What We're Reading: November 29

Throughout the week, the BPC Housing Commission will highlight news articles that address critical developments in housing policy. Any views expressed in the content posted on this forum do not necessarily represent the views of the Commission, its co-chairs or the Bipartisan Policy Center.

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Housing hypocrisy

Editorial

The Washington Post

“Now is the time to begin unwinding the FHA’s role in the market and “crowd in” private capital. The administration’s white paper on housing finance reform last February backed such a strategy, including a return of the FHA “to its pre-crisis role.” The first step would be legislation that permitted the FHA to insure loans on houses costing up to $729,750 to lapse Oct. 1 as scheduled. Ditto for the temporary hike in the maximum loan eligible for securitization by Fannie Mae and Freddie Mac, which Congress also set at $729,750.” Read more here.

Housing Prices Won’t Recover Until 2013: Economists

Reuters

“U.S. home prices will stagnate through next year and only start recovering in 2013, according to economists polled by Reuters who also felt the stimulus options being floated will not do much to reinvigorate the market. The housing market, considered by many as critical to any meaningful economic recovery, is still struggling to find its footing after collapsing by a third over the past several years, leaving many owing more than their homes are worth.” Read more here.

Sales of Existing U.S. Homes Unexpectedly Rise

By Alex Kowalski

Bloomberg

“Purchases increased 1.4 percent to a 4.97 million annual rate, the National Association of Realtors said today in Washington. The median forecast of 75 economists surveyed by Bloomberg News was for a 4.8 million rate. The median house price dropped 4.7 percent from a year earlier, and the number of properties for sale was the lowest for any October since 2005. Borrowing costs near a record low are helping homebuyers take advantage of housing that’s growing more affordable as prices drop. At the same time, the end of a temporary halt on foreclosures may push more properties onto the market, triggering further slides in value that may prevent the industry from recovering for years.” Read more here.

Higher FHA loan limits reinstated for high-cost housing markets

By Alejandro Lazo

Los Angeles Times

“President Obama on Friday signed into law a bill that will reinstate higher limits for Federal Housing Administration-backed mortgages in high-cost areas. In expensive housing areas such as Los Angeles and Orange counties, the limit for these FHA-backed loans had dropped to $625,500 from $729,750 on Oct. 1. The change became effective Friday. Similar ceilings applying to loans that can be backed by Fannie Mae and Freddie Mac will not increase. The California Assn. of Realtors and its larger national partner association had lobbied for all of the loan limits to be reinstated.” Read more here.

30% of FHA mortgage modifications redefault within a year

By Jon Prior

HousingWire

“More than 30% of the nearly 282,000 modifications completed on Federal Housing Administration mortgages in 2010 redefaulted within a year, according to an independent study sent to Congress this week. It’s not great news, but it is down from last year’s statistics. Modifications made in 2009 remain the worst performing since the financial crisis struck in 2007. Nearly 39% of the 180,700 FHA modifications completed that year redefaulted within 12 months.” Read more here.

Third-Quarter 2011 Shadow Inventory Update: Months-To-Clear Slightly Improved On Mixed Regional Performance

By Diane Westerback

HousingViews

“Regional default and liquidation rates varied widely in the third quarter of 2011. This prompted a marginal improvement in the number of months Standard & Poor’s Rating Services’ estimates it will take to clear the supply of distressed homes on the U.S. market, at 45. While this number declined for the second straight quarter, it only marks a two-month improvement since the second quarter of 2011 and is still three months longer than our estimate a year ago.” Read more here.

How Do You Define Who’s Homeless in a Recession?

By Emily Badger

The Atlantic

“Earlier this fall, the Census Bureau released new data on the number of households doubling up during the recession. Back in 2007, 27.7 percent of all adults in America were combining households under the same roof. By the spring of this year, that number had jumped to 30 percent, one of the surest signs that the recession is hitting families closest to home: in their basic ability to shelter themselves. The true number may be even higher, as researchers estimate that many households under-report the number of friends and relatives cramming in, either out of fear of the landlord or the immigration officer.” Read more here.

New city program aims to turn foreclosed home sites into parks

By Dakota Smith

Los Angeles Daily News

“One morning in September, Pacoima residents were greeted by a curious sight: A white tent pitched outside a long-shuttered, foreclosed home on Kagel Canyon Street. Under the tent sat eager staffers from the Department of Recreation and Parks, holding notebooks and questionnaires. As the team explained, the foreclosed home was set to be bulldozed and replaced with a small park, one of 50 planned by the city. The sidewalk meeting represents one piece of an ambitious plan announced last week by Mayor Antonio Villaraigosa to build 50 new parks throughout the city, including transforming 10 foreclosed homes into green spaces. ‘This is the leading park initiative in the country,” said Barry Sanders, president of the Board of Commissioners of the Recreation and Parks Department.’” Read more here.

The Death of the Fringe Suburb

By Christopher B. Leinberger

The New York Times

“By now, nearly five years after the housing crash, most Americans understand that a mortgage meltdown was the catalyst for the Great Recession, facilitated by underregulation of finance and reckless risk-taking. Less understood is the divergence between center cities and inner-ring suburbs on one hand, and the suburban fringe on the other. It was predominantly the collapse of the car-dependent suburban fringe that caused the mortgage collapse.” Read more here.

Stronger Lure for Prospective Home Buyers

By Nick Timiraos

The Wall Street Journal

“Home prices and mortgage rates have fallen so far that the monthly cost of owning a home is more affordable than at any point in the past 15 years and is less expensive than renting in a growing number of cities. The Wall Street Journal’s third-quarter survey of housing-market conditions in 28 of the nation’s largest metropolitan areas found that home values declined in all but five markets compared with the second quarter, according to data from Zillow Inc. Meanwhile, rent levels have risen briskly across the country and mortgage rates, hovering around 4%, are the lowest in six decades.” Read more here.

The Makeup of Stuck America

By Richard Florida

The Atlantic

“The ability to move to find new work has long been a cornerstone of the American Dream. There is growing concern that being stuck in place contributes to higher levels of unemployment. Our analysis, however, finds no correlation whatsoever between the percentage of residents who were born in a state and either the overall rate of unemployment or its change over the past year. There is also no correlation between it and the level of income inequality. States with higher percentages of home grown residents do however have higher poverty rates (with a correlation of .33). State mobility appears to be related to residents’ perceptions of their future economic conditions. The percentage of residents born in a state is closely associated with the percentage of people in the state who see the economy as getting worse (.34) and negatively associated with the percentage who perceive the economy to be getting better (-.29). This likely reflects a difference in the levels of income and skills that underlie these divergent perceptions about the economy.” Read more here.