The divide between what the majority of people want verses what the establishment wants is never greater than it is when discussing property values. Those who have assets want them to rise in price, while the poor and those just starting out want lower prices they can afford. Of course, they have no political power. The result over the last 40 years has been bubble after bubble, with additional government intervention to keep the party going at all cost.
Listening to CNBC or any business publication, you’d think the economy was nothing but buying and building houses. A recovery in housing is a sign that the renter is being fleeced once again at higher and higher levels. That real wealth creation has collapsed and wages all over the nation are stagnant makes no difference to them. The easy money is in financialization and speculation on these assets.
In the minds of politicians and their banking cronies, the perfect housing market is in North Dakota where the oil business dominates the local job market and provides fairly low wages. Jobs outside the oil industry pay even less.
Worse are the absurd prices for property in a rural state with little infrastructure and few amenities. Consider this ad for a new apartment complex charging $2000 a month for a single bedroom! No, that’s not a fluke. Here’s another.
Meanwhile, President Obama thinks prices aren’t high enough and is actively seeking to increase home ownership for sub-prime buyers. Does this not ring of deja vu?
The Washington Post reports:
The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place… administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.
Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.
So what are taxpayer backed loans? If the borrower defaults, the bank takes back the house, but losses on the bank’s investment are paid by the government, essentially removing risk for the bank and encouraging more careless loans. The result will be higher prices for buyers and renters as well as higher deficits as the government bails out the banks. We can’t think of a clearer example of “They got bailed out. We got sold out” than this.
It’s the same game currently being played with student loans. If a student defaults (which many do), the school or bank doesn’t get discouraged from providing such large loans; instead they are encouraged to provide as many as possible because no matter what happens, they get paid. This is a large part of the reason college tuition has exploded across the nation. Not only are they doing the exact same thing that blew up the housing market in 2008, but this time they’re using taxpayer funds to back the mortgages insuring prices will rise just like the cost of college. The fleecing of America continues.
The nature of this predatory behavior is classic Obama. Further, it’s another example of transferring risk from the gamblers to the taxpayer — just like we’ve seen with “bail-in” measures to seize private bank accounts. More on that later.
