Tuesday, May 11, 2010

Passion Party #211 - Making Homes Affordable?

There has been a LOT OF NOISE from the senate subcommittee lately. They are investigating what happened to Washington Mutual, what went wrong, and who is to blame (of course, it is not the Senate).
There is certainly enough blame to go around.
In my view, everyone is guilty
from the top executives that made hundreds of millions to the faulty oversight of our government agencies to the rating agencies that gave AAA ratings to crappy mortgage-backed securities to the individual that bought a house with a loan that they knew they could never really afford.

But I did pick up one very interesting point:
A basic initiative in the banking industry and in congress was to permit more people to buy homes, rather than keep paying rent.
Realtors crowed, "Grab your piece of the American Dream!"
Congress passed laws to make sure more people could buy homes, and banks happily complied with various "Making Homes Affordable" initiatives with assisted down payments and lax qualifying methods.

Funny thing is, in the end all these initiatives made homes LESS affordable, as the demand and the increased ability to buy pushed home prices up 100% nationwide from 2000 - 2006.

So, after all this, are homes more affordable?

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