Moon Kil Woong

Are We Becoming a Nation of Renters? Investing for the New Housing Dynamic

Having too big of home is like renting if you can't build up equity. You pay your rent in property taxes and bank interest. Thus renting is often better. There is nothing wrong with it. In fact’s it’s suitable and prudent based on what you economic situation.

People have really stigmatized renters incorrectly. A renter who saves beats a homeowner who doesn't hands down. Furthermore, housing prices unhinged from a reasonable multiple to local rental costs are really susceptible to price correction 15x is rich. The only way rental prices rise is more demand.

Thus rental prices in many ways are the fundamental support to the housing market. Not fake low interest ARMs, 3.5% down FMA loans, or 30 mortgages at 5.5% peddled by Fannie Mae, Ginne Mae, and Freddie Mac at the future cost to taxpayers (when they go underwater and get bailed out by the government again from writing these absurdly low long term mortgages and buying the bonds from banks).

Thus the only ones who may be laughing all the way to the bank in the future is renters to the chagrin of the government and real estate brokers. Sure you don't get the giant housing price apreciation gamble, but if you want to gamble goping to Vegas seems a lot cheaper these days.

What REALLY Caused the Mortgage Crisis - And What to Do Now

The banks have grown too lazy and inefficient. Nowadays they won't write a loan unless they can dump it off to Fannie Mae and Freddie Mac meaning they only are good at making sure a loan qualifies for these "private company's" government backed blanket protection. Is this how a market should operate. We have effectively socialized the entire home mortgage market and called it private. In reality, Fannie Mae and Freddie Mac are government institutions operating not for profit but to fulfill some political fantasies at the risk and cost to taxpayers. Until the cancer is cut out from the market our problems will not go away. They may be supressed but they will inevitably just re-emerge again.

The cancellation of implicit government guarantees and the dissolution of Fannie Mae and Freddie Mac have become so prevalent and everpresent that they can't be wiped out instantly without destroying the entire mortgage market. We should face that fact and start forcing banks to address their complete lack of internal loan assesment now so that someday they won't need or want such a institutional crutch again.

Banks should only loan what they want to keep or what they themselves can sell off as securitized bond packages with them being the ultimate counterparty default risk. We don't need frankenbonds anymore that no one can afford to trace and value save by assuming that the taxpayer will pay because Fannie Mae and Freddie Mac packaged them and put a big taxpayer backed sticker on them.