11 marzo 2007

Homeownership: The Fast Path to Poverty?

Por Dean Baker

Now that the housing bubble is starting to deflate, many of the excesses of the mortgage industry are coming to light. Many of the mortgages that they issued at the peak of the bubble are going bad, especially in the sub-prime market. More 10 percent of the sub-prime hybrids issued in 2006 were already seriously delinquent just 11 months after issuance. Note that this is the period in which low teaser rates are in place. One can only imagine the share of these loans that will eventually go bad when the interest rate resets at a higher level.

There is a real structural problem with the mortgage industry that hopefully will be addressed in the wake of the collapse of the bubble (mortgage issuers make money on selling the mortgage, not holding it), but there is a more fundamental policy question that needs to be asked. Politicians routinely hawk homeownership as an end in itself and have pushed policies that are designed to maximize homeownership. (They have also been assisted in these efforts by private foundations that are committed to assisting moderate income families.) This has often meant promoting policies that provide large subsidies to homeowners, and implicitly neglecting renters.

This single-minded promotion of homeownership is now proving to have disastrous consequences for many moderate income families that bought homes at the peak of the bubble. Many of these families will end up losing their homes and whatever savings they had used to buy a home. Their credit record may be permanently damaged and possibly their aspirations as well.

This is what happens when sound policy is subjugated to political ideology. For many people, in many circumstances, homeownership is a good idea. But it is not everywhere and always better for people to own than rent. With the unwinding of the housing bubble, and the millions of tales of families in distress that will be part of this picture, it will be important for the media to examine the policies that got us here. This means that reporters should go after the ownership at all costs crowd. These people have a lot to answer for.

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