Home Ownership: The End of the American Dream

When reading newspapers, magazines, and online stories, it is important to remember that journalists are mostly, lazy hacks who write whatever Journolist or other co-ordinated efforts tell them to write, often pushing the Democratic Party line of the day. Journalists (hacks) basically re-write press releases and issue it as news, sometimes not even re-writing the press release. Often the two (re-issuing press releases, parroting the Democratic Party message of the day) efforts are combined. So when the Financial Times and USA Today both proudly trumpet "the end of Home Ownership" as a goal by people close to the Obama Administration, it is wise to take a look at why this goal is being pushed, and the inevitable consequences. Neither of which, predictably, is good for America. The Death of the American Dream (of home ownership) will have significant and long-lasting costs.


The Financial Times article may be found here. Money quotes include:

“The goals of housing policy should be that people are well housed, not necessarily that they are homeowners,” says Raphael Bostic, a senior official at the Department of Housing and Urban Development. Mr Bostic’s views differ from the administrations of Presidents George W. Bush and Bill Clinton, which tried to expand ownership. “We want sustainable home ownership, not just home ownership for ownership’s sake,” Mr Bostic says.

Ownership rates have already fallen from their pre-crisis peak and any further decline could be damaging for Democrats as they head into the November midterm elections. Nearly 10 per cent of borrowers are at least 90 days behind on their mortgages in the average Congressional district, more than two-and-a-half times the rate on election day 2008, according to a Deutsche Bank study. Democratic districts tend to have more troubled borrowers than Republican districts, suggesting Democrats might face greater voter anger over housing.

...

Australia, Ireland, Spain and the UK all have higher home ownership rates than America, and although those countries have suffered from the housing bubble’s collapse, none has suffered quite as much as the US. One reason is that American home buyers had greater access to cheap credit, created by a Wall Street securitisation machine that bundled mortgages, many of which were high-risk subprime debt, into bonds and sold them to investors around the world.

...

US policymakers have long upheld the benefits of home ownership, including the creation of safer, more stable communities. Studies have even shown that children of homeowners perform better in school than children of tenants. But now some researchers are starting to rethink those assumptions, arguing that a community of renters can be just as stable, so long as those renters are encouraged to stay in their properties for a long time. New York City, which has a large number of renters and also communities that are civically minded, is a prime example. “The benefits of home ownership are largely a myth,” says Dean Baker, co-director of the Center for Economic and Policy Research, a left-leaning think-tank.

...


Some government officials have started to play down the benefits of home ownership. Speaking in January at a meeting of the American Economic Association, Karen Pence, the Federal Reserve’s chief researcher for household and real estate, argued that homes were a terrible investment. Emphasising that she was speaking for herself and not on behalf of the Fed, Ms Pence said that unlike stocks and bonds, homes were an indivisible asset. “You can’t just slice off your bathroom and sell it,” she said. And because home prices are closely tied to the job market, what amounts to the largest financial asset for most people would decline in value just when they needed it most.

There is another downside to generous subsidies funnelled to homeowners, namely that the US is potentially investing too little in other important areas such as education, infrastructure and technology. At the height of the housing bubble in 2006, for instance, mortgages accounted for nearly half of all US debt issued that year, about double the historical norm, according to Haver Analytics. “We’ve over-emphasised our investment in housing and neglected to invest in education and infrastructure,” says Bill Gross, who, as the founder of Pimco, is the manager of the largest bond fund in the world. “We need to refocus on the production of ‘things’ rather than the production of financial products and houses.”

Administration officials have hinted that they plan to do just that by scaling back some support for government-backed home loans in a broad overhaul of housing finance.

USA Today's story is here. Notable quotes include:


Federal housing policy offers the wealthiest Americans billions in tax breaks without delivering much bang for the buck in increased homeownership, critics told government policymakers Tuesday.

"We aren't getting our money's worth," Mark Zandi, chief economist of Moody's Analytics, said at a government conference on reforming housing policy.
The government spent $230 billion last year to promote homeownership through tax breaks and spending programs. The biggest chunk — $80 billion — went toward the mortgage interest deduction, according to the Congressional Budget Office.


Michael Stegman, housing policy specialist at the MacArthur Foundation, said the mortgage tax break goes primarily to the wealthiest households. A study this year by the Tax Policy Center of the Brookings Institution and the Urban Institute noted that the mortgage deduction was worth just $91 a year to families earning less than $40,000 — and $5,459 a year to those making more than $250,000.
The government, seeking to overhaul the housing market after the collapse of mortgage giants Fannie Mae and Freddie Mac, is unlikely to touch the politically sacrosanct deduction anytime soon.
But analysts suggested that the government's debt — $8.8 trillion and growing — meant that housing subsidies might one day face the knife. "We can't afford it," Zandi said.
The U.S. homeownership rate (66.9%) is about the same as Canada's and is lower than Australia, Ireland, Spain and Britain's even though "these countries provide far less government support for homeownership," Michael Lea of San Diego State University wrote this year.

Treasury Secretary Timothy Geithner told the conference "there's no clear consensus yet" on reforming the way mortgages are financed. He promised "fundamental change" in the way Fannie and Freddie do business: They used an implicit government guarantee to borrow cheap money and make big bets in the housing market. When their gamble went bad, taxpayers picked up the tab.

Messages, co-ordinated from government officials and Democratic think tanks, and government dependent ratings agencies (Moody's like the others is dependent on the good-will of the Obama Administration not launch investigations into how they rated junk CDOs that went bust in the 2008 melt-down, and regulations that could put them out of business)?

Message 1: People should not own houses, because every place can be turned into rent-controlled New York City, on the Upper East Side.

Message 2: Mortgage deductions are bad for the budget, and Europe doesn't have them [America must ALWAYS copy Europe in every little detail.]

Message 3: Owning a house is no better and actually "worse" than renting in creating stable and prosperous communities.

Message 4: The financial crash was caused by home owners borrowing too much money, and therefore economic stability requires far less home ownership.

Message 5: Only "rich people" benefit from home mortgage deductions, let's eliminate home ownership as a goal for most Americans.

Message 6: Homes are a terrible investment.

Message 7: We invest too much in housing, and not enough in education and infrastructure (and sub-rosa, welfare spending and Democratic pork).

Taken altogether, the co-ordinated propaganda message dutifully spewed out by the Press means only one thing:

Obama plans to end mortgage deductions. He also plans to end Fannie and Freddie guarantees for home loans (something Barney Frank now backs, a switch from his position just a few months ago).

Why?

Because the Obama Administration is running out of money for its ambitious program of "transfer the wealth." The primary objective of Barack Obama and the people around him is to transfer money from ordinary (mostly White) Americans to the pockets of intermediaries like Rev. Wright, Louis Farrakhan, ACORN, Jessie Jackson, Bill Ayers, Civil Rights attorneys, Shirley Sherrod, and the like on behalf of Black and Hispanic residents and citizens.

Looking ahead to the fall mid-term elections, a Republican House (likely) and fewer Democratic Senators (likely) will mean that Obama's ambitious program to transfer that wealth will be constrained in the areas of "cap and tax" and "green" idiocy, and even using the EPA to do so by executive order can be problematic, given the House's ability to probe all sorts of financial dealings and sweetheart deals that are likely to be given out to favored Democratic constituencies. The Value Added Tax, a favorite of Obama's (because it hits Whites with middle class consumption patterns hardest, and is what Europe does), seems dead on arrival.

In addition, Fannie and Freddie are falling apart. There are trillions "off the books" in liabilities, there is essentially no private market for mortgages any more, even those with good credit histories, well established, with solid earnings records and little risk. Given the uncertain condition of the world economy, and the US failure to provide any employment gains against what Vice President Joe Biden calls the permanent loss of more than 8 million jobs, this is understandable.

But there is another reason behind the "Death of the American Dream" to turn Americans into a nation of renters. It is simple racial animus, on the part of Obama, and his Chicago cronies (like Valerie Jarrett) who are Black, and class animus against ordinary middle class White Americans, by the rich, White elites that form the backbone of Obama's supporters and administration.

Rose Fitzgerald Kennedy was supposed to have said, upon learning to her horror that the cars in the private chapel on her estate belonged to the servants, "What's the point of being rich if ordinary people can have nice things too?"

This is the primary motivating factor behind the instinctive push for ending home ownership for most Americans, and turning them into a nation of transient renters.

It is true, that as Steve Sailer, and others have noted, expanding home ownership to those with no chance of paying back the mortgages, was insane and spread the defaults globally. Offering a strawberry picker who made $14,000 a year a $670,000 mortgage, as "The Big Short" author Michael Lewis ("Moneyball," "Liars Poker") notes, was bound to go bad. Massive reforms on how CDOs (collateralized debt obligations) were rated, sold, and "cloned" were, and are needed. That mortgages were securitized and sold to investors wanting streams of cash, was not in itself a bad thing. That the mortgages were mostly junk, bound to fail, and sold as investment (near riskless) grade is something straightforward to address. Much of the blame falls on lazy, and greedy investors who failed to do their due diligence.

Moreover, the decline in home ownership rates (as the Financial Times chart makes clear) is due to not the absence of easy credit, but the decline in real wages. As noted by Citizen.org, US wages have stagnated since the 1970's, largely as the result of foreign wage competition. "In 1973, the average hourly wage for American workers, in today's dollars, was $17.26 while in 2007 it was up less than 1 percent to $1742. Over the same period, US workers average productivity nearly doubled." In the 1980's, the competition from first Mexico, then China, drove down wages of blue collar workers. In the 1990's and onwards, competition from outsourcing drove down the wages of white collar workers, along with job losses as manufacturing moved to China or Vietnam. That Boeing has an assembly plant in Vietnam for the wings of the new Dreamliner, is indicative how far manufacturers will chase cheap labor, and as noted in the Financial Times:


Mr Johansson, the head of the European Roundtable of Industrialists (ERT) and also chief executive of truckmaker Volvo, told the Financial Times that public debate was focusing on the wrong issue.

"We have much too much discussion about labour costs. What we really need to be concerned about is that we have the right skills and education."
...
He added: "We have too few young people all in all, and too few young people going into engineering. We are beginning to see real competition coming from India and China in, for example, highly-qualified engineers."

The view of the ERT is highly significant because it is made up of business leaders in charge of companies with revenues of €1,600bn ($1,980bn) and 6.5m employees.

He railed against the idea that Europe can live off knowledge only and keep research and development while letting manufacturing drift to lower-cost countries.
"There needs to be a political debate: how can we compete?
"It is a false model that we can live off knowledge and have manufacturing elsewhere. Over time manufacturing and R&D go hand in hand."

America, even more than Europe, has not been able to keep income rising. Cheap credit, and falling prices for electronic goods, primarily computers, and new gadgets like IPods, IPads, IPhones, and the like provided the illusion of growing income, which was based on credit and fairly cheap imported Chinese goods, also including textiles and shoes, and the like. Dub it the "Wal-Mart model of prosperity." Which was illusory.

For big ticket items, like homes and cars, America remained mired in low or static income growth, as energy costs rose and desirable places to live increased in value (due to mass immigration of poor, Mexicans, making previously nice, pleasant, middle class places into barrios ridden with crime).

America has a housing problem. But it is really just an extension of low wage growth, and mass immigration. Middle class Americans traditionally own homes in their later middle ages as a retirement place. They aim to have no more mortgage payments, and own their homes free and clear, so they can adjust to much lower retirement (and fixed) incomes when they do retire. Thus the pattern of Americans is to move around, chasing jobs, until the final job near retirement allows a free-and-clear title to a middle class home, in a neighborhood unlikely to change anytime soon (for the worse). Young people will take a risk on gentrification, older folks closer to retirement seek to cash out equity when they move to their final home, and pay off their mortgage.

Obama does have levers available to him, either through lame-duck legislation, after the November elections, but before a new Congress is seated, or through regulation. He can if he wishes end mortgage deductions, to raise more money that can be distributed to his supporters. ACORN, Jessie Jackson, Louis Farrakhan (and the Nation of Islam), perhaps the Annenberg Challenge and Bill Ayers, or the Gates Foundation, with Ayer's brother. [The Gates Foundation, by the way, explicitly excludes White children from scholarships, only non-Whites need apply.] He can instruct Tim Geithner, Treasury Secretary, to have Fannie and Freddie stop purchasing home mortgages, or slow that down, creating far fewer home purchases, and using the money for say, ACORN initiatives or salaries for local government employees through Federal Block Grants.

These are all very attractive prospects to Obama, and the Rose Fitzgerald Kennedy folks in the Media, Think-Tanks, Democratic politics, and the like.

It will however, come with a cost. Rentals are places that impose significant downward pressures on White middle class families. Pet ownership is forbidden in most of them. Rentals are in areas with bad schools, mostly non-White majority. The surest way, as Steve Sailer noted, to turn White kids into non-White hating adults, is to have them beaten up every day by non-Whites. Which is guaranteed in non-White majority school districts. White middle class people, accustomed to owning their own homes, will suddenly and irrevocably be placed in fairly squalid rentals, with much lower living standards (no more backyard barbecues, no more dogs or cats as pets, no more small garden, no more sunning themselves in the backyard in private, no more living in relative privacy). The neighborhood is likely to be considerably downscale, transient, and fairly non-White. [Few places in America resemble NYC's Upper East Side.]

This as America is filled with empty spaces, simply begging for spread-out houses, particularly away from the water-constrained coasts, and Chicago/NYC style water constrained metropolises. There is no particular reason for say, the Dallas-Fort Worth area not to build out, other than keeping Whites cheek and jowl with non-Whites.

And this is a dangerous and irrevocable step. As Whites lose guilt over segregation and slavery, a development already well underway, they are likely to resent terribly being pushed into non-White majority areas with the "crime tax" imposed upon them, and demand vigorous, non-PC, and non "disparate impact" or "racial profiling" concerned policing. In other words, move the White majority into rental housing in non-White areas, and they will reliably demand that police crack down hard, without any concern over racial profiling, on non-Whites.

America's social peace has been bought by private home ownership, by Whites realistically fearing non-White crime and retaliation (for past wrongs), living in safe, removed, mostly White suburbs. Move Whites out of safe, removed, White-majority suburbs, in large numbers, and they will fight. If not to return to the suburbs, to move non-Whites out of the rental areas.

Something similar has already happened in Britain. As noted by the Daily Mail, the English Defense League has grown from a few members to several thousand members in just a year. Over 10,000 were predicted at the Bradford match (likely to be banned). Yes, of course the EDL is made up of mostly White soccer hooligans. But the issue is simple: who does Britain belong to? Muslim "conquerors" who came to "take over" or the natives (who have nowhere else to go). Of course England's destiny is violent (and quite possibly a Muslim take-over). The EDL members may be yobs, but they are trapped. They don't have the income or education to flee to Switzerland, or the south of France's rural areas, or other places English folks from the Upper classes are escaping to. Thus, a running street fight that never ends.

America is much bigger. It can, probably, absorb (though not without huge costs including social and political) some portion of the illegal aliens and their descendants already present in the US. That of course supposes a vast physical separation by virtue of middle class, safe suburbs providing a safety valve for social discontent as Whites are made a minority in their own nation, for no reason anyone explained. Obama's obvious plan to turn most aspiring home owners into renters is likely to produce the US version of the EDL. With the end of White Guilt, the result is likely to be a simple, and ugly battle over turf "ownership."

The nation is in the best of hands.