While the housing market paced a sharp recovery in 2013, and there are signs the sector is stabilizing, persistent doubt remains as to its impact on the American economy as a whole.
The general consensus among public economists is that the housing market has lagged behind the greater U.S. economy in terms of recovery and overall growth.
Growth in the housing market, while notable, seems to be leveling off in some areas and dangerously sharp in others.
As of late, certain commentators are attempting to parse exactly why activity in the housing market has been comparatively slow. New analysis from Los Angeles Times contributor Michael Hiltzik tackles this head-on, while outlining some hypothetical prescriptions.
Noting analyst consensus, Hiltzik points out the importance of increasing mortgage credit availability, considering that the fixed 30-year mortgage remains cornerstone of the American home loan market. However, the opening of mortgages for home purchases seems to have bottomed out by the close of 2011.
Taking all this into consideration, there needs to be a stable “engine” of some variety to insure the housing market continue to grow. Without directly endorsing this myself, Michael Hiltzik suggests at least partially retaining public-sector mortgage management.
His rationale hinges on the possibility that this will shift loan responsibility from private borrowers back onto greater institutions, and into the ownership of entities better adept at handling them.
While a counter-argument might suggest this encourages economic paternalism, there is a feasible case to be made that it also removes an element of fiscal risk.
To address possible qualms around propping up both the 30-year fixed mortgage and keeping loan management in public hands, Michael Hiltzik points out that the greatest threat to the housing market remains regional upsets.
To follow the train of logic that supporters of the 30-year fixed mortgage endorse, it’s a mortgage paradigm that only bolsters price stability against confounding factors. In order for the housing market to sustain its recovery, there will need to be certain economic stabilizers. It’s easy to argue the inverse is true as well.
So What’s the Solution?
While I can’t explicitly endorse every claim in Michael Hiltzik’s Los Angeles Times column, he does fixate on some crucial points. Within reason, fixed-rate mortgages will need to remain accessible to the mainstream of America buyers. As an adjunct to this, mortgages will need to rest at least partially within the hands of institutions against which culpability can be enforced.
The factors leading up to the 2008 recession were multifaceted, but the bottoming-out of the mortgage market was no small contributor.
Ultimately, we’ll need to insure by some means or the other that most Americans are able to safely purchase homes.
Too strong a slowdown in the housing market could discourage recovery in certain metros, further compromising the ability of young professionals and middle-earning families to put down for a mortgage of their own.
Photo Credit: Justin Gaurav Murgai