Thursday, February 9, 2012

What’s Up With the Housing Market?

By Stephanie Allen, Project Assistant.

Here’s something we haven’t talked about in a while: the housing market. For years now economists have been saying we’ll need a recovery in the housing market before we see significant economic recovery. So, what’s up with the housing market? The truth is not a whole lot. Last week CoreLogic released theirhome price index with year-end numbers from 2011. Homes prices fell 4.7 percent from 2010’s year-end prices (0.9 percent if you don’t count distressed sales) making 2011 the fifth year in a row that housing prices have fallen. It seems we have yet to hit bottom.

This morning the New York Times reported that five of the nation’s largest banks have agreed to a $26 billion dollar settlement that could provide relief to homeowners and could help the housing market begin to turn around (or at least to stabilize). But it’ll take more than homeowner relief to shore up the housing market according to Christopher Mayer, a housing expert at Columbia’s business school: “if you don’t do something to help the foreclosure process, it’s not going to help the housing market.” 

All of this has some people asking whether we really need to right this ship. It has people from all walks of life questioning the policy of promoting and subsidizing homeownership in America. From the growing number of renters to the baby boomers who have paid off their mortgages to the libertarian-leaning right to New York University business school professors people are beginning to ask whether it’s good national policy or whether we mightn’t be better off as a nation letting this ship sink.

To be sure, homeownership is part of the American dream, but bad policy and lack of oversight has turned that dream into a millstone around our necks. Is it possible to reconceive that dream? What would an America with a lot more renters look like? Would it spur a move away from the suburbs to central cities? Would it free us up to invest our money in other sectors of the economy? How might a move to a more renter-heavy society change the way we do economic development? 

It will be interesting to see where this housing market crisis will take us. For the last five years we’ve been trying to stop the hemorrhaging. Once we finally hit bottom, which path will we take?