tank right now without the QE as an argument against such QE.
It is our reading of Ben Bernanke and the other Fed governors, sans Esther George, that they have no intention of letting QE get away from them in either direction: bust or irrational boom.
Whether they will remain collectively steady hands is a question, but austerity certainly would not be the right medicine under any circumstances.
Read the source article … https://www.inman.com/2013/09/20/new-hom e-statistics-may-be-generating-a-false-s ignal/
- Economist’s View: Fed Watch: Further Post-Mortem
We disagree with the linked article but only somewhat, not wholesale. If you read the article by Tim Duy, and we suggest you do, you will see that the emphasis is placed upon that the Fed should not have made its taper talk when it did. Where we differ is that it is not that it shouldn’t have said anything but that it should have said that it was testing forward guidance and fully expects that if it doesn’t explain that, that the economy will actually tighten (which it did). In other words, the Fed did not finesse the situation.
Ben Bernanke was right that most people, including most so-called experts, didn’t listen well. Where Ben was wrong was in that he didn’t do a good enough job anticipating the possible negatives absent educating the public and those “experts” on the new forward guidance (that can be a meat axe or a small and fine scalpel, as needed in the right, careful, skillful hands).
Read the source article … https://economistsview.typepad.com/econo mistsview/2013/09/fed-watch-further-post -mortem.html