Comments on: Edward Gleaser on Housing Subsidies

By: odograph

odograph — Fri, 05 Dec 2008 23:23:50 +0000

BTW, I've been for unwinding housing subsidies, including the mortgage interest rate tax deduction, and the housing capital gains loophole, for years. What we need(ed) was uniformly low taxes, not a hodge-podge of special gifts. The question now is whether rejecting the "bad" is inviting the "worse." I read this morning that 10% of current mortgage holders are behind or in foreclosure. To say that's huge is an understatement. Without a good path it would be nice to know the least bad.

By: odograph

odograph — Fri, 05 Dec 2008 23:19:56 +0000

I think the case when examined always goes back to the private mortgage makers, competing with looser standards, and passing along the hot potato (bad loans) before the sh*t hit the fan. I think the Wikipedia page is a pretty fair round-up.

By: Steve Verdon

Steve Verdon — Fri, 05 Dec 2008 23:08:52 +0000

The GSEs (Fannie & Freddie) were decreasing their sub-prime mortgages in this period.

http://real-estate-and-urban.blogspot.com/2008/09/charles-calomiris-and-peter-wallis.html

Really? I don't see that as necessarily being true based on the graph.

1. The graph is only up to 2004,
2. The graph is only for mortgages in general from what I can see.

The title of the chart is "Holdings of Mortgage Debt Outstanding by Type of Institution".

And looking at your first link there was clearly a housing boom in the early 1980's which fits with what Gleaser notes about a 25 year period.

And I see no Treasury data in any link. I see Fed data, but no Treasury data, and certainly no data on performance.

By: Scott Swank

Scott Swank — Fri, 05 Dec 2008 22:40:39 +0000

The housing boom really took off around 1997:

http://www.1stmillionat33.com/posts/06-09-12/house_his.gif

The GSEs (Fannie & Freddie) were decreasing their sub-prime mortgages in this period.

http://real-estate-and-urban.blogspot.com/2008/09/charles-calomiris-and-peter-wallis.html

Hence, the opening line: "America’s housing woes are, in part, the legacy of government policies that pushed consumers to borrow and banks to lend." Should read "... in small part...".

Now consider Richard's point (supported by Treasury data) that "The loan performance on Fannie's book of business is substantially better than the overall mortgage market." And this argument is pretty clearly a straw man.

Joust on Don Quixote, joust on.

By: Brett

Brett — Fri, 05 Dec 2008 22:21:44 +0000

Plus, you could give the Housing Department to refuse the loan help to anyone wanting to buy a house in a certain areas with bad indicators (like extremely high property values, high stress of water supplies, high risk of fire, etc).

By: Brett

Brett — Fri, 05 Dec 2008 22:11:43 +0000

I'm wondering about that myself, or more specifically, why they do it in the retarded way they do. Wouldn't it be easier just to offer some type of subsidized credit (sort of like with student loans) to people who have a decent credit rating so they can have the deposit to put down for an apartment, then allow people to do the same with a down-payment for a house (with a stricter credit rating requirement)? That way, people would only be able to get a a house if they could actually afford the monthly payments; all the loan would do is help get them past the purchasing expenses hump, like the down payment and closing costs.

I'm speaking from personal experience - my mom had a decent credit rating and enough monthly income to make the payments once she was in the house we ultimately got, but hadn't had enough discretionary income in the past to put aside to pay for the closing costs and down payment. We managed to get the house because one of my uncles is a real-estate agent, and he generously did the closing costs related stuff for no charge, while lending us the money for the down payment.