Wall Street Journal 4/21/11
President Obama said he’s concerned that housing is “probably the biggest drag on the economy right now” after being asked yesterday about the intractability of the housing crisis that is now entering its fifth year.
Obama was responding to question during Wednesday’s Facebook town hall from a homeowner in Williamsburg, Va.:
The housing crisis will not go away. The mortgage financing for new home buyers with low to moderate income is becoming very difficult. As President, what can you do to relax the policies that are disqualifying qualified home buyers from owning their first home? How can you assure the low to moderate home buyers that they will have the opportunity to own their first home?
Obama put on his professor cap and provided a sanguine diagnosis of the crisis. Underwater borrowers aren’t spending much because they’ve lost wealth and job mobility is hindered because people can’t easily sell their homes and move, he said. His administration had made “significant progress,” he added, in working with mortgage lenders to renegotiate loans, despite the fact that these programs have been widely criticized by Republicans and Democrats for falling short of lofty goals.
But he also said that it would be hard for some buyers today because credit had become too easy during the bubble, when many investors took advantage of easy money and rising prices to flip homes for a quick profit. “We’ve got to strike a balance,” he said. “Frankly, there’s some folks who are probably better off renting.”
He warned against a return to the past, but didn’t quite spell out a vision for the future:
What we don’t want to do is return to a situation where people are putting no money down and they’ve got very easy payment terms at the front end and then it turns out five years from now, because they’ve got an adjustable-rate mortgage, that they couldn’t afford it and they lose their home. I think the regulators are trying to get that balance right. There are certain communities with high foreclosure rates where what we’re trying to do is see if can we help state and local governments take over some of these homes and convert them and provide favorable terms to first-time home buyers. But, frankly, I think we’ve got to understand that the days where it was really easy to buy a house without any money down is probably over. And what … I’m really concerned about is making sure that the housing market overall recovers enough that it’s not such a huge drag on the economy, because if it isn’t, then people will have more confidence, they’ll spend more, more people will get hired, and overall the economy will improve. But I recognize for a lot of folks who want to be first-time homebuyers it’s still tough out there. It’s getting better in certain areas, but in some places, particularly where there was a big housing bubble, it’s not
What we don’t want to do is return to a situation where people are putting no money down and they’ve got very easy payment terms at the front end and then it turns out five years from now, because they’ve got an adjustable-rate mortgage, that they couldn’t afford it and they lose their home.
I think the regulators are trying to get that balance right. There are certain communities with high foreclosure rates where what we’re trying to do is see if can we help state and local governments take over some of these homes and convert them and provide favorable terms to first-time home buyers. But, frankly, I think we’ve got to understand that the days where it was really easy to buy a house without any money down is probably over. And what … I’m really concerned about is making sure that the housing market overall recovers enough that it’s not such a huge drag on the economy, because if it isn’t, then people will have more confidence, they’ll spend more, more people will get hired, and overall the economy will improve.
But I recognize for a lot of folks who want to be first-time homebuyers it’s still tough out there. It’s getting better in certain areas, but in some places, particularly where there was a big housing bubble, it’s not