From tiny towns to the national electorate, voters have been clear about who they want in office — elected officials who see housing as an economic cornerstone critical to recovery.

More than 80 percent of Americans believe housing is critical to economic recovery and candidates’ positions on housing will be important to the decisions of nearly 70 percent of Americans when they go to the polls in the 2012 election, according to a national survey released today by Move, Inc., an online network of real estate web sites.

Growing Importance

The survey reveals deep national concern over the housing situation and the importance housing will play in next year’s national elections.

Nearly one in three of those surveyed think helping homeowners avoid foreclosure should be the next presidential priority in his or her first 100 days in office. Keeping interest rates low (26.4 percent) ranked second and making more affordable mortgage credit available (14 percent) placed third.

• Americans are not optimistic about change in the housing market.

  More than 73 percent of Americans believe conditions for buying a home a year from now will be the same or worse than today. Only 23.2 percent expect home buying conditions to improve.

• After four years of living in a housing downturn, American voters clearly want answers and are looking to our elected leaders for solutions,” said Errol Samuelson, chief revenue officer of Move, Inc.
• Americans are just as split as elected officials over government’s role in housing.
• Move reported 42 percent said the government’s role in housing should be reduced; 21.3 percent said it should be increased and 31 percent said the role of government in housing should remain the same.
• Americans find themselves in a Catch-22 quandary over housing.

While they believe housing is critical to economic recovery, only 2 percent of those surveyed plan to buy a home in the next 12 months.

Among those who won’t take the plunge for at least two years, 55.1 percent don’t have enough for the down payment and closing costs; 52.5 percent said they’re concerned about jobs or lack confidence in the economy; 53.1 percent are waiting for prices to stabilize or increase; and 34.6 percent said tight and expensive credit is an obstacle.

Affordability

Home prices are more affordable than they were a year ago and just about as affordable as they were before the big boom run up in prices, but American’s aren’t buying it.

In March 2010, 45.4 percent said they thought a median income family could afford more than half of the homes for sale in their neighborhood. Today, only 32 percent share that sentiment.

“Perceptions as much as the realities of homeownership are standing in the way of boosting demand for housing. Until these concerns are resolved, we expect both buyers and sellers to remain on the sidelines,” said Samuelson.

________________________
Broderick Perkins is executive editor of DeadlineNews.Com, leading real estate, personal finance and consumer news portal.

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Figures from the Census Bureau confirm what’s widely been seen throughout America: Matt and Martha are moving back in with Mom and Dad. Multi-generational housing is here, if not by choice than as a rational economic strategy created by a lack of better alternatives.

According to David S. Johnson, Chief of the Census Bureau’s Housing and Household Economic Statistics Division, some 5.5 million adults aged 25 to 34 now live with their parents. This means 13.4 percent of young adults are back at home.

The economics of multi-generational living are fairly obvious: The youngsters are not paying rent, heat or electric to an outside third-party. In many cases they are part of the new economy, which is to say they’re unemployed, under-employed or barely scraping by with a part-time job.

No one knows how many young adults are paying rent to their parents or chipping in other ways such as household maintenance and chores. In any case, the parents are hopefully getting the benefit of an extra pair of hands.

What we’re really looking at is the contraction of the American economy, a place where a college degree may hold little value in fields where the same work can be done overseas, a country where the bright promise of tomorrow has dimmed, a nation where it was once possible to support a household with one salary and then two and now for too many people it’s not possible at all.

As parents and adult children double-up a new and unfortunate reality has begun to settle in: For a huge swath of American households the future won’t be much more than a time of hanging on. In the not-too-distant future tourists from foreign lands will come to our shores to buy crafts at bargain prices, admire our great spaces and throw money off cruise ships to watch as native children dive for coins and currency beneath the sparkling sun.

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Sen. Ted Kaufman (D-DE) is now proposing systemic financial reform. One part of that reform — a big part — would clearly involve changes in the way mortgages are originated, underwritten, bundled, sold and re-sold. The impact on borrowers and the housing marketplace would be significant.

From the Senator’s speech, Wall Street Reform That Will Prevent The Next Financial Crisis:

“On one end of the securitization supply chain, regulators allowed underwriting standards to erode precipitously without strengthening mortgage origination regulations or sounding the alarm bells on harmful nonbank actors (not even those within bank holding companies over which the regulators had jurisdiction). On the other, securities backed by risky loans were transformed into securities deemed “hi-grade– by credit rating agencies, only after a dizzying array of steps where securities were packaged and repackaged into many layers of senior tranches, which had high claims to interest and principal payments, and subordinate tranches.

“The non-banking actors — investment banks, hedge funds, money market funds, off-balance-sheet investment funds — that powered structured finance came to be known as the shadow banking market. Of course, the shadow banking market could only have grown to surpass by trillions of dollars the actual banking market with the consent of regulators.”

Kaufman also looks at how companies on Wall Street sold mortgage-backed securities — and then bet that those securities would fail:

“t has also become known that some firms underwrite securities — promoting them to investors — and then short these same securities within a week and without disclosing this fact, which any reasonable investor would regard as adverse material information. In the structured finance arena, investment banks sold pieces of collateralized debt obligations — which were packages of different asset-backed securities divided into different risk classes — to their clients and then took proceeded to take short positions in those securities by purchasing credit default swaps. Some banks went further by shorting mortgage indexes tied to securities they were selling to clients and by shorting their counterparties in the CDS market. This is how a firm like Goldman Sachs could claim that they were effectively hedged to an AIG collapse.

“Unfortunately, the use of products like CDS in this way allows the banks to become empty creditors who stand to make more money if people and companies default on their debts than if they actually paid them. These and other problematic practices that place financial firms’ interests against those of their clients need to be restricted. They also completely violate the spirit of our seminal legislation from the 1930s, which insisted — for the first time — that the sellers and underwriters of securities disclose all material information. This is nothing less than a return to the unregulated days of the 1920s; to be sure, those days were heady and exciting, but only for a while — such practices always end in a major crash, with the losses disproportionately incurred by small and unsuspecting investors.”

For the full speech, see: Wall Street Reform That Will Prevent The Next Financial Crisis

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Okay, so what’s the big deal?

In basic terms, the rule says that if you apply for a loan on July 30th or thereafter the lender must provide you with a good faith estimate of closing costs (GFE) within three business days. Also, you must get your estimate at least seven business days before closing — though borrowers can waive this requirement if they need to close in less than a week.

The new rule also says something else: The lender cannot charge you any fees before delivering the good faith estimate, the lone exception being a reasonable charge for a credit report.

The July 30th standards — which many lenders have already adopted — forces lenders to give notice and tell you the real costs of closing BEFORE you pay out any significant money for a new loan.

“Creditors,” according to the Federal Reserve, “must deliver or mail the early disclosures at least seven business days before consummation. If the APR contained in the early disclosures becomes inaccurate (for example, due to a change in the loan terms), creditors must ?’redisclose’ and provide corrected disclosures that the consumer must receive at least three business days before consummation. The disclosures also must inform consumers that they are not obligated to complete the transaction simply because disclosures were provided or because a consumer has applied for a loan.”

In other words, you can provide basic application information to a lender and elect not to go through with the loan and only be out the cost of a credit report.

Needless to say, some lenders who try to rope in borrowers with stiff “application fees” are appalled by the new regulations, which to them are — of course — unfair, unkind, impractical and no doubt socialistic. To humans who need a mortgage, the new rules merely create an element of fairness in the marketplace.

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For decades the banking community refused to lend to minorities. There was redlining and there were gentleman’s agreements. Discrimination was so ingrained that it was literally written into the lending system.

Institutional Bias

For example, it wasn’t until 1977, according to The Washington Post, that basic appraisal textbooks were updated to say “it was once common practice to examine the racial, religious or ethnic composition of a neighborhood in an effort to detect any sign of nonconformity or change. Such an approach is now regarded as misdirected and the use of factors relating to the racial, religious or ethnic composition of a neighborhood in arriving at a conclusion of value is now deemed an unreliable practice.” (See: Appraisers Institute Settles Suit, Nov. 19, 1977)

In 1980, the appraisal industry finally agreed to a policy which said that “the value attributed to the property is not dependent upon the homogeneity of racial, religious or ethnic characteristics of the neighborhood…and the lack of such homogeneity in a neighborhood does not cause a diminution of value.” (See: Agreement Set In Rights Case Against Lenders, The Washington Post, Jan. 26, 1980)

Under the old rules merely by integrating, neighborhood home values would automatically go down — indeed, values were required to go down — not because of the worth of bricks and mortar but because of the people who lived in the community.

Given this background, efforts were made to reduce discrimination within the mortgage lending industry. One idea was to require Fannie Mae and Freddie Mac to buy more loans from lenders that had been made to minority borrowers, thus the development of goals.

Clinton Versus Bush

So what were the goals? The Federal Housing Finance Agency (FHFA), the government regulator now running Fannie Mae and Freddie Mac after they were seized in 2008, recently provided a chart that showed the goals for 2009 and back to 2004. But what about earlier goals? We asked FHFA to go back to the year 2000, the last year President Clinton was in office, and FHFA’s response is illuminating.

As you will see, the goal was substantially less than 50 percent under President Clinton (his last full year in office was 2000) and was raised significantly under President Bush — something our dinner speaker neglected to mention. Here are the figures from FHFA:

Minority Loan Purchase Goals

2000 — 42%

2001 — 50%

2002 — 50%

2003 — 50%

2004 — 50%

2005 — 52%

2006 — 53%

2007 — 55%

2008 — 56%

2009 — 51%

Goals Reduced Under Obama

In April 2009, FHFA announced that goals for 2009 would be reduced.

“FHFA has determined that in light of current market conditions, the 2009 housing goal and home purchase subgoal levels previously established in regulation are not feasible unless they are adjusted,– said agency director James B. Lockhart. “Restrictions on the availability of private mortgage insurance for borrowers with lower down payments, a surge in refinancing, particularly by higher income borrowers, the increasingly important role of FHA in the mortgage marketplace and a slowdown in the multifamily market, among other factors, mean fewer goals-qualifying loans in 2009.”

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Really?

According to the NAHB’s chief economist, David Crowe, “the housing recession is nearing an end and housing will return on a very slow basis.”

This is interesting. Are we having a housing recession? Certainly not in California, Arizona, Nevada, Florida, Michigan or any number of other markets. If the national housing market can be characterized as being in a “recession” then what could you possibly call the situation in major foreclosure areas except housing depressions?

When is the “end” that we are nearing? In a month? This year? 2029? How many months in a “nearing”?

“And despite a continuation of rising unemployment well into next year, although at a slowing pace, housing in this year’s second half is expected to begin gradually leading the economy to higher ground,” says the article in describing several economic forecasts.

But if unemployment is rising doesn’t that put a damper on home sales? How do growing numbers of people without jobs buy houses? Or food?

The article says that housing statistics are inaccurate because “45% of existing home sales currently are foreclosures that are not typical of the existing housing stock.”

Are buyers to ignore foreclosed homes when making an offer and bid more? Does this make sense to anyone?

What’s typical of the existing housing stock is not the issue, what’s typical of the homes for sale is important because that’s how we value homes in both good times and bad.

Oh well, Jay Leno has been out for a few days so it’s good to hear the economic thinking of the home builders.

For the full story, see: Housing, Economic Growth Now Heading to Higher Ground.

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“U.S. home prices rose 0.7 percent on a seasonally-adjusted basis from January to February, according to the Federal Housing Finance Agency’s monthly House Price Index. January’s previously reported 1.7 percent increase was revised to a 1.0 percent increase. For the 12 months ending in February, U.S. prices fell 6.5 percent. The U.S. index is 9.5 percent below its April 2007 peak.

“The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. For the nine Census Divisions, seasonally-adjusted monthly price changes from January to February ranged from –1.2 percent in the East North Central Division to +3.8 percent in the Pacific Division.”

This is a big survey, but also one which does not reflect much of the marketplace, the properties financed with loans which were not bought by Fannie Mae and Freddie Mac. Also, these numbers may not be final — January’s previously reported 1.7 percent increase was revised to a 1.0 percent increase.

Regional Results

Pacific Census Division: Hawaii, Alaska, Washington, Oregon, California — UP 3.8%.

Mountain Census Division: Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona, New Mexico — UP 0.1%.

West North Central: North Dakota, South Dakota, Minnesota, Nebraska, Iowa, Kansas, Missouri West South Central: Oklahoma, Arkansas, Texas, Louisiana — UP 1.5%.

East North Central: Michigan, Wisconsin, Illinois, Indiana, Ohio — DOWN -1.2%.

East South Central: Kentucky, Tennessee, Mississippi, Alabama — DOWN -0.2%.

New England: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut — UP 2.2%.

Middle Atlantic: New York, New Jersey, Pennsylvania — UP 0.7%.

South Atlantic: Delaware, Maryland, District of Columbia,
Virginia, West Virginia, North Carolina, South Carolina, Georgia, Florida — DOWN -0.8%.

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You want to know the answer to this question because it may explain how plunging stock prices are impacting the economy — and whether you will have a job next week or be able to sell your home.

Speaking at a symposium sponsored by the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming last Friday, Federal Reserve Board Chairman Alan Greenspan said that while much attention has been paid to rising — and falling — prices on Wall Street, “movements in the prices of some other assets in the economy — changes in house prices, for example — have been steadier, less dramatic, but perhaps no less significant.”

“Over the past year and a half,” Greenspan points out, “home values have appreciated, whereas equity values have contracted significantly.”

Generally, says the Fed Chairman, we spend about 90 percent of our income for consumer goods. So as incomes rise one can reasonably expect an increase in consumer spending. This is important because personal consumption represents almost 69 percent of our gross domestic product.

One catch is that wages and such do not account for all personal spending. About 20 percent of what we spend comes from wealth — increases in value over time.

A second catch is that we do not spend all wealth in the same way. Generally, says Greenspan, we likely spend 3 percent of stock gains on consumer spending whereas “the amount of personal consumption expenditures generated from realized capital gains on the sale of homes, financed through the mortgage market, represents approximately 10 to 15 cents on the dollar.”

This is all very nice but what does it mean in real life?

Until March, 2000 there was no doubt rising share values were the nation’s most visible source of new wealth. Huge profits were made from IPOs, employee stock options, and rising share values. But such appreciation was converted into spending at relatively low levels.

Meanwhile, home values have continued to rise over time and at a pace which has generally been greater than the rate of inflation — meaning that additional spending power, real wealth, has been created. And real estate wealth, says Greenspan, is several times more likely to be spent for consumer goods than profits from stock sales.

In an expanding economy it’s nice to have the additional consumption which new wealth on Wall Street represents. It means additional jobs and growth throughout the county.

But what happens if stock prices fall? What’s the impact?

Greenspan’s statement implies that declines on Wall Street, while not good, have less impact on the national economy than housing declines of equal magnitude.

Greenspan seems to be making these points:

• Consumer spending is the bedrock of our economy. This explains why the business sector can contract and yet the economy does not go into an automatic recession — or worse.

Profits from real estate and securities are treated differently by consumers. Real estate profits tend to result in more consumer spending.

• Reduced profits from stock will have less impact on the economy than declining home prices.
• Falling home prices are a precursor to tough economic times. Declines on Wall Street may be tolerable, but a widespread fall in housing prices would reflect substantial economic problems.
• Politicians now in office are unlikely to do well in a contracting economy.

It never happens that the head of the Federal Reserve offers policy suggestions to the President and Congress in plain language. Instead there is a need to parse sentences and divine meanings, but in this case the message is clear: If we are to have an economy which does not needlessly plop into a recession it would be wise to support the housing sector. In practical terms, that means don’t fiddle with mortgage interest deductions and adopt policies which encourage construction and ownership.

————————
Published originally by Realty Times on September 4, 2001 and posted with permission.

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This federal law applies to the sale and rental of housing, residential lots, advertising the sale or rental of housing, real estate financing, the provision of realty services, and the appraisal of real property. It also prohibits the practice of “blockbusting.”

Other federal laws which offer protection include:

• The Civil Rights Act of 1866
• The Civil Rights Act of 1968
• The Americans with Disabilities Act
• The Equal Credit Opportunity Act

State and local laws may also identify additional discriminatory factors are protected classes.

Brokers, lenders, community housing organizations, attorneys and legal clinics can explain such matters in detail.

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Answer: Try the following sources:

State architectural associations.

Local builders.

State and local builder organizations.

Hardware and building supply outlets

University architectural schools.

RebuildingTogether.org

The library of the National Association of Home Builders in Washington, DC.

Local public housing agencies.

Local chapters of associations that serve those with special needs.

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