Housing Market Slowdown

As I wrote in my previous post, rental housing is tight because people can't afford to buy.  The pundits are finally waking up to the fact that the housing market is slowing down and so the merry-go-round is about to stop again.  As a preliminary note, the only reason the housing market has been increasing is because a lot of hot, commercial money has been jumping in to snap up tons of houses for potential rentals or tear-down redevelopment; owner-occupied housing, which creates the community stability and social benefits we traditionally look for from this market, has not been making the difference.

The pundits talk about rising prices and rising interest rates forcing people out of the market, but they are ignoring, perhaps deliberately, the elephant in the room.  Too many people lack the economic stability to make such a long-term purchase.  Their income hasn't been steady for the last several years (if ever), they don't know how steady it will be over the next five years (It probably won't be.), and they don't even know if they'll be here for the next five years (probably not).  People can't buy, and even if they can, they don't have a good reason to.

Fun with Fannie and Freddie

As I wrote back on 27 March ("This is a good idea?"), Fannie Mae and Freddie Mac have had their capital requirements reduced so they can save the mortgage markets. They also had their limits increased dramatically so they may now acquire Alt-A size mortgages, even though Alt-A is shaping up to be a bigger meltdown than subprime. And even though Fannie and Freddie posted multibillion dollar Q1 losses. Guess what, folks, you're in the mortgage business, making the world safe for stupid mortgages. Your tax dollars at work.