By Catherine Austin Fitts
Speaking as a former Assistant Secretary of Housing, an important traditional formula for Democratic Administrations to win Presidential elections is to juice the mortgage and housing markets. If you look at the team lined up to run for the Democrats, these are the folks who engineered the last housing bubble. They know how to plow massive taxpayer-funded mortgage credit into the market and make personal fortunes doing it.
But there are challenges in getting the old tricks to work. First and foremost is that America has still not recovered from the last pump and dump of the housing market:
The home ownership rate now stands at the lowest level in 25 years, and it continues to drop each quarter it is measured.
Put simply, the housing market is underperforming because both homebuilders and home sellers are underperforming. Housing starts are still well below even historical norms, despite pent-up demand, and sellers, despite gains in home equity, are still not willing to list at current prices.
…purchase loan originations were down 25 percent in the first quarter from the previous quarter and up only 1 percent from a year ago, according to new numbers from RealtyTrac.
Housing by the Numbers: Something is Weird – Diana Olick, CNBC
Quite a lot of housing must come out of negative equity status:
The U.S. Housing Crisis: Where are home loans underwater? (Zillow, Q3, 2014)
There are a number of ways to float people out of underwater loans, of course:
Home appraisers are inflating the values of some properties they assess, often at the behest of loan officers and real-estate agents, in what industry executives say is a return to practices seen before the financial crisis.
An estimated one in seven appraisals conducted from 2011 through early 2014 inflated home values by 20% or more, according to data provided to The Wall Street Journal by Digital Risk Analytics, a subsidiary of Digital Risk LLC. The mortgage-analysis and consulting firm based in Maitland, Fla., was hired by some of the 20 largest lenders to review their loan files.
Dodgy Home Appraisals Make a Comeback, Wall Street Journal (12-1-14)
Even if home values rise, this still does not address how incomes can increase sufficiently to afford homes at current prices – and don’t forget inflated property taxes and maintenance costs.
That means a lot of Americans are going to get squeezed out for good:
Nearly half of all working-age adults in Los Angeles and Orange counties live in a home with another adult who is not their spouse — a higher percentage than any other big city in the country, according a new report by real estate website Zillow. In second place: the Inland Empire.
Economists at Zillow crunched U.S. census numbers and found that 47.9% of adults in metro L.A. lived in “doubled-up” households in 2012, a number that has grown rapidly — up from 41.2% in 2000 — as the recession and yo-yo-ing housing market have pushed more people to share apartments.
Nearly Half of Los Angeles Adults Double Up on Housing, Study Finds, LA Times (113-14)
However, someone is pretty confident. Hillary Clinton’s video announcement of her candidacy looked like a Fannie Mae or Freddie Mac TV ad. The subliminal message seemed to be “vote for me and you will move up into a newer, bigger home.”
In fact, you don’t need Americans to do better to juice the housing market. Encouraging foreign investment will result in an enormous flow of purchases in the residential housing market:
Zillow Inc. agreed to make its U.S. property listings available to Chinese consumers through a partnership with a Beijing-based website. E-House Holdings Ltd.’s Leju real estate site will carry Zillow listings that include homes for sale by agent and owner, units in projects under construction and foreclosures and short-sale properties, Seattle-based Zillow said today in a statement.
Chinese buyers spent more than $11 billion on U.S. real estate last year, with an average $425,000 purchase, Zillow said. The Leju-Zillow site, to be operated by the U.S. company, will be ready around midyear, according to the statement. “Brokers and agents with listings on Zillow are now able to reach Chinese home shoppers who are ready to invest in the U.S. market, with no additional cost or effort,” Errol Samuelson, Zillow’s chief industry development officer, said in the statement.
Zillow to Give Chinese Homebuyers Access to U.S. Listings, Bloomberg (4-2-15)
Foreigners do not necessarily need to bring capital. Immigration of young people from Latin American and other countries can be combined with government subsidies and FHA mortgage programs for first-time homebuyers. These programs can be used to kick-start the first-time home buyer market in targeted communities (new voter registrations welcome!!).
If you look at the President’s proposed budget, this is clearly part of the plan.
In addition, there are plenty of ways to move out the people who don’t support you and pick up their housing for cheap.
To temper the angst of the traditional market, there is relaxation of Fannie Mae and Freddie Mac terms and conditions as well as unlimited mortgage credit for veterans who are apparently guaranteed a mortgage if they want one.
Once you can get enough flow going to make the housing stats look good and momentum begins to grow, the people who choose the President will be ringing the cash register.
Just take a look at Warren Buffet’s portfolio. He will be selling:
- Manufactured housing at Clayton homes
- Mortgages at Wells Fargo
- Paint at Benjamin Moore
- Furniture at the Nebraska Furniture Mart
His national network of real estate brokerages Berkshire Hathaway Home Services will be floating on a sea of transactions as America goes “on the move.” And his insurance operation will no doubt be selling lots of insurance to home-builders and homeowners while having lots of fun in the bond and stock portfolios. It’s no wonder that Warren is tweeting for Clinton.
Then, off course, there are the Wall Street funded speculators whose coffers have been filled by picking up cheap foreclosed properties on the distress of Americans. These speculators will profit by flipping the properties back at a higher price to individuals who pay full price with mortgages financed with FHA, VA, Fannie and Freddie.
Oh, yes, it’s time to have a woman running things. Women understand the importance of owning your own home. But if that heart-warming pitch doesn’t move you and you ask too many questions, be prepared to get a growl from those in the previous Clinton Administration: shut up – this is none of your business!!
In the meantime, if you are in the market to buy a home – particularly in an area where the economy is reasonably strong – it is important to take into account the likelihood of a significant injection of federal credit into the US housing market between now and November, 2016.
The more strategic your area is to the Democrats and their major donors, the more significant that injection is likely to be.