I may not be able to make a substantive post today, so here are a few national stories of interest that caught my attention in the last couple days.
David Wessel, Wall Street Journal: Rethinking Part of the American Dream
It’s time to have a serious conversation about the American approach to home ownership and mortgages. A system once celebrated for putting so many families into their own homes and for making mortgages so widely available has become, as one housing economist puts it, “a case study in failure.”
Beyond the complexities of securitization, the merits of home ownership tax breaks and the politics of Fannie Mae and Freddie Mac lurk two fundamental issues.
One, the U.S. has for decades overemphasized the virtues of home ownership.
Two, many Americans are addicted to a unique, and costly, strain of mortgage—a 30-year fixed-rate loan that can be paid off at any time without penalty.
The U.S. has long seen home ownership as an unquestioned virtue, dating to a 1918 government “Own Your Own Home” campaign. Herbert Hoover, Franklin Roosevelt, Bill Clinton and George W. Bush all talked as if owning a home was the only way to join the middle class. Not only did it promote social stability—recall Mr. Bush’s “ownership society”—and build well-maintained neighborhoods, home ownership became a hedge against inflation and a way to save for retirement. Until it didn’t.
Personally I think home ownership is great—as long as it is done right. That means buying a home you really want to live in, not one you think will make you a bunch of money. It means buying a home you can afford, even if a few unexpected expenses come up or you’re out of a job for a few months. And it means eventually paying off your mortgage, not trading houses every few years and re-starting yet another new 30-year interest cycle.
David Streitfeld, New York Times: Housing Market Slows as Buyers Get Picky
Before the recession, people simply looked for a house to buy. Later they got squeamish just thinking about buying. Now they are on a quest for perfection at the perfect price.
Exacting buyers are upending the battered real estate market, agents and other experts say, leading to last-minute demands for multiple concessions, bruised feelings on all sides and many more collapsed deals than usual.
It is a reversal of roles from the boom, when competing buyers were sometimes reduced to writing heartfelt letters saying how much they loved the house and how they promised to eternally worship the memory of the previous owners. These days, it is the buyers who are coldly seeking the absolute best deal while the sellers are left in emotional turmoil.
“We see buyers who must have learned their moves from the World Wrestling Federation,” said Glenn Kelman, chief executive of the online broker Redfin. “They think the final smack-down occurs at the inspection, where the seller will be reluctant to refuse any demand because the alternative is putting the house back on the market as damaged goods.”
Everyone expected the housing market to suffer at least a temporary hangover after the government’s $8,000 tax credit expired, but not necessarily this much. Preliminary data from around the country indicates that the housing market began swooning last month immediately after the credit was no longer available. In some places, sales dropped more than 20 percent from May 2009, when the worst of the financial crisis had subsided.
To me it makes perfect sense that buyers should be the ones in the driver’s seat. After all, they’re the ones coming to the table with a giant wad of (borrowed) cash. Why shouldn’t they be able to be picky?
And as far as the sudden drop in sales post-tax credit… Duh.