If Housing Is Booming – Why Do We Need Another Fix

Submitted by Lance Roberts of Street Talk Live blog,

President Obama recently stopped in Phoenix to deliver his latest diatribe on how he is going to fix the economy.  Yes, that is correct, another round of “campaign speeches” that, as has been the hallmark of this Administration to date, have generally wound up mired in an abyss of a broken congressional system.  What really struck me, however, was his comprehensive plan designed to further boost the housing market including:

  • Helping responsible families save $3,000 a year by refinancing while mortgage rates are still low.
  • Take executive action to cut red tape so responsible families can get a mortgage.
  • Fix our broken immigration system to increase home values [WTF!]
  • Rebuild communities hit hardest by foreclosure.
  • Create and preserve affordable rental housing by passing a bipartisan Senate proposal.
  • Put private capital at the center of the housing finance system
  • End Fannie Mae and Freddie Mac’s failed business model so taxpayers are never again on the hook for bad loans and bailouts
  • Ensure widespread access to safe, responsible financing like the 30-year fixed rate mortgage
  • Support affordability and access for renters and homeownership for first-time buyers, in part by continuing the historic affordability role of Federal Housing Administration (FHA)
  • Ensure all prospective homeowners receive a single, simple three-page mortgage disclosure form
  • Increase incentives for lenders to deliver high quality loans and products.
  • Level the playing field for financial institutions of all sizes so borrowers can work with the lender right for them.

Excuse me? Another plan for the housing market.  The housing market has been inundated with programs including HAMP, HARP, tax credits for first time home buyers,“fraud-closure” forgiveness, trillions of dollars injected to artificially suppress interest rates, bailouts of banks, etc. which have resulted in a surge in home prices. The Federal Reserve, the White House, the media and every housing and real estate related organization have been crowing over the resounding housing recovery over the last couple of years.  If this is the case then why do we need another housing support program?

The reason is because, as I have been writing about over the last couple of years, the housing recovery has been a facade of speculative investors flooding into the housing market. I specifically discussed this issue recently in “Housing – Is It Really Recovering?”:

“While the Federal Reserve and the current Administration have tried a litany of programs to jump start the housing market nothing has worked as well as the “REO to Rent” program. With Fannie Mae/Freddie Mac, and the banks loaded with delinquent and vacant properties, the idea was to sell huge blocks of properties to institutional investors to be put out as rentals. This has worked very well.


The chart below shows the number of homes that are renter occupied versus the seasonally adjusted home ownership rate.




Do you see the potential problem here? Speculators have flooded the market with a majority of the properties being paid for in cash and then turned into rentals. As this activity drives the prices of homes higher, reduces inventory and increases rental rates – it prices out “first time homebuyers” who would become longer term home owners. The problem is that when the herd of speculative buyers turn into mass sellers – there will not be a large enough pool of qualified buyers to absorb the inventory which will lead to a sharp reversion in prices.


Maybe this is why the Federal Reserve, and the FDIC, are looking to relax the regulation put in place after the last housing bubble which required banks to have “skin in the game.” By removing that restriction banks can now go back to providing mortgages to unqualified buyers, pool them and sell them off to unwitting investors. Haven’t we watched this movie before?”

That last paragraph is central to the real issue at hand.  While Obama continues to focus on ways to stimulate the housing market by manipulating the process; he continues to miss the real issue – employment.

A real focus on fiscal policy in Washington that would lead to a real recovery in employment would negate the need for the ongoing bailouts of the economy and housing.  Increased employment would:

  • Lead to a stronger economy negating the need for ongoing QE programs from the Federal Reserve.
  • Higher wages which would lead to increased savings and higher rates of home ownership.
  • More individuals on company sponsored healthcare plans reducing the need for “ObamaCare” which is impeding employment.
  • Increased aggregate end demand which would encourage more productive investments.
  • Increased tax revenues which would reduce the budget deficit.
  • Allow for reductions in government spending which would lead to a balanced budget and eventual budget surpluses.

There is hardly a single issue that higher levels of employment won’t eventually fix.  Yet, the focus continues to be applying “Band-aids” rather than curing the patient.

Another housing bailout program is the last thing we need.  The “American Dream” was never about “home ownership” but rather the ability to come to America with nothing more than the clothes on your back and build a successful life for you and your family.  The reward for achieving success in America was owning a home.  Home ownership is a privilege – not a right.

It’s time to stop trying to fix what is broken by trying to cure the symptoms rather than the disease.  In the past four years we have destroyed 200 years of contract law, we have engaged in unprecedented economic experiments and forgiven criminal actions in the name of financial stability.  Our “Founding Fathers” would be ashamed of what has been done to the country they sacrificed everything for.  Maybe we should return our focus back to what made this country the “land of opportunity” to begin with:  life, liberty and the pursuit of happiness.  It is within that simple phrase that generations of legal immigrants lived their “American Dream.”


  1. They’re building 2 new houses across the street.

    A neighbor told me the builder told her the new houses were costing $10,000 more to build because the cost of materials has risen.

    So I did a little research. Our house was built almost 3 years ago. One of the new houses is virtually identical.

    Funny thing though, the construction loan for the new house is only $850.00 more than the construction loan for our house…3 years ago. Hmmmm……

    Unless the rest of the $10,000 is coming from another source, me thinks the builder is lying to the neighbor.

    I think they’re all liars, to one degree or another, from the top, right down the line. The president, .gov agencies, the media, anyone in financing, realtors and builders. And last, but not least, the American Dreamers who so desperately want to believe the bullshit, they are lying to themselves.

    It’s the SCAM of the century.

  2. Dipshit Obama is trying to campaign on the only positive thing that has happened during his presidency: a new housing bubble. It matters not that the average American has not be able to participate in the new bubble, or that hedge funds are using ZIRP free cash to drive up housing prices. Obama simply doesn’t have any other positives to crow about. The jobs market is a disaster because of Obamacare. Debt is spiraling out of control, the welfare state is growing exponentially, interest rates are going up, Obama’s foreign policy has been a complete and utter disaster.

    Obama’s doing the only thing he knows how to do: campaign and give away free shit. It’s probably all he’s going to do the next three years. Unless he’s impeached, which he surely should be.


  3. If Washington REALLY wanted to fix the economy:

    What we really need to do is to return to the principles that once made this country great. In early America, we protected our markets with high tariffs. Access to the U.S. market was a privilege. Foreign domination was kept out, and our economy thrived.

    And once upon a time the U.S. economy was actually a free market system where rules, regulations and red tape were kept to a minimum. Our nation blossomed under such a system. Sadly, today we have become a nation that literally has millions of laws, rules and regulations. The control freaks seem to run everything.

    Another thing we could do to turn this around would be to get rid of the IRS and the income tax. Did you know that the greatest period of economic growth in U.S. history was during a time when there was absolutely no income tax?

    And of course probably the most important thing that we could do for our economy would be to get rid of the Federal Reserve. The Fed is a massive Ponzi scheme and it has played a primary role in creating almost every single financial bubble in the post-World War II era. Right now we are living in the greatest bond bubble in the history of the planet, and when that Fed-created bubble bursts the pain is going to be absolutely excruciating. In addition, the value of our currency has declined by over 96 percent and the size of the U.S. national debt has gotten more than 5000 times larger since the Fed was created. The Federal Reserve is at the very heart of our economic problems, and we desperately need to shut it down.


  4. KaD, I agree, if we abolished the IRS created a tariff system so that other countries would have to pay to sell to the greatest consumer society on the planet and stopped foreign aid, sold all of our military bases to the country they are located in and cut military expenditures by 2/3 we would be on our way to a real recovery.

    We could easily fund SS with the savings.

    Unfortunately these dumbfucks don’t understand basic economics.

  5. Our military would then be focused on what it should be focused on, protecting our borders, not policing the world. We have enough nuclear missiles in our nuclear subs to still be considered a military threat that no one would want to mess with.

    Why not just come out and tell the world, you know what we are done policing the middle east and the world. Hey middle eastern people we’re done meddling please don’t attack us anymore. Would that really be so hard.

    The reason they attack us is our foreign policy, not because they are jealous of us.

  6. Obummer’s new housing “fixes” will make housing more expensive and therefore less affordable for new buyers; will further screw market-rate renters, cash buyers who are not investors or hedgefunds, and savers who need interest: and fuck up the mortgage market for another decade at least; and will of course cost taxpayers another fortune.

    With the $6 Trillion dollars and change that we have shoveled into propping up the housing market and bailing out both financial houses and po’ suffering underwater home borrowers, either directly or indirectly, through a rat-maze of programs at various agencies and the Fed, we could have:

    A. Built a conventional rapid rail (NOT “high speed) rail system that would serve every city and town in the country with a population over 5,000 people with reliable, frequent rail service running at 100mph (something we found it easy to do in 1927 but can’t figure out for the life of us how it could be done now).


    B. Repaired every dangerously deficient bridge, highway, and hydro-dam in the country, something to think about if you live downriver from the Glen Canyon Dam or Wolfe Creek Dam


    C. Paid down a massive portion of our monstrous national debt


    D. Given the money back to the taxpayers so they could decide how it could most efficiently and effectively be allocated for the greatest economic good, which could be anything from paying down household debts, or paying the kids’ college tuition so they don’t have to borrow, clear up to founding new enterprises developing the advanced technologies we will need to retain a comfortable lifestyle in the post-peak-resources era.

  7. There is no economic recovery. Most likely the US economy is sinking further into a depression. The numerous indicators of economic collapse are ignored by economists and financial media busy at work weaving the Matrix to support The Lie.

    As former executives of the ” banks too big to fail ” and their proteges run the the US Treasury, the financial regulatory agencies, and the Federal Reserve, US economic policy has been focused on bailing out the excessively large banks created by mindless deregulation. The purpose of US economic policy is to save the large banks from their bad bets on poorly understood new financial instruments in the gambling casino created by deregulation.

    The architects of financial deregulation, such as former Senator Phil Gramm and President Clinton were rewarded for their service with fortunes of their own. The free market dupes, who aided and abetted Bill and Phil and misrepresented the repeal of financial stability as a new beginning for laissez faire capitalism, still pretend that the crisis resulted from Congress requiring banks to make mortgage loans to poor black people who could not pay.

    The lack of reality in America is extreme. I do not believe anything like it has ever existed in the modern world. Essentially, no one in government or out understands anything.

    The combination of the power of vested interests with ideological thinking remote from empirical reality is destroying the US economy and the prospects of the American people. The employment profile of the US economy is increasingly that of a third world country. Economic security, except for the rich, has disappeared. A large and growing percentage of the population experiences the insecurity of poverty or near poverty, while the waiting lists for $50 million dollar yachts expands.

    The distribution of income is so skewed upward that people of enormous wealth bid up the prices of used Ferraris from the 1950s and 1960s to $12,000,000 and $35,000,000. I can remember when a used Ferrari was something that a person with a moderate income could afford to purchase.

    Detroit, once the fourth largest American city and the manufacturing powerhouse of the world, is bankrupt. The populations of the cities that once were America’s thriving manufacturing base are declining. Cleveland has boarded up homes. St Louis has 20 percent of its home vacant. Welfare is under attack by the Republicans and even some Democrats as the plight of the population worsens and despair rises.

    Washington only responds to the half dozen powerful, rich private interest groups that fund election campaigns. The American people have no one to represent them. The American people have been placed outside the system of ” democratic capitalism ” which is only for the one percent.

    The way the jobs-offshoring, bail out the rich, US economy operates today makes every one poor, including the remnants of America’s once flourishing middle class. A few people have the power, and they are driving everyone else into the ground. The US government is their agent.

    So go wave the flag, support the troops, believe the government’s and media’s lies, but unless you are the well-connected one percent, don’t expect any future for your children. You have been sold out by your government. President Obama is making pretty speeches, but only the stupid will be fooled.

  8. I wonder if Preezy saw me giving him the finger as he was passing over my house on the approach to Phoenix.

    I’ll tell you again Jim, I don’t know where the money is coming from and who’s doing the buying, but just this evening as the wife and I were going out to dinner to celebrate our 49th year of wedded bliss(sometihng in there about bliss and ignorance) we passed by 3-4 either new subdivisions getting started, or ones that got caught in 2008-2009 being completed. These are subdivisions that have 200-500 homes or more. Big signs out front…Homes from the $200’s. Homes from $300’s. And on up. Prices on the rise. Bubble getting bigger. And of course Mr. Mulatto don’t give a shit because he’ll be out before it bursts.


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