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In Obama's Second Term, What Will Happen to the Housing Market?
Townhall.com ^ | November 19, 2012 | Mark Calabria

Posted on 11/19/2012 7:24:16 AM PST by Kaslin

The most glaring absence during the hard-fought campaign between President Barack Obama and Mitt Romney was any offer of substance regarding the housing market. It was, after all, a housing bubble-driven financial crisis that helped propel Obama to victory in 2008 and recent improvements in the housing market that perhaps helped secure his re-election Tuesday night. So housing policy was always there, even if only in the background. What does the next four years likely hold for the housing market?

Well, Obama's victory means that Federal Reserve Chairman Ben Bernanke will keep his job, at least until the end of his term in 2014. That means the Fed's policy to hold interest rates at record lows will continue. While mortgage spreads over Treasuries have been elevated, mortgages overall will likely hover near historic lows over the next year, providing some upward pressure on housing prices.Regardless of who the election winner is, the primary driver of housing policy will be the housing market. With home prices recovering in many areas and foreclosures on a slow but steady decline— due in part to rising prices and an improving labor market — Obama is likely not to introduce new foreclosure prevention programs in his second term. With Republicans maintaining their control of the House, legislative efforts to force broad-based reductions in underwater mortgage balances are essentially dead. While re-tools of Obama's signature HAMP and HARP programs are likely, those will be modest. In many ways, I believe the White House is eager to put the foreclosure crisis behind them and move on. .author_pub2 a { float:right; margin: 10px 0 8px 8px; display:block; height: 142px; width: 110px; background: url(/people/pub_photos/calabria.jpg) no-repeat -110px 0; } .author_pub2a a { float:right; margin: 10px 0 8px 8px; display:block; height: 142px; width: 110px; background: url(/people/pub_photos/calabria.jpg) no-repeat 0 0; }

Mark A. Calabria is director of financial regulation studies at the Cato Institute.

More by Mark A. Calabria

With Obama's victory and modest Democrat gains in the Senate, the president will likely renew attempts to put in place key appointments. Among those are replacing Ed DeMarco, the Federal Housing Finance Agency's acting director. Not only will this appointment influence the modifications efforts (or lack thereof) of Fannie Mae and Freddie Mac, but it will also give the administration a larger voice in Congressional debates over the future of the government-backed mortgage giants. Given the significant differences between House Republicans, Senate Democrats and the White House on reform of Fannie and Freddie, both companies will likely still be in their conservatorship limbo at the end of Obama's second term.

The Senate is also likely to act on a permanent housing commissioner to administer the Federal Housing Administration. Such an appointment will become all the more critical, as, in my opinion, FHA will require some amount of taxpayer assistance in the years ahead. If such amounts exceed $10 billion, which I believe they will, then legislative reform of FHA becomes a strong possibility with a focus on reducing taxpayer losses.

Romney repeatedly spoke of tax reform with an emphasis on reducing deductions in order to lower rates. Despite a vocal minority within progressive circles calling for reducing the mortgage interest deduction and using the money for rental assistance, an Obama victory largely guarantees the continued existence of the mortgage interest deduction in its current form. One can almost hear the Realtors breathing a sigh of relief.

With Obama's re-election comes the likely permanence of the Dodd-Frank Act and its newly created Consumer Financial Protection Bureau. Once the battles over CFPB's existence die down, I believe bipartisan attention will shift to the agency's regulation of the mortgage market. Both Dodd-Frank's Qualified Residential Mortgage and Qualified Mortgage definitions have raised concern across the political spectrum. Whether it's a concern that low-income and minority families will be denied credit due to the restrictions of QRM/QM, or that the regulations will hold back the overall mortgage/housing market, a more substantial debate will begin, ultimately resulting in a softening of the provisions of QRM/QM.

Much of what I have discussed lies on the regulatory side of housing policy. To a large extent, the real action will remain there. Whoever was going to win was going to face some stark budget realties. With little chance of wholesale entitlement reform, discretionary spending will be squeezed. Federal assisted housing programs have their peak funding (in real terms) behind them. While the overall housing market will continue to gain momentum over the next four years, that momentum will be slow. The days of real double-digit house price appreciation are years away. Obama will not be riding a housing bubble nor will he be tasked with cleaning up another bust. That will have to wait for future administrations.

This article appeared in AOL News on November 7, 2012.


TOPICS: Business/Economy; Culture/Society; Editorial; Politics/Elections
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1 posted on 11/19/2012 7:24:22 AM PST by Kaslin
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To: Kaslin

Did you ever see “Pottersville” from “It’s a wonderful life?


2 posted on 11/19/2012 7:29:09 AM PST by Nachum (The List was hacked- www.nachumlist.com)
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To: Kaslin

Quite simple. To make a loan payment, you need a job. To make a large loan payment, you need a good paying job. If the number of jobs, especially good paying jobs is declining, stagnant or growing - then the number of potential buyers will do likewise.

With Obama unchained, the number of jobs will, I predict, decline or stagnate. Same with the housing market.

Of course, that will not be true of every area, but nationally, and this is what my current crystal ball says, that will be the trend.


3 posted on 11/19/2012 7:30:20 AM PST by Darteaus94025
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To: Kaslin

No worries, comrade! Soon the people will own the real property.


4 posted on 11/19/2012 7:31:43 AM PST by LucianOfSamasota (Tanstaafl - its not just for breakfast anymore...)
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To: Kaslin
Until the 8-10 million homes that are in default are foreclosed and sold off the crisis will remain and grow.
5 posted on 11/19/2012 7:32:28 AM PST by Hans
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To: Kaslin

‘Due in part to an improving labor market” Really? Where? This administration seems quite content with a stagnant labor market and GDP below 2%. If they are concerned they have no plans to improve them.


6 posted on 11/19/2012 7:34:01 AM PST by Blackirish
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To: Kaslin
There will be a building boom!


Spacious apartments!


7 posted on 11/19/2012 7:34:27 AM PST by COBOL2Java (The GOP-e said "Beat a Marxist with a Liberal!" What a colossal blunder.)
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To: Kaslin

Teh fact that the wealthy are able to purchase homes larger than they need, on the backs of the oppressed workers, is a good indication of how the housing market will go. Such a condition goes against social justice and basic fairness.

Add in Agenda 21 and the need to keep the population within urban areas and you see the whole picture.


8 posted on 11/19/2012 7:35:09 AM PST by DBrow
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To: Darteaus94025
Quite simple. To make a loan payment, you need a job.

Oh, contrair. Have you been following the news? It sounds like the Obama Administration is pushing for some relaxed lending rules to help spur the mortgage and residential realestate market. Sound familiar?

Specifically, they want fairness and have suggested that banks are discriminating against "low income" and "minority neighborhoods". Now does it sound familiar? No?

How about this. Freddie and Fannie will assume high risk mortgages under a special program if they can pass legislation to encourage banks to take higher rists? What about now?

We may be too stupid to govern ourselves as a nation anymore. We never learn.

9 posted on 11/19/2012 7:35:44 AM PST by Tenacious 1 (The Click-&-Paste Media exists & works in Utopia, riding unicorns & sniffing pixy dust.)
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To: Blackirish
This administration seems quite content with a stagnant labor market and GDP below 2%. If they are concerned they have no plans to improve them.

Why doesn't THIS media ever point out that our GDP, economy and employment growth is not even keeping up with population growth? They were very quick to jump on this and exagerate what growth needed to be in about 2002 as "Bush's Economy" started to boom. Remember, it was a "jobless" recovery? Only low wage jobs were comming back in Bush's economy. "We may have added 250,000 jobs, but they are lower paying jobs...." was the media reports.

I know the answer. Rhetorical question really.

10 posted on 11/19/2012 7:40:19 AM PST by Tenacious 1 (The Click-&-Paste Media exists & works in Utopia, riding unicorns & sniffing pixy dust.)
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To: Darteaus94025

“To make a loan payment, you need a job.”

To make a loan payment, you need a loan. To get a loan, you need a STABLE job AND an acceptable credit rating. If the loaning institutions are reputable, they won’t frivolously lend money to unqualified buyers. If unqualified buyers are not “buying” houses, then...... And if your job has questionable stability/longevity, then don’t be stupid and over-extend your debt capacity. IF Obama has this “dream” of granting home-ownership for everyone by raising taxes, then the bottom will fall out for all of us.


11 posted on 11/19/2012 7:43:14 AM PST by fivecatsandadog (Don't let reality ruin your day.)
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To: DBrow
Teh fact that the wealthy are able to purchase homes larger than they need, on the backs of the oppressed workers, is a good indication of how the housing market will go. Such a condition goes against social justice and basic fairness.

I think I missed something important here. Is there a sarcasm tag or something? What is agenda 21?

....Giving the benefit of the doubt and assuming I'm confused....

12 posted on 11/19/2012 7:43:51 AM PST by Tenacious 1 (The Click-&-Paste Media exists & works in Utopia, riding unicorns & sniffing pixy dust.)
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To: Darteaus94025
You're exactly right.

Further, a part of the premise of this article is incorrect. The housing market has not made recent improvements, as per a number of folks I know in real estate sales (and related industries) nationwide. Many of the positive stories the media promoted prior to the election appear to be nothing more than politics.

Added to this, the full implementation of Dodd/Frank is going to mean further restrictions on lenders which translates into even fewer sales.

13 posted on 11/19/2012 7:44:20 AM PST by Rational Thought
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To: Kaslin
There is a US population age distribution problem that Zero's "free abortions and birth control" policies make even worse. The historical US population age pyramid isn't a pyramid any more.


14 posted on 11/19/2012 7:45:44 AM PST by Sooth2222 ("Suppose you were an idiot. And suppose you were a member of congress. But I repeat myself." M.Twain)
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To: Tenacious 1

Obama will guarantee that any gains in the past 4 years will be nullified with perpetual stupidity.


15 posted on 11/19/2012 7:50:50 AM PST by fivecatsandadog (Don't let reality ruin your day.)
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To: Kaslin

“The most glaring absence during the hard-fought campaign between President Barack Obama and Mitt Romney was any offer of substance regarding the housing market.”

There was not much substance offered on *any* subject, except the firing of Big Bird. For example, why didn’t the GOP beat the commies senseless over the lack of a congressional budget for the past three years? Something is ROTTEN in DC, and 48% of the voters know it.


16 posted on 11/19/2012 8:00:53 AM PST by TexasRepublic (Socialism is the gospel of envy and the religion of thieves)
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To: Sooth2222
There is a US population age distribution problem that Zero's "free abortions and birth control" policies make even worse. The historical US population age pyramid isn't a pyramid any more.

It's a minaret...

17 posted on 11/19/2012 8:15:28 AM PST by null and void (America - Abducted by Aliens...)
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To: Kaslin

Well, let’s review....FHA is about to beg for more money; Fannie Mae and Freddie Mac are crippled by corruption; the major banks are holding a huge inventory of foreclosed loans - hoping to avoid a huge loss (good luck with that) that would be the result of dumping all of these homes on the market at once; unemployment remains high, and; businesses are issuing pink slips by the wagon load.

Sounds like a firm foundation for a housing boom to me!!


18 posted on 11/19/2012 8:28:10 AM PST by Donkey Odious ( Adapt, improvise, and overcome - now a motto for us all.)
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To: Kaslin

Maybe this guy would understand the “housing market” if he spoke of it in terms of being part of the economy, instead of treating it as if it is some isolated non-related sector.

Housing would sovle itself, it the economy would recover, which would only happen with LESS government and not more.


19 posted on 11/19/2012 8:37:52 AM PST by C. Edmund Wright ("WTF?: How Karl Rove and the Establishment Lost....Again")
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To: Kaslin

New Section 8 tenants moving in next-door to your $870,000 McMansion


20 posted on 11/19/2012 8:59:47 AM PST by Buckeye McFrog
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