Your housing news for the day

Fannie Mae has posted a fourth quarter loss of $3.6 billion. Luckily, the Office of Federal Housing Enterprise Oversight has just announced that it is lifting the caps on its portfolio, allowing Fannie Mae and Freddie Mac to lose money on an even more spectacular scale. Meanwhile, S&P states the obvious: more people missing their housing payments means lower credit quality on mortgage backed securities.

Comments

Fred February 28, 2008 12:03 AM

Megan,

You may be interested in today's Holman Jenkins column, in the event you haven't seen it yet: Let Houses Find a Bottom.

He summarizes the research about low income home ownership he mentioned last August:

Next up, what about the low-income homeowners who (unlike speculators) were the intended beneficiaries of homeownership expansion policies? Both President Clinton and President Bush championed such initiatives, and now 69% of households own their homes, up from 64% in 1992.

Do the poorer households that were the targets of these initiatives actually benefit from homeownership? Carolina Katz Reid, then at the University of Washington, looked at the question systematically, using subjects who bought houses between 1977 and 1993. For most low-income households, homeownership proved a bad bet, even in a rising market. Mortgage costs ate up their incomes and tied them down in subpar neighborhoods with bad schools and inferior job opportunities. Their capital gains were subpar or nonexistent even if they managed to hold onto their houses for a decade. Lacking much income, they didn't benefit from the mortgage-interest deduction.

And concludes:

As piles of money shoveled out in the wake of 9/11 and Hurricane Katrina showed, even with untold trillions of dollars in unfunded entitlement liability hanging over the federal government, there is little resistance to contracting vast new liabilities whenever large numbers of voters are in distress, even if (as now) their own choices played a role. A more honest use of taxpayer money at least would be to buy up houses at foreclosure auctions and demolish them, especially in neighborhoods likely never to recover. The true fillip to "social stability" right now would be to nip in the bud the blighted, suburban slums of the future.