President Obama did not say much about housing in the first presidential debate. In his response to Jim Lehrer’s first question, he said, “housing has begun to rise,” and left it at that.
But others are making much stronger statements and arguments for him. The Democratic platform boasts that “President Obama took swift action to stabilize a housing market in crisis,” crediting him with helping 5 million families restructure their loans, and giving tax credits to first-time homebuyers. Supporters have echoed the platform and expanded on it: in last week’s Washington Post real estate section, under the headline “Housing was in a free fall. Obama caught it,” Mark Zandi writes, “The Obama Administration deserves credit for quickly ending the housing free fall,” and “Obama’s efforts to shore up housing were well timed.” Zandi is chief economist for Moody’s Analytics and has been an advisor to President Obama.
Swift, quick, and well-timed? Housing policy has floundered, creating one unsuccessful program after another, while housing production fell through the floor. The first three years of President Obama’s term have been the worst three years for housing since World War II. This year is better than any of the last three, but worse than any of the 63 years before them. Each of President Obama’s four years has been worse than any year for any of his predecessors back to President Truman in 1945, when resources were being directed to finish the war.
During these four years, American homeowners have been losing ground and losing their homes. After the debate, a vice-president of Realty Trac, a leading producer of housing market data, summarized the situation as follows: “Since Obama took office in January 2009, more than 6 million homeowners have started the foreclosure process and 3.2 million have lost their homes to banks. Meanwhile, home values have plummeted 30 percent from their peak even with recent home price gains, leaving more than 12 million homeowners seriously underwater, owing at least 25 percent more on their mortgages than their properties are worth.”
The administration’s various efforts to prevent foreclosures have achieved so little that each new initiative is greeted by the housing industry with a shrug. The Home Affordable Modification Program, the first and largest initiative back in 2009, was expected to help 7 to 8 million homeowners by lowering their mortgage payments. The latest report from the U.S. Treasury states that only 800,000 households are being helped, and over 1 million households have been turned down or dropped from the program. Searching for on “HAMP criticism” brings up over 300,000 hits across the political spectrum. There has been nothing so unpopular since the urban renewal program in the 1960s. The program is so unsatisfactory to so many that bloggers on the avowedly progressive website Firedoglake.com have been complaining that HAMP is “hurting liberalism.”
Among other failings, “It’s making the lives of its participants worse while promising to make it better.”
The latest program, the Home Affordable Refinance Program (HARP 2.0), has been more successful, thanks to the unprecedented low mortgage interest rates, but some lenders are reporting that the volume of activity is slowing down, and the program has been strongly criticized by liberal bloggers because the homeowner is only allowed to deal with the original lender. As far as any homeowner is concerned, the lender is a monopolist.
Zandi, an optimist, forecasts that even with HARP 2.0, another 3 million homeowners will lose their homes through foreclosure. Other estimates are higher. Laurie Goodman, Senior Managing Director of Amherst Securities and a member of the Bipartisan Policy Center’s Housing Commission, told the Senate Housing Subcommittee last spring that she projects 7 to 9 million more foreclosures. That would be at least 10 percent of all homeowners, on top of those who have already lost their homes.
The positive housing news is that house prices, sales, and construction have been improving in recent months, as both President Obama and Governor Romney have noted. For an industry that’s been increasingly desperate, any improvement anywhere will be greeted with relief. But meanwhile, the overall economy has been growing more slowly in 2012 than it did in 2011, which isn’t good for housing. President Obama was right to be modest.