Housing needs substantial help from the federal government, taxpayers and the banking industry if it hopes to attain a real recovery, according to arguments put forth by three top Federal Reserve officials in speeches last week.
Housing needs substantial help from the federal government, taxpayers and the banking industry if the economy is to have a full recovery.
The speeches are part of the recent Federal Reserve push to influence government fiscal policies and mandates, all in the search of amending an economy dragged down by ongoing housing woes. Among the ideas outlined by the Reserve are a number of approaches aimed at ending the cycle of price drops and property repossessions hammering the health of real estate across the country. Top themes included:
1. Principal reduction for borrowers (via banks and Fannie/Freddie)
2. Relaxed qualification terms for refinancing (aimed at helping underwater borrowers)
3. Jumpstarting lending through minimized liability for lenders on federally-backed loans (to break through tight credit conditions)
Bernanke sent a host of recommendations to Congress last week, all of which focused on helping homeowners and homebuyers build positive momentum within the market.
Across the board, the Fed tenets cite the intrinsic vulnerability of any economic recovery that doesn’t include a substantial improvement in the housing sector. Barring recovery there, the Fed argued, the country risks losing the battle back toward growth, and all areas of the economy may backslide, creating much larger—and thornier—economic problems down the road.
With its own armory of weapons exhausted—and interest rates at rock bottom—the new push by the mammoth financial overseer seems to be aimed at refocusing government agencies on the importance of housing recovery, and the improvement of borrowing and payment conditions for the nation’s homebuyers and homeowners.
The National Association of Home Builders was quick to laud the recent Fed involvement, suggesting in a press release that tight credit for home buyers and builders was unnecessarily hampering recovery, and shortchanging the broader economy of the myriad positive effects that a functional housing sector can bring.
See also:
Twisting Rates to Turn on Housing
Fed Rules for Fannie and Freddie
10 Cities Where it’s Better to Buy than Rent
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The Fed needs to act decisively and quickly because the housing market, particularly in the Northeast, where there is little growth and basically an outmigration, continues to have more supply than demand and even refinancings for underwater borrowers can help get the industry moving.
I totally agree with Debbie Gartner that demand of housing market industry in our society is rapidly increasing.