EnduringSense

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Posts Tagged ‘Homes’

Tea Party: Radical or Principled

Posted by Steve Markowitz on October 18, 2013

You got to give it to the Left’s ability to create the narrative (propaganda) within the media.  Along with President Obama, the Left has painted Republicans as obstructionist, while at the same time created the narrative that they are bipartisan.  How preposterous.  Neither side (party) is bipartisan nor should they be.  Political parties are created to support a political view(s).  If Americans were indeed bipartisan there would be no need for multiple parties.

The word “bipartisan” is bantered around often by the Left and its allies in the media.  This Blog proffers the view that bipartisanship inhibits the advancement of societal growth.  Imagine if bipartisanship prevailed between Lincoln, Republicans and the proslavery Democrats prior to the US Civil War. The North would have allowed the South to continue the use of slaves.  How about if prior entering World War II bipartisanship was used to satisfy the demands of isolationists?

Perhaps the best example of the failure of bipartisanship is the United Nations.  It is so much easier to list its failures that its accomplishments.

One of the more outrageous and disingenuous claims of the Left is that the Tea Party is radical.  If true then these Leftists must also believe that our Founding Fathers and the Constitution are radical.  Main themes of the Tea Party include fiscal conservatism and smaller government.  To paint these visions as radical is a horrifying aspect of how far this Country has descended into creeping socialism.

A recent exchange on CNN between, video below, started when reporter Michael Holmes called the Tea Party “radicals”.  CNN’s Jim Acosta appropriately responded: “Well, Michael, I mean, first of all, let’s be careful about using the term ‘radical,’ because a lot of those folks feel like they’re standing on principle today, even though they didn’t come out on top in this.”  It is obvious that Leftists believe that one must agree with their Progressive policies to be principled.  What a convenient way to stop open debate.

Posted in Tea Party | Tagged: , , , , , | Leave a Comment »

Federal Housing Administration to Run Out of Reserves in 2012

Posted by Steve Markowitz on February 14, 2012

The Wall Street Journal reported that the Federal Housing Administration (FHA) will run out of reserves this year for the first time in its 78 year history.  Since the FHA has budget authority, it can go directly to the U.S. Treasury for funds without making a request of the Congress.  This is another example of government spending of the People’s money without Constitutional authority.

The FHA was established by the US government during the 1930’s to help facilitate homeownership in America.  This agency does not make housing loans, but instead insures lenders who make them.  Since the housing meltdown, the FHA has had its charter substantially expanded, insuring borrowers who only can afford down payments of even less than 5%.  While this type of intervention may have initially propped up the housing market in recent years, its easy and risky mortgages is cajoling buyers into making an economic decisions.  Specifically, it offers incentives to low-income buyers to purchase homes that are likely to continue depreciating some years.  This not only puts at risk the FHA’s (the People’s) money, but the underwater houses are a long-term financial burden for buyers.

Instead of recognizing the growing problem at  the FHA, President Obama is again attempting to expanded its charter.  Earlier this year the President proposed allowing underwater homeowners to refinance their mortgages through the FHA.  This will place additional risks on the taxpayers since many of the refinanced homes will continue dropping in value with their mortgages ultimately becoming the responsibility of the U.S. Treasury.

People who cannot afford to pay their mortgages and whose home values are significantly underwater need to get out from under this financial burden and that will only occur by walking away from the homes, as distasteful as this is.  The banks and government agencies that made the inappropriate loans need to eat those losses now so that the housing market can bottom and a true recovery can began.  These losses to the banks and government agencies will also be a strong incentive to not repeat similar errors in the future.  It also ensures that those that made the bad loans pay the price, not the bulk of Americans who stayed clear of imprudent financial behavior.

The problem with the housing market is an imbalance between supply and demand.  Any government intervention merely prolongs the downturn as they do not address the imbalances.  In fact they end up creating even more imbalances.  Adding insult to injury, the FHA has become an important player in the mortgage and housing markets in recent years.  When this agency ultimately retrenches in the housing market, as it ultimately must, its negative consequences on the economy will be huge, likely requiring an even large bailouts.

The FHA is another example of a failing governmental agency.  While many private companies run into economic challenges and some even fail, their failure should be viewed as the market’s cleansing of inefficiency.  While such occurrences are unhappy for the failed companies’ owners and employees, it is a healthy process for the overall economy.  This reality was understood by Americans until we started down the slippery slope of bailouts that began before the Obama came to power.  With these bailouts increasing in frequency and scope, it is easy to see that the path is unsustainable.  However, like an addictive drug, stopping the juice is a painful process and politicians are willing to offer the medicine.  The patient will have to get a lot sicker before appropriate treatment will be implemented.  That day of reckoning is coming.

Posted in Bailouts, Housing Market | Tagged: , , , , | Leave a Comment »

Home Buyers Required to have More Mortgage Down Money

Posted by Steve Markowitz on February 19, 2011

Commercial banks are requiring home buyers to come up with more down money for mortgages.  This is a natural result of a marketplace that got out of balance during the housing bubble.

The Wall Street Journal reported that the median down payment has risen from a mere 4% in 2006 to 22% on conventional mortgages, similar to what was required in the more sane times of the mid 1990’s.  While this increase will continue to depress hosing prices with fewer people able to obtain mortgages, it will stop another housing bubble from occurring.  It will also bring supply and demand for homes back into balance.  Finally, it will help insure that banks get repaid on mortgages made, a novel concept.

The federal government has had a schizophrenic reaction to the more rational behavior of the mortgage markets.  The Obama administration last week indicated that it will seek to raise the minimum mortgage down payments to 10% on conventional loans backed by Fannie Mae and Freddie Mac.  However, private lenders are already ahead of this curve.  At the same time the federal government offers loopholes for mortgages obtained through agencies such as the Federal Housing Administration (FHA), requiring only 3.5% up front.  The FHA makes up half of today’s home mortgages.

The government used the housing bubble to heat up the American economy to 2006 at the expense of our economy today.  By promoting cheap mortgages with low down money, as well as home ownership to those that could not afford them, they artificially increased home values.  These increased values were then used by home owners to use phantom equity to barrow and ultimately spend more than they could afford.  The financial meltdown and ongoing economic challenges are prices we continue to pay for these bad polices.

Private greed played a role in creating the housing bubble and resulting financial meltdown.  However, this greed could not have been acted upon at the level reached without the government’s intervention into the mortgage markets.  Should the government continue intervening in the housing market in the name of lessening the public’s pain, future economic imbalances will be just as catastrophic as those that resulted from its previous interventions.

Posted in Governmental Intervention, Supply and Demand | Tagged: , , , , , , , , , | Leave a Comment »

Super Rich Do Well in Bailout Nation

Posted by Steve Markowitz on September 24, 2010

NPR (National Public Radio) this week reported that the super rich fared pretty well during the past year.  This group was defined as including those that made the Fortune 400 List, the 400 wealthiest Americans.  As a group they gained 8% during a year while that most America didn’t do nearly as well.  This has increased the gap between the very wealthy and poor to the largest percentage since the Roaring ‘20s.

Typical of Left-leaning NPR, they throw out facts that Americans may find disturbing, but don’t dig into the reasons behind them.  Taking the study to this next logical level just might take the NPR audience to conclusions that the producers don’t want them to go.

It can be argued that the massive government bailouts are the primary reason for the increased inequity between wealthy and poor.  While politicians sold the Country on the bailouts based on the threat that without them worse calamities would occur, the results paint a different picture.  By most metrics the economy remains mired in systemic problems with unemployment reaming high.  But that has not stopped the super-rich from doing well.  So, who did the bailouts really help?

Government bailouts come in many forms.  The obvious ones are those to the banks and auto makers.  But there have been many more, some disguised that continue to this day.  This includes the “quantitative easy” by the Fed (Federal Reserve).  With quantitative easy, the Fed in essence prints money to purchase various forms of debt.   This has included $175 billion of Fannie Mae and Freddie Mac debt, $300 billion in U.S. Treasuries and $1.25 Trillion in mortgage backed securities since November 2008, for the purported purpose of pumping up the housing market and industry.  Let’s review the results of the Fed’s actions for the housing market, figures courtesy of Money and Markets published by Weiss Research, Inc.  All numbers are annualized.

  • In November 2008, housing starts were 652,000.  In August 2010, it was 598,000, an 8.3% decrease.
  • In November 2008, builders were selling 389,000 homes.  In July 2010, they sold 276,000, a 29% decrease.
  • In November 2008, 4.53 million existing homes changed hands  and 4.13 million in August 2010, a 8.8% decrease
  • In November 2008, the Case-Shiller 20-city home price index was 154.50.  The most recent figure, June 2010, was 147.97, a 4.2% decrease.

Read the rest of this entry »

Posted in Bailouts, economy, Governmental Intervention | Tagged: , , , , , , , , , , , , , , , , | Leave a Comment »

Homebuilder Confidence Drops; Another Sign of Failed Obamaomcis

Posted by Steve Markowitz on August 16, 2010

The Associated Press reported that homebuilder confidence dropped for the third straight month, falling to its lowest level since March 2009.  The reasons cited by builders for the drop is ongoing home foreclosures that has created excess supply of homes, as well as the expiration of the $8,000 federal tax credit.

The drop in homebuilder confidence is another indicator of the failure of Obama economic policy.  These programs have mistakenly relied on stimulus and bailouts from the federal government to fix an economy that is burdened by excessive debt.  The government’s stimulus further increases that debt and disrupts markets that need to have supply and demand brought into balance.  Kicking the can down the road has not worked and will not work with additional efforts.

For nearly two years President Obama has blamed George Bush for the economic mess that he inherited.  While that excuse had validity during the first year of his presidency, that dog no longer hunts.  The constant interventions by the government into the economy have worsened the problem, not improved it.  Continuing down that same failed course will not lead to better results in the months to come.

Posted in economics, Housing Market, President Obama | Tagged: , , , , , | Leave a Comment »