Housing Has A Long Way To Real Recovery

Just a short few years ago several of the major funds and many smaller investors scooped up the single family foreclosure inventory at deep discounts. They swept millions of houses off the market in a relatively short time span and had a huge negative impact on the available inventory for individual home owners who were seeking a well priced home to buy for themselves. This rapid sweep of the inventory also rapidly forced an increase in prices in the most hard hit markets like Phoenix. While I always believe it is very good to have the private sector weep away the problem properties after a serious collapse of the market, the results from this have had a negative impact on many homebuyers and the economy potentially.

First time buyers, and those with lower incomes who needed or wanted to buy a well priced house were effectively kept out of the market because prices rose too much,and there was little inventory to purchase in many markets. As prices rose, many would be buyers were simply unable to execute. There are several; other factors which also combine with the lack of inventory and higher prices, to prevent the housing market from really returning to a robust market essential to the recovery of the economy. The first is the obscene fines levied by Obama and Holder on the major mortgage lenders to satisfy the populist political rhetoric of get the bankers. The big banks were claimed to have done all sorts of terrible things to the poor home buyer who lied on his loan app and who took out home equity loans to go on vacations and buy big screen TVs. While the banks were sloppy in some paperwork, the reality was the borrowers were irresponsible and Barney Frank forced the banks to make loans in neighborhoods we all knew were not sustainable for heavily leveraged home ownership. For Fannie and Freddie and some major institutional buyers of mortgage backed securities to now claim they were mislead, is simply to say we had no idea what we were doing and we bought the portfolios because the salesman took us to a great strip club. So now the White House can say we really got those bankers.  What they fail to say is we effectively ended the top mortgage lenders from making loans to the average buyer, and especially not the first time buyer. The banks have moved on, but the economy and potential home buyers are screwed. Just as no banker for generations will ever help the government bailout failed banks like Countrywide or Bear, or Merrill, none will reach to make anything but prime quality loans. So now even Ben Bernanke can’t get a refinance of his mortgage.