I am sometimes told by well-meaning (I think) people that I am a pessimist about the health of the housing industry. That is because I hold firm to the belief that much of the pervasive information being disseminated through various industry-related organizations, trade associations, and individuals with a vested interest in spinning good news about the so-called housing “recovery” has been disingenuous at best.
In fact, I am an optimist by nature. It is my optimism that triggered me to offer my thoughts here as to ways I believe we can jump-start a very real housing recovery as early as next year. Now, to be sure, these aren’t the only things that need to happen to facilitate this, but they do represent a solid foundation onto which said recovery can be built.
1. True GSE reform.
As so clearly pointed out in an article co-authored recently by Josh Rosner, managing director at Graham Fisher & Company, among other impressive credentials, and Glen Corso, executive director of Community Mortgage Lenders of America, published in HousingWire, it is time for GSE reform.
A must-read article for anyone involved in the housing and mortgage lending/servicing industry, the authors eloquently make the case for removing Fannie Mae and Freddie Mac from conservatorship. This, in their view, as with those of countless others in the industry, is necessary to strengthen the mortgage industry and provide loans to more and more Americans seeking the first rung of the economic ladder
Among many other points, far too many and in more detail than can be covered here, they state that ending the conservatorships, combined with significantly higher capital than pre-crisis, would protect the affordable housing trust fund money, currently at risk because a GSE with no capital may need to take a new Treasury draw, thereby suspending trust fund payments.
Further, they state that no one wanted or favors endless GSE conservatorship. True, indeed.
2. Ease the regulatory burden on businesses, especially small businesses, that stifles meaningful job creation.
Start by dismantling the Consumer Finance Protection Bureau. Like the monster created by Dr. Frankenstein, the CFPB, which was created by Dodd-Frank, is running amok and creating havoc within the mortgage industry, which ultimately hurts the very consumers the bill and its monster creation were to protect.
The regulatory factory in Washington, D.C. is one of the only factories left in America. Unfortunately, this factory doesn’t actually produce anything of value. To the contrary, it not only stifles production, in the case of the coal industry it all but shuts it down, destroying countless economic lives in the process. Yes, we need regulations to protect us all from a virtual plethora of bad actors, but not so much that it chokes the economy and shrinks job growth — not by a long shot.
Consumers are the ultimate regulators: Through market forces driven by their purchasing power (when they have some) they determine with whom they will do business. That should not be the function of government.
3. Narrow the Federal Reserve’s mandate to a strong dollar and stable prices.
Today, the central bank is also charged with managing long-term interest rates, maximizing employment, and regulating banks. It is doing none of those things well. Its mandate to maximize employment requires it to inflate the currency, which actually contradicts its mandate to keep prices stable. As we certainly aren’t getting real employment growth anyway, Americans have nothing to lose.
The monetary policies employed by the Fed have only benefitted the money and ruling classes in America, at the expense of the shrinking middle class, who have seen their wages stagnate or disappear altogether.
4. Promote trade schools instead of misleading people into believing that “everyone” should have a college education.
Clearly it is beyond time to encourage young people who are not inclined or interested in attending college (and borrowing tremendous sums of money in the process) to gain experience in fields like construction, auto repair, masonry, plumbing and countless other endeavors, through trade schools and other activities. Not everyone needs or should go to college.
We need more workers and fewer philosophers. And there are many jobs in these fields going unfilled because employers can’t find qualified candidates. These workers, thousands and thousands of them, will want to, and will, have the money required, to buy homes.
It is one of my core beliefs that without a strong job market and increased job participation rate no real economic growth and an attendant housing recovery is possible.
The above actions, along with others, will help lead us to a stronger economy in general and a real housing recovery in particular. Oh, that in addition to electing a pro-growth, foreign and domestic policy expert who will surround himself/herself with experienced, capable, beyond competent people who all have the best interests of the American people at heart.