Welcome to Politics Bites, where every afternoon at It's A Free Country, we bring you the unmissable quotes from the morning's political conversations on WNYC. Today on The Brian Lehrer Show, Jhoanna Robledo, real estate reporter at New York magazine, and Nick Timiraos, Wall Street Journal real estate reporter, talked about Obama's housing rescue plan, the latest real estate market indicators, and whatever became of all those vacant condos.
The vicious foreclosure cycle
New statistics for September show housing prices fell 3.8 percent—worse than analysts expected. All told, the price of an average American home has declined more than 30 percent since 2006
When homes lose value, it puts owners at risk for going underwater on their mortgages: Eventually, the house may be worth less than what they owe, so even selling the asset wouldn't cover the liability. Foreclosure is the result; ironic, because foreclosures sell for less and drive down home prices to begin with. Nick Timiraos said it could be hard to extricate ourselves from the trend.
We could be in a vicious cycle where more foreclosures means prices go down, more prices going down means more people are underwater and if they can't get jobs, if they can't make their mortgage payments, then they become foreclosures and the cycle feeds on itself.
The Schumer solution
How do we get out of this mess? Do we make it easier for homeowners to refinance, as the Obama administration has been trying to do? Do we put more focus on growing the economy so people have an easier time affording their mortgage payments in the first place?
Senator Chuck Schumer (D-NY) has an unlikely proposal: Offer "homebuyer visas" to foreign nationals so that they may buy property in the United States. Schumer says it would help the housing market and bring consumers with high net worth into the country, where they'll buy goods and pay taxes.
Jhoanna Robledo was confused about the proposal in terms of why it was necessary and how it would help.
It's a little confounding to me because foreign buyers are already here. My question is how much more it can improve the market here in the city?
Nick Timiraos echoed her concerns, pointing out that the homebuyer visa wouldn't allow foreign nationals to work in the United States. Only a very specific demographic would be able to use it.
If they're rich or retired it works for them, but if you can't work there's not a whole lot else you would do with it. These are maybe second homes or retirement homes for wealthy foreign nationals.
A bright, bullish future?
Although home prices and sales were down in September, housing starts rose. Does that indicate bullishness in the housing market? Should we anticipate prices to start climbing again soon?
Nick Timiraos said that maybe in the long term there was some hope that housing will be a good buy, but looking at the short term he wasn't sure from whence such optimism came. Certainly it's a buyer's market, but he didn't see it become a seller's market anytime soon.
Housing is cheaper than it's been in a long time...Interest rates are very low and housing starts have been minimal, so it's hard to get much lower from here if you're looking at just the homebuilder's segment. In terms of home prices getting better here, we're heading into a part of the season where foreclosures will be a growing share of home sales...in the next few months i'm not so optimistic.
Jhoanna said she was seeing a modicum of relief rather than optimism.
I wouldn't say people have been talking as if they're very bullish on housing. Right now we're moving sideways. We're happy I think to be stabilizing and we'll see what happens.