The High Cost Of Homeownership And Government Intervention
While enjoying the banter of a chat room the other day, I was encouraged to look up some information about how we ended up in the subprime recession/depression.
In a word: Government.
There are those who credit the banks, the lending institutions, and certainly they were complicit. But they began by doing what they are regulated to do. Even now, when the words of the government are they want the banks to lend more, bankers will tell you the regulators are not letting that happen. So government is talking out of both sides of its many mouths. (No surprise there)
If one actually wants to understand the subprime situation, one must go further back and understand the intention of the do-gooders.
Fannie Mae and Freddie Mac were two quasi-private government entities, which were assigned the goal of increasing homeownership among the less fortunate. It is not my intent to here discuss how that occurred, but the fact is it did. Over a period of time, very definite goals were written to help lower income people gain houses of their own.
It is a wonderful sounding proposition: homeownership. Everyone should be a homeowner.
And so demand for houses began to increase, leading to the building of more, which encouraged the lenders; prices rose, more low income people (and others) took advantage of the boom, and the cycle built on itself ~ until as all bubbles do, it popped.
Government. Now it wants to put the rap for the economic debacle elsewhere. Democrats blame Republicans. Republicans blame Democrats. Obama blames everyone for what’s wrong and takes credit for anything that goes right (according to him). The perfect politician.
Anyway, that’s the background. Government is the problem. If it can be screwed up, government will!
The ideal is that everyone should own homes. Some do-gooders got government to accept this ideal, and so regulations were made, etc.
But the ideal itself is wrong. Everyone should not own homes. Some people should rent. Some should get subsidized housing (free). Only some of the people should own their home, not all the people.
If left to their own resources, not everyone would be able to attain a mortgage and owe money to a lending institution collateralized by a house. The reasons are simply that the lending institution requires a certain situation and history of those they lend money to. Why? We all know. They want to get paid back – with interest. When the government got involved, they forced those rules to become less stringent and so people, who previously would not qualify for a loan, became qualified. Yet that qualification to gain a loan did not change their ability to repay the loan. It is this ability, or more appropriately lack thereof, which is why some people should rent.
Not everyone handles finances well enough to make house payments and keep enough money for repairs and regular maintenance, the electric bill, etc. Some people just are not capable of these responsibilities. Home ownership for them is more than they can cope with; better for them to rent. They then have one monthly payment and everything else is taken care of. They still have a roof over their heads, but not the responsibility of repairing the leaks.
Further, if one considers that many people die while still owing money on a mortgage, one realizes that ‘owning’ a home does not mean being rid of a house payment, that is having paid the mortgage off and having no monthly payment. In fact they never ‘owned’ their home, all they had was monthly payments just like any renter. All ‘owning’ means is that one is responsible for everything about the house, to include repairs, payments, taxes and maintenance.
Nonetheless, do-gooders agitate government to provide ‘home ownership’ to everyone and government representatives, always mindful of how to buy a vote, are easily convinced. Besides, it’s not their money. Thus the do-gooders can pat themselves on the back about the good they’ve done.
The result is not always so wonderful.
The do-gooders avoid any responsibility as their voice and advocacy is long in the past. They will avoid complicity by pointing at some particular regulation or private business and saying they did something wrong to cause the problem.
The fact is the whole process was wrong. Government should never have interfered in the private market.
The do-gooders, with government representatives’ complicity, caused the problem. As always, they try to blame others.
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