Action on Stalled Housing Market Vital for U.S. Economic Expansion: View
n an unusual step, the Federal Reserve sent a white paper to congressional committees last week, urging them to look again at what ails the U.S. housing market and at possible remedies. More can be done, the Fed says, to help it revive.
Good advice. Housing is where the recession started, and it remains one of the main things holding back the recovery. Friday’s unemployment numbers -- nonfarm payrolls grew by 200,000 in December, and the jobless rate ticked down to 8.5 percent from 8.7 percent -- join other tentative signs of an improving economy, but the housing mess is mostly getting worse. There’s still a grave risk it might stop, not just delay, the expansion.
The Fed’s paper underlines the scale of the problem. The decline in U.S. house prices has wiped out a staggering $7 trillion in home equity. The ratio of housing wealth to disposable income has crashed from 140 percent at its peak to 55 percent, the lowest since the figures began to be collected in the 1950s. The number of “underwater” mortgages has grown to 12 million: More than one in five homeowners owes more than the property is worth. It’s surprising the economy is making any headway at all into a gale of this force.
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The Fed says there are no easy answers, but makes several suggestions that Congress should take up. The first is to encourage conversions from owner-occupation to rental. The rental market has strengthened lately: Rents are up and vacancies down. A faster rate of conversions would keep rents in check and relieve the pressure of unsold homes on house prices. Fannie, Freddie and the Federal Housing Administration account for about half of the inventory of foreclosed properties. Many of these, according to Fed research, are viable as rentals. A government-sponsored foreclosure-to-rental program aimed at clearing away regulatory hurdles would make a big difference.
http://www.bloomberg.com/news/2012-01-09/action-on-stalled-housing-market-vital-for-u-s-economic-expansion-view.html
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financial institutions can keep their foreclosed houses off the market rather than lowering prices to meet demand.
Low interest rates also mean those who saved pennies for retirement and depend upon interest are relegated to "Welcome to WalMart" to barely survive.
That's what happens when society lets a privately owned bank control a nation's money supply. Heads financiers win, Tails We the People pay for their losses.
