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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: jpk1 who wrote (201266)	5/8/2009 11:24:47 AM
From: Jim McMannis	Respond to of 306849

Seems to be the pattern du jour. For a while now. Pump on the open. Maybe there really is a PPT.

To: jpk1 who wrote (201266)	5/8/2009 11:27:50 AM
From: Jim McMannis	Respond to of 306849

"The only people who profited from the Bush policies were mortgage originators, house builders, lawyers and real estate agents." "Mr. Obama is no different from his predecessors. His housing rescue plan shows the same faith in policies to boost home ownership. Maybe he should stress test the idea first." Ghosts of housing bubble still haunt U.S. Montreal -- kyakabuski@globeandmail.com theglobeandmail.com Americans hold certain rights to be inalienable. Among them are life, liberty and the pursuit of a bungalow (while aspiring to something roomier). Home ownership is to the United States what public health care is to Canada: a national virtue only the unpatriotic would doubt. The end result is that much bad policy gets made in its name. With all the stress testing on Wall Street, it's easy to forget that the roots of the financial crisis actually lie on leafier residential avenues. Unless President Barack Obama rethinks policies aimed at boosting home ownership, the next financial bubble remains an accident waiting to happen. Bill Clinton's National Home Ownership Strategy and George W. Bush's "ownership society" both advocated "creative" measures to help low-income earners buy houses. Mr. Bush deemed that June would henceforth be known as National Homeownership Month and, with laws such as the American Dream Downpayment Act, vowed to make homeowners out of 5.5 million members of minority groups. As such, the Bush administration was complicit in underwriting subprime mortgages. Dirty bombs known as option adjustable rate mortgages, which often left borrowers with negative amortization (i.e. more debt), proliferated on his watch. When regulators raised questions, mortgage lenders simply switched regulators or lobbied Washington to get them to back off. For having "over-incented housing" - as Mr. Bush's treasury secretary Henry Paulson recently put it - the United States got financial Armageddon. The irony is the supposedly pro-home-ownership policies missed their goal. The U.S. rate of ownership did rise - from 67.2 per cent in 2000 to a peak of 69.2 per cent in 2004 - but it had slipped to 67.3 per cent by the first quarter of this year, totally erasing the "gains" of the Bush era. The only people who profited from the Bush policies were mortgage originators, house builders, lawyers and real estate agents. The minorities Mr. Bush vowed to help are hardly any better off than they were as renters. Almost a third of Hispanic homeowners dole out more than 38 per cent of their pretax income on mortgage payments and property taxes, compared with a quarter of black households and only 16 per cent of white homeowners, according to recent data compiled by The Associated Press. Americans have always held these things to be true: Homeowners make better citizens, and mortgage payments are the same as savings. Except, subprime borrowers usually had little or no equity in their homes. If they did, they just borrowed against it to consume more. And rather than encouraging more Americans to put down roots, the Bush policies that sustained the housing bubble only "incented" them to flip properties. Interestingly, Canada has a higher rate of home ownership than the United States without any of the same policy bias in favour of homeowners. Unlike the United States, mortgage interest is not tax-deductible here and the GST applies to new homes. In Quebec and Atlantic Canada, and coming soon to Ontario, provincial sales taxes also apply. And our mortgage-lending standards are among the most stringent in the world. Yet, 68.4 per cent of Canadian households owned their home in 2006, according to that year's census. What does that prove? The virtue of home ownership is much overrated. As an impediment to labour mobility, it is now being blamed for making the U.S. downturn even worse. Fewer Americans moved in the year to March, 2008, than at any time since 1962, suggesting that fewer people are willing or able to move to where the jobs are. In Canada, the evidence is mixed. Alberta and Ontario have home ownership rates above the national average - at 73.1 per cent and 71 per cent, respectively - but those provinces also have the highest rates of labour mobility. Quebec has the lowest rate, at 60.1 per cent, but its population is the most homebound of any. Regardless, Canadian governments should remain officially agnostic when it comes to home ownership. They should be neither for nor against it. But if neutral home ownership policies saved Canada's financial system from collapse, adopting them is out of the question for a U.S. Congress obsessed with property rights (the Republicans) and minority entitlements (the Democrats). "Much of what helps support the Canadian model is probably beyond the grasp of the American political process," Pietro Nivola and John C. Courtney wrote in a recent briefing note for the Brookings Institution. "Eliminate mortgage-interest deductions? Forget it. Temper the pursuit of what the left calls 'affordable home ownership' or what the right calls the 'ownership society'? Fat chance. Shift more of the tax burden's target from earnings to consumption? Don't hold your breath." Mr. Obama is no different from his predecessors. His housing rescue plan shows the same faith in policies to boost home ownership. Maybe he should stress test the idea first.