Three years into the president’s term, the nation’s housing market remains a mess. Although some data shows some signs of improvement in recent months, one in four homes with mortgages is underwater and homeowners are struggling to cope with the loss of $7 trillion in home equity. Meanwhile, the National Association of Home Builders calls 2011 the worst in its 69-year history when it comes to construction of new homes.
Even so, with Iowa voters set to caucus on Jan. 3, the GOP candidates are not rushing forward with alternatives, making it very likely there will be no help on the way if a Republican recaptures the White House next fall. In fact, some of the ideas proposed by Republican presidential candidates could further harm the housing industry, according to industry leaders.
Neither Obama nor the GOP candidates are talking about the kinds of expensive and, no doubt, politically risky moves some economists say are necessary to repair the housing market.
Some economists say bold moves, such as a large-scale refinancing program that would relieve mortgage holders of their negative equity, would help revive the market. Mark Vitner, a senior economist at Wells Fargo, is among those who say that such programs — including one featuring federally backed second mortgages — would give underwater homeowners the ability to sell their homes, and bring back confidence to people who are waiting for the market to improve before they buy or sell.
More than that, all the Republican candidates are advocating a smaller federal role in the housing market, which industry leaders say is the opposite of what is needed.
“So far, none of [the GOP candidates] have said what the American people want to hear — that there is a federal commitment to housing,” said Gerald M. Howard, chief executive officer of the National Association of Home Builders.
To be sure, the GOP candidates have made dramatic statements about the need to get government “out of the way” of the housing market. They say they want to get rid of Fannie Mae and Freddie Mac, the government-backed mortgage giants that together control the vast majority of the nation’s secondary mortgage market.
But Fannie and Freddie, as well as the Federal Housing Administration, have been integral to the response the government has mounted to the housing crisis. Eliminating Fannie and Freddie — which is also a stated goal of the Obama administration — is unlikely to be possible anytime soon without making the market worse, analysts say.
Obama recently loosened requirements on a federal program that would make it easier for underwater homeowners to refinance their mortgages at lower rates. That effort replaces another program that fell far short of its goals and that was not lifting the burden of negative equity from homeowners.