Great Housing Depression of 2008-20??
Forces greater than oneself are like that. But the housing crisis isn't exactly a force of nature, and that's what's frustrating about the Great Housing Depression of 2008-20??. It's understandable for you or I to be numbed by these horrendous housing numbers. But sometimes it seems as if Timothy Geithner and his colleagues in the Obama administration are like motorists driving around the fallen tree limbs but seem helpless to do anything about it.
The sorry fact is that record-low interest rates just aren't sufficient, in themselves, to bring people into the market. The horrid numbers we are seeing are evidence enough of that. So what's the answer? Well, one idea that seems reasonable enough is to extend to under-water property owners the same largesse that two consecutive administrations have bestowed upon the big banks. There's a plan reportedly under consideration that would push Fannie Mae and Freddie Mac to loosen their refinancing guidelines. That way, homeowners would be able to refinance even if their homes wouldn't otherwise qualify.
Oh, yes, I realize that a lot of people say that such an idea would screw mortgage-security bondholders and would be "unfair" to homeowners who were able to refinance without help, it is argued. I think that's baloney. A small-fry bailout -- imagine that, non-billionaires and non-bankers being bailed out! -- would not be unfair to a soul. It would pump dollars directly into the economy and serve a broader public purpose: to keep properties from going into foreclosure, or having to be sold short. That would inure to the benefit of everybody, including homeowners who didn't need government help to refinance and might be feeling a tad resentful.
They shouldn't be. We're in the middle of a Great Real Estate Depression, and that homeowner who managed to refinance through normal means may want to sell his house next month or next year. Right now he's facing the prospect of taking a shellacking. That's why the refinancing plan being weighed by the Obama administration not only makes sense, but is fair for everybody -- the direct beneficiaries, their neighbors, and for Fannie, Freddie and their bondholders. It's fair because something other than pushing rates lower needs to be done to revive the housing market. A refinancing-bailout would derail a vicious circle that is plaguing U.S. real estate.
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