http://www.npr.org/templates/story/story.php?storyId=129348144

text size A A A August 21, 2010
For more than 20 years, the mantra in Washington has been "more, not less" when it comes to Fannie Mae, Freddie Mac and the expansion of homeownership.

But in light of the financial crisis and Fannie and Freddie's near-collapse, policy leaders are also rethinking the government's role — and many Americans are starting to question whether homeownership is the only path to the American Dream.

Fannie and Freddie function by buying, bundling and then stamping a government guarantee on mortgages. Then they sell them to investors. It keeps the banks happy because it keeps capital flowing, and it keeps consumers happy because it makes low, fixed-rate mortgages possible.

At least that how things were supposed to unfold. But the two mortgage finance giants "made astonishing mistakes," Raj Date, executive director of a financial policy think-tank called the Cambridge Winter Center, told NPR's Audie Cornish.

'It Has All Come Back To Haunt Them'

"As normal people everywhere in the country realized that housing prices seemed to be growing straight into the stratosphere, instead of becoming more conservative about lending against those ridiculously high values, Fannie and Freddie just continued to make the same kind of loans and indeed made more aggressive loans during that period of 2005, 2006, 2007," Date said. "And it has all come back to haunt them."

The world we live in today is not quite the world that existed in 1950.
- Raj Date
So instead of rationally-priced credit, he said, the country wound up with a $6 or $7 trillion bubble in housing values. And all of Wall Street and most of the country's banks made the same sort of mistakes, Date said.

Policy makers are at a bit of a crossroads, said Date, who was among a number of industry leaders who huddled with Treasury Secretary Timothy Geithner this week to figure out a new way forward on housing.

Fannie and Freddie have dramatically scaled back their level of aggressiveness in underwriting credit, Date said. But, he added, "the fact of the matter is that on average and over time, Fannie and Freddie represent an economic subsidy from the public at large to middle and upper middle-income homeowners."

Despite talk on Capitol Hill of dismantling the two organizations, it might be tough to get rid of them. That's because Fannie and Freddie, along with the Federal Housing Administration, are responsible for some 95 percent of the mortgages in the country today, Date said.

"If you think that the fall of 2008 was calamitous, believe me, you haven't seen anything yet if you were just somehow to turn off the lights on Fannie and Freddie today," he warned. "That said, I think the policy makers are trying to be thoughtful about the right long-term answer is for housing finance more broadly, and that involves revisiting some issues that have been treated as sort of untouchable for quite some time."

Ultimately, Date said it might be time to rethink homeownership as an American ideal.

The White Picket Fence Reconsidered

"The world we live in today is not quite the world that existed in 1950," he noted. "The nature of households and the rate at which they dissolve and reform, the nature of work and its transient nature across geographies are all things that suggest that maybe, just possibly, a middle-class American shouldn't stake themselves to an illiquid, very large, concentrated, leveraged asset —- that is to say, a house."

Alyssa Katz, author of Our Lot: How Real Estate Came To Own Us, also thinks America needs to reconsider the American Dream.

"Homeowenership has gone from being pretty much an unmitigated good — something that would provide stability — and instead has thrown a huge cloud of doubt over the value of homeownership for a lot of people."

Even so, there also are downsides to renting, she said.

"Some of the common beliefs about renting are absolutely true," Katz said. "Being a renter has very little security. They don't have any promise they'll be able to live in the apartment or home for more than a year or two. Renting is also perceived as something that really divides Americans by class. So I think for a lot of potential renters, or people who own and are thinking of making that transition to renting, they have to overcome this sense that they are giving up a sense of status."

That's a tough thing to shake for many Americans, she said.

If more people rent, the benefits of homeownership will only increase for those who own homes because the pool will shrink, Katz said.

"Those who have access to homeownership and the benefits that it brings, as a result of policy, will be even more privileged than they are now."

August 21, 2010

Earlier this year, Mark and Joanne Cleaver faced a decision: buy or rent. In normal times, their decision would have been easy.

But these are not normal times.

"We would lose money if we bought now — even at today's market rates," Joanne says. "Frankly, condo prices would have to go down a good 30 percent more to overcome the negative effect of the transition and transaction cost."

Mark and Joanne sold their home in Milwaukee — a home they owned for 28 years — and moved to Chicago. The couple, both in their 50s, relocated for her job. And they decided to rent an apartment overlooking Lake Michigan.

"It was a tough decision," Mark says. "You have kind of the emotional baggage of wanting to continue to own a house — the 'American Dream' theory. The flip side of it is, you kind of get to give up the baggage of all the maintenance cost. And all the maintenance time that goes along with it."

Utilities are included. Parking's included. I write my check, I'm done for the month. It's a wonderful feeling.
- Mark Cleaver

"Our front porch collapsed on our Milwaukee house," Joanne adds. "It was, like, $22,000 to replace it, just to get back to having a front porch. That's a lot of money to get hit with just to be able to walk up to your house, your front door."

Mark says that when he writes his rent check every month, he thinks to himself, "This is worth every penny."

"It locks my cost in every month," he says. "I have no surprises. Utilities are included. Parking's included. I write my check, I'm done for the month. It's a wonderful feeling."

While the Cleavers are enjoying the conveniences of renting — a staffed pool, a workout room, maintenance workers — they still haven't ruled out buying again. "We'll continue to go to open houses and take a good look and see if there's something there that really absolutely hits on all those cylinders," Joanne says.

And so far the Cleavers say there is only one downside to renting: "We do miss the ability just to go out into a backyard and grill," Mark says.

But they say it's a compromise they're willing to make.

"And when winter comes, and I'm watching everyone else doing their snow shoveling and snow plowing," says Mark, "I'm going to be smiling."

For many people home ownership is good. It encourages responsibility, and the stability results in good community spierit.
But it also needs government co-ordination to make sure jobs appear in the right places. For example when a steel works closed in the UK the government went to great measure to attract other industry / services etc. to that town. This way both private investment and public investment in housing, schools, facilities etc. remain utilized.
"
Thirty years of rebuilding Corby

Three decades after the closure of the Corby steel works, the town is said to be prospering.

"It's a town that's on the up," said Nick Bolton, from the North Northamptonshire Development Company.

Around 10,000 people lost their jobs when British Steel closed the Corby plant in 1980. A further 10,000 jobs were lost in allied businesses.

Former steelworker Peter McGowan said: "The major legacy for Corby is that it is working; it's found its feet again."

Dominating

From the 1930s until 1980, the steel works dominated Corby. "It was almost a one horse town," said Steve Purcell, who was an instrument mechanic at the steel works.



"For the men, there was not a lot other than the iron and steel works and the quarries," he added.

Thirty years after the closure of the works, Peter McGowan can vividly recall the way it loomed over the town: "The skyline in Corby was dominated by the black soot, smoke, the lights, the smell."

The works closed in stages between April and December 1980. It followed a 14-week National Steel Strike, although the decision to close had been taken before the dispute began.

"The day that I walked back in [after the strike], was the same day that I got my redundancy papers. It was April 1st. It had to be a joke but it wasn't," said Steve Purcell.

The effect on the town was immediate.

"Everybody was down, quite despondent and depressed," said Steve Purcell.

"They couldn't see what on earth they were ever going to do again. What use is it that you used to be a pusher driver on a coke oven?"

"There was a feeling of devastation throughout the town," said Peter McGowan. "People couldn't talk about anything else; people couldn't think about anything else."

Regeneration

The Conservative government made Corby an Enterprise Zone to attract jobs to the town and the local Labour-controlled council worked with other bodies to bring European Community grants to the area. The first new business to locate to Corby was Oxford University Press.



The director of investment and marketing at the North Northants Development Company, Nick Bolton, said that it was not until 2001 that Corby really started to regenerate.

That was when the Labour government established Catalyst Corby, an urban regeneration company. They planned to double the population from 52,000 to over 100,000 and create more than 30,000 jobs over the next 30 years. Catalyst Corby has since become the NNDC.

Significant facilities to open in Corby include Eurohub, a rail freight link to the Channel Tunnel, new shops in the town centre, an international-sized swimming pool and the reopening of the railway station.

"What's particularly noticeable when you walk the streets [of Corby] is the shift in self-confidence in the town," said Nick Bolton. "It's a town that's on the up. People see that and they want to bring their businesses here."

http://news.bbc.co.uk/local/northampton/low/people_and_places/history/newsid_8715000/8715706.stm

S.

Easy

Lower Taxes and deregulate and that will start everyone on the road to economic recovery.....except those who expect the government to take care of them. Better known as looters.

Nonsense - they will just import fast cars from Europe, buy gold bars, flat screen TV's from China, Japan.
Also drive their gaz guzzlers more importing more oil.
Meanwhile those on food stamps....
Without homes......
Children in 100 year old schools.......
Companies without funding to put the latest technologies into production.......
Transit systems that need investment.....
S.

by YUKI NOGUCHI

Listen to the Story
Morning Edition [4 min 10 sec]
Add to Playlist
Transcript
[URL]http://www.npr.org/templates/story/story.php?storyId=129427659[/URL]

EnlargeCourtesy of Melissa Brooks
[B]
After a year, Melissa Brooks and her husband still haven't found a buyer for their home in Lansing, Mich. -- even though it's listed for less than they owe on the mortgage.[/B]

text size A A A August 26, 2010

With unemployment high and jobs scarce, work is hard enough to find. But in today's economy, there's an even bigger barrier for some: their home.

Many people can't afford to sell their homes; as many as one-third of homeowners owe more than their home is now worth, and there are few buyers. Americans who once expected mobility now find themselves grounded, with their careers and lives fixed in place. They can't move to better job markets without taking a huge financial hit.

Is your inability to sell your home affecting your life? Tell us about your experience.

Among them are Melissa Brooks and her husband. They had planned to move from Lansing, Mich., to Atlanta, to be closer to family and more available jobs. But for the past year — even at a steep discount — their home hasn't found a buyer.

"Everything's kind of just centered around selling this house here in Michigan," Brooks says.

It has complicated her life. On the one hand, she has enrolled her child in school in Lansing.

But Brooks herself, a teacher, is keeping her career on hold in case they can move — she's not looking for a job, nor is she pursuing her graduate studies. She's also kept the house on the market, which is now a short sale — meaning it's listed for less than what they owe on the mortgage.

The experience of buying a home has scarred her, she says, and she often feels angry.

[IMG]http://media.npr.org/news/graphics/2010/08/equity-map/equitymap.gif?t=1282760859&s=2[/IMG]
Interactive Map: Negative Equity Mortgages By State

"Recently, I guess, I've been angry at the people looking to buy my home, which sounds crazy, because I want to sell the home," she says. But after renovating her 19th century home with money she'll never recover, she's appalled that prospective buyers ask her whether she plans to paint the deck or replace the wallpaper.

"I feel like, 'Don't ask me anything,' because we're short-selling this house, we're not doing anything else to it," Brooks says.

[B]On a national level, this phenomenon is hurting the efficiency of the labor market, says real estate professor Joe Gyourko at the Wharton School at the University of Pennsylvania. With these constraints, employers and employees aren't finding their best match.

"Outside of outright foreclosure itself and the loss of wealth, it's probably the most important impact of overleveraging the housing market that we're going to have in this cycle," Gyourko says.

Some parts of the country — namely the East and West Coast markets — are likely to recover more quickly. But not everyone will be able to wait for home prices to recover and continue to forgo better jobs. In other words: At some point, people will abandon their houses.[/B]

Related NPR Stories
Existing-Home Sales Hit A 15-Year Low
Homebuyers' Dilemma: Has Market Bottomed?
The Long View: Home Prices Are Still High
Post-Mortgage Meltdown, Where Do We Go Now?

"If you need a job and you need to improve your life chances, you know, why not?" Gyourko says. "I mean, it's not that it's free and it's not that it doesn't cost you, but it may be worth paying that price."

Tony Abrom has considered that.

His workplace has been downsizing, so he has been looking for work elsewhere, including out of state. Two years ago, he and his wife prepared to sell their house in Douglasville, Ga.

"We were really ready to leave," Abrom says. "We were painting the walls and everything and getting everything done, and that assessment just took the wind out of everything we were doing."

Now, Abrom can't afford to drive far from his home, but he also cannot afford to sell it.

Being stuck also forced Abrom to defer his dream of joining the Air Force, which would also require a move. And it appears he won't be free to leave for some time. "My father's buying a house four down from me — same floor plan that I have for half the price that I paid for mine. And when I saw that, it gave me the feeling that, 'Oh my God, I'm never going to be able to get out of this neighborhood.' "

[QUOTE=Atabey]

by YUKI NOGUCHI

Listen to the Story
Morning Edition [4 min 10 sec]
Add to Playlist
Transcript
[URL]http://www.npr.org/templates/story/story.php?storyId=129427659[/URL]

EnlargeCourtesy of Melissa Brooks
[B]
After a year, Melissa Brooks and her husband still haven't found a buyer for their home in Lansing, Mich. -- even though it's listed for less than they owe on the mortgage.[/B]

text size A A A August 26, 2010

With unemployment high and jobs scarce, work is hard enough to find. But in today's economy, there's an even bigger barrier for some: their home.

Many people can't afford to sell their homes; as many as one-third of homeowners owe more than their home is now worth, and there are few buyers. Americans who once expected mobility now find themselves grounded, with their careers and lives fixed in place. They can't move to better job markets without taking a huge financial hit.

Is your inability to sell your home affecting your life? Tell us about your experience.

Among them are Melissa Brooks and her husband. They had planned to move from Lansing, Mich., to Atlanta, to be closer to family and more available jobs. But for the past year — even at a steep discount — their home hasn't found a buyer.

"Everything's kind of just centered around selling this house here in Michigan," Brooks says.

It has complicated her life. On the one hand, she has enrolled her child in school in Lansing.

But Brooks herself, a teacher, is keeping her career on hold in case they can move — she's not looking for a job, nor is she pursuing her graduate studies. She's also kept the house on the market, which is now a short sale — meaning it's listed for less than what they owe on the mortgage.

The experience of buying a home has scarred her, she says, and she often feels angry.

[IMG]http://media.npr.org/news/graphics/2010/08/equity-map/equitymap.gif?t=1282760859&s=2[/IMG]
Interactive Map: Negative Equity Mortgages By State

"Recently, I guess, I've been angry at the people looking to buy my home, which sounds crazy, because I want to sell the home," she says. But after renovating her 19th century home with money she'll never recover, she's appalled that prospective buyers ask her whether she plans to paint the deck or replace the wallpaper.

"I feel like, 'Don't ask me anything,' because we're short-selling this house, we're not doing anything else to it," Brooks says.

[B]On a national level, this phenomenon is hurting the efficiency of the labor market, says real estate professor Joe Gyourko at the Wharton School at the University of Pennsylvania. With these constraints, employers and employees aren't finding their best match.

"Outside of outright foreclosure itself and the loss of wealth, it's probably the most important impact of overleveraging the housing market that we're going to have in this cycle," Gyourko says.

Some parts of the country — namely the East and West Coast markets — are likely to recover more quickly. But not everyone will be able to wait for home prices to recover and continue to forgo better jobs. In other words: At some point, people will abandon their houses.[/B]

Related NPR Stories
Existing-Home Sales Hit A 15-Year Low
Homebuyers' Dilemma: Has Market Bottomed?
The Long View: Home Prices Are Still High
Post-Mortgage Meltdown, Where Do We Go Now?

"If you need a job and you need to improve your life chances, you know, why not?" Gyourko says. "I mean, it's not that it's free and it's not that it doesn't cost you, but it may be worth paying that price."

Tony Abrom has considered that.

His workplace has been downsizing, so he has been looking for work elsewhere, including out of state. Two years ago, he and his wife prepared to sell their house in Douglasville, Ga.

"We were really ready to leave," Abrom says. "We were painting the walls and everything and getting everything done, and that assessment just took the wind out of everything we were doing."

Now, Abrom can't afford to drive far from his home, but he also cannot afford to sell it.

Being stuck also forced Abrom to defer his dream of joining the Air Force, which would also require a move. And it appears he won't be free to leave for some time. "My father's buying a house four down from me — same floor plan that I have for half the price that I paid for mine. And when I saw that, it gave me the feeling that, 'Oh my God, I'm never going to be able to get out of this neighborhood.' "
[/QUOTE]


In Europe over the years industry has been located to take advantage of housing stock. With the decline of one industry other industries are strongly encouraged to move to the area.

But home ownership will decline with the decline of secure jobs. In particular in areas without a wide variety of employment. The American dream will be available to far fewer people.

S.