Collapse Of The "Ownership Society"

Mish's Global Economic Trend Analysis ^ | 16 Aug 2009 | Mike "Mish" Shedlock

[BGHater]

Bush's "ownership society" has collapsed under the dead weight of debt. There is too much debt and too little income to support it. Please consider President shifts focus to renting, not owning.

The Obama administration, in a major shift on housing policy, is abandoning George W. Bush’s vision of creating an “ownership society’’ and instead plans to pump $4.25 billion of economic stimulus money into creating tens of thousands of federally subsidized rental units in American cities.

The idea is to pay for the construction of low-rise rental apartment buildings and town houses, as well as the purchase of foreclosed homes that can be refurbished and rented to low- and moderate-income families at affordable rates.

Analysts say the approach takes a wrecking ball to Bush’s heavy emphasis on encouraging homeownership as a way to create national wealth and provide upward mobility for low- and working-class families, especially minorities. Housing and Urban Development Secretary Shaun Donovan’s recalibration of federal housing policy, they said, shows that the Obama White House has acknowledged that not everyone can or should own a home.

In addition to an ideological shift, the move is a practical response to skyrocketing foreclosure rates, tight credit, and the economic crisis.

Barney Frank The Hypocrite

"I’ve always said the American dream should be a home - not homeownership," said Representative Barney Frank, chairman of the House Financial Services Committee and one of the earliest critics of the Bush administration’s push to put mortgages in the hands of low- and moderate-income people.

What a distortion of reality. Barney Frank was in the pocket of Fannie Mae and Freddie make and their biggest supporter for years. Now he plays on semantics in an unbelievable lie. He would have been better off keeping his mouth shut, but political hacks seldom if ever can.

It's Better To Rent

The "Rentership Society" as Calculated Risk dubs it, reminds me of a chart I put together way back in Spring of 2005. Note the lower right hand corner of the top chart.

San Diego Home Prices (with thanks to piggington)

The above charts are from It's a Totally New Paradigm written March 26, 2005. Here are some excerpts from that post.

• Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors says that "South Florida is working off of a totally new economic model than any of us have ever experienced in the past." He predicts that a limited supply of land coupled with demand from baby boomers and foreigners will prolong the boom indefinitely.
  
  
• "I just don't think we have what it takes to prick the bubble," said Diane C. Swonk, chief economist at Mesirow Financial in Chicago, who was an optimist during the 90's. "I don't think prices are going to fall, and I don't think they're even going to be flat."
  
  
• Gregory J. Heym, the chief economist at Brown Harris Stevens, is not sold on the inevitability of a downturn. He bases his confidence in the market on things like continuing low mortgage rates, high Wall Street bonuses and the tax benefits of home ownership. "It is a new paradigm" he said.

Flash Forward: July 13, 2009

Housing Update - How Far To The Bottom?

Please consider Housing Update - How Far To The Bottom? for a current look at where home prices are.

Using the Japan Nationwide Land Prices model as my guide, here is how I have called things in real time.



click on chart for sharper image

My previous update was was on December 1 ,2008 in a post with the same name as this one Housing Update - How Far To The Bottom?

I just added the Summer 2009 arrow. Housing prices are now one notch closer to their final destination. The US Timeline scale is compressed. At the current pace, housing will take about 7 years total to bottom vs. 14 years in Japan.

The formation of the "Rentership Society" shows just how much things have changed. However the idea is not pervasive yet. Sentiment still has a ways to go to reach the bottom. However, I may soon need to move the arrow another notch.

[classified]

Oh Great! Welfare Housing Projects again? Who wan’ts to live in the projects except drug heads, prostitutes, criminals, etc.?

[classified]

Democrat Slave Quarters!!!!

[Ghost of Philip Marlowe]

I called this a while ago.

This was never about private ownership of homes.

Inner-city projects failed miserably. And leftists didn't like “cooping up” all the poor together.

So they encouraged them to buy nice homes in nice neighborhoods. They customized mortgages so that practically anyone could get one, knowing they wouldn't be able to afford them.

Now they'll move in and take over the mortgages, the government becomes the owner and rents it out to the tenants, just as Obammie the Commie suggested.

Voila. The projects have now moved out and scattered throughout suburbia. A nice little “add” is that it helps to break up the more conservative vote of many suburban areas by diffusing the DNC vote through these suburban projects.

[presently no screen name]

Just dam! Gov’t - Stay the heck away from us citizens. Isn’t there anything you can’t wait to get your sticky fingers on?

[WorkingClassFilth]

Don’t forget Hillary’s plan to shove Section 8 people into the ‘burbs via witholding federal monies from distribution to cities not in compliance with ‘Smart Growth’ high-density (read: low budget rentals = crime = decreased home values) housing guidlines. The diaspora of the criminal class was effected by cash addicted suburban governments willing to take the bait for the sake of a few more ammenities to offer movers in the fat 1990’s. An additional RAT bonus was that X42 was able to tout better crime stats as a result of his ‘Crime Bill.’

[FreeReign]

...purchase of foreclosed homes that can be refurbished and rented to low- and moderate-income families at affordable rates.

We all better hope that our neighbors don't get their houses foreclosed, else it will be "hello low renters".

Un-flipping-believable.

You work your tail off and play by the rules for your entire life to afford a house in a beautiful neighborhood, and what do you want to bet they'll stick some low renter into some beautiful foreclosed house in your neighborhood.

[familyop]

So the single mothers will move to their bosses’ neighborhoods. ;-)

[SoCalPol]

Unless you live in one neighborhood where tens of thousands of people from the Middle East, Horn of Africa, SouthEast Asia, Russia, Mexicans, etc. where prices are lower, you can perhaps afford a home or the rent in large
apt. units.

Or other areas of the County I wouldn’t allow my cat
let alone live in.

But here in San Diego, homes can start with the lower prices at present, $450,000 to over 30 million dollars.

Condo units in my neighborhood start at $500,000 to over
$4 million a unit. Homes from 1 million on up.

Apt. rent from $1,400 on up

Other areas of the city are much higher.

I Rent and at least I don’t have to pay property taxes,
or worry about cost of repair work.

[Ghost of Philip Marlowe]

Excellent points.

[Le Chien Rouge]

... tens of thousands of federally subsidized rental units in American cities...

Neighborhoods/Cities which will not have these units:

1) Beverly Hills
2) Martha’s Vinyard
3) Berkley
4) Ithaca NY
5) Aspen
6) Northwest DC
7) Bill Ayers neighborhood Chicago
8) Upper East Manhattan
9) Malibu
10) Nancy Pelosi’s neighborhood

[Rick_Michael]

Not a bad conspiracy theory....hmm...