Seeking Alpha

Should the government help finance homeownership? asks Robert Shiller in the NYT, referring to...

Should the government help finance homeownership? asks Robert Shiller in the NYT, referring to the conservatorship of Fannie Mae and Freddie Mac and the Federal Housing Administration's direct subsidization of home-ownership, not to mention execptionially loose monetary policy. Shiller doesn't seem so convinced, pointing out that renters can more easily move if they find a new job, while it's "hardly wise to put all of one's life savings into a single, highly leveraged investment in a home."
Comments (15)
  • 13761362
    , contributor
    Comments (382) | Send Message
     
    i agree with this. if prices are being unnaturally "juiced" by these policies then the irony is the result is a lessening of home ownership as well along with many other things.
    14 Jul 2013, 08:47 AM Reply Like
  • Archman Investor
    , contributor
    Comments (2350) | Send Message
     
    The government already finances college for most American students.
    It puts them in debt and will never allow them to default. It in essence "owns" today's youth. All part of the plan i guess.
    14 Jul 2013, 09:13 AM Reply Like
  • D_Virginia
    , contributor
    Comments (2280) | Send Message
     
    > Should the government help finance homeownership?

     

    This is a very complex issue.

     

    Higher rates of home ownership are highly correlated to a lot of positive social effects -- lower crime, better school performance, more community involvement, the list goes on. People are just better citizens when they own a piece of their community, and this holds true at all economic levels. Renters have a much higher tendency to simply not care.

     

    I think these largely outweigh the economic impact in a SANE mortgage market. NINJA loans, interest-only option ARMs, and other such nonsense were of course ticking time bombs.

     

    But traditional 30-year fixed loans with reasonable lending standards, even for low income borrowers, still had every reasonable default rates, even at the height of the crisis.

     

    The lessons here are pretty clear: Home ownership /is/ good for the country, but stupid loans dreamed up by scumbag bankers looking for more fees, are /not/ good for the country.
    14 Jul 2013, 09:18 AM Reply Like
  • The Patriot
    , contributor
    Comments (320) | Send Message
     
    "Higher rates of home ownership are highly correlated to a lot of positive social effects -- lower crime, better school performance, more community involvement, the list goes on"

     

    I have heard that statement for decades. For the sake of argument,
    I will say its mostly true. My guess it has more to do with "family values" than home ownership.

     

    The stupid loan idea was fully backed by B.Frank et al
    14 Jul 2013, 10:47 AM Reply Like
  • Copious28
    , contributor
    Comments (368) | Send Message
     
    I have seen some high quality schools deteriate because of renters. Good for transient workers, bad for the community.
    14 Jul 2013, 11:04 AM Reply Like
  • dcfleck
    , contributor
    Comments (41) | Send Message
     
    "Higher rates of home ownership are highly correlated to a lot of positive social effects"

     

    Right, they are *correlated*. Note that correlation says nothing about the direction of causality, or even that causality is involved - maybe home ownership and all those other positive effects are not directly related at all, but are being influenced by other factors that we aren't even considering here.
    14 Jul 2013, 11:51 AM Reply Like
  • D_Virginia
    , contributor
    Comments (2280) | Send Message
     
    > Note that correlation says nothing about the direction of causality

     

    This is true, but users of this over-used quip should read its background:
    http://slate.me/18f8qH7

     

    To summarize: "No, correlation does not imply causation, but it sure as hell provides a hint."

     

    And for the sake of levity:
    http://xkcd.com/552 :-)

     

    When there are a bazillion variables in play, one has to look at the patterns that can actually can be identified, and then see if there is are reasonable hypotheses that can be formed to support the data.

     

    In this case, the reasonable hypothesis is that a sense of ownership (indeed, actual ownership) and belonging in a community promotes better community behaviors. Community members who are apt to stick around longer, have more social incentives to be positive members of that community.

     

    Can we prove this beyond a shadow of a doubt? No, as with most things in the very messy real world. But it seems to fit the data that we can gather pretty darn well.
    14 Jul 2013, 03:50 PM Reply Like
  • dcmorris
    , contributor
    Comments (266) | Send Message
     
    American Dream:
    This is what we were told, take a job at the factory and join a union, dedicate 30 years to the company and get a pension at retirement. Pay 6.67% to SS and you will have protection and insurance. Pay your taxes so the government can grow your community and make your life better. Support your leaders and the military that protects these freedoms. Buy a house as an investment in your family and watch your life grow.
    How did that work out for most of you?

     

    At least the young are not being lied to. I hope they see that.
    14 Jul 2013, 09:42 AM Reply Like
  • jmodrkrk
    , contributor
    Comments (94) | Send Message
     
    Anybody that uses the entirety of their savings to finance a home purchase is doing it wrong. You either don't have enough savings or are living outside your means. Workforce mobility is extremely important -- if you can't afford to commit to home ownership and the potential prospect of moving around for work, just rent. Or buy something you can rent if you had to move.
    14 Jul 2013, 10:29 AM Reply Like
  • tomlos
    , contributor
    Comments (1098) | Send Message
     
    Sure, why not! Government should finance and backstop home ownership, mortgage, a job, health care, cell phones, and anything else one needs.
    14 Jul 2013, 11:33 AM Reply Like
  • minecanary
    , contributor
    Comments (411) | Send Message
     
    Mortgages, school loans, and SS among others are all problems that are coming the home to roost in the very near future. Soon you will remember Bennie's largess as the good old days even if it's just adding fuel to the fire.
    14 Jul 2013, 12:04 PM Reply Like
  • RS055
    , contributor
    Comments (1874) | Send Message
     
    And most of all - the govt should force people to lend to highly leveraged mutual funds ( called banks) and consider such loans as "money" - which the govt then "insures" using a highly a under-capitalized agency called the FDIC ( which has something like $20 Billion in capital against about $10,000 Billion in insured assets). If the FDIC runs out of money - then naturally congress (ie. you) will bail yourself out through increased taxes , I suppose.
    Nice scheme. Totally unnecessary. Why not just have your cash in T-Bills and be done with it?
    14 Jul 2013, 12:09 PM Reply Like
  • JDiamond
    , contributor
    Comment (1) | Send Message
     
    All loan rates should be capped per type of loan. Get rid of the credit score system which is a legal way of gouging people. And do buy a house; it's cheaper than renting and (if you received tax credits) after 3-years of being your primary you can rent it out. Get on that ladder and don't get off.
    14 Jul 2013, 04:52 PM Reply Like
  • mobyss
    , contributor
    Comments (1834) | Send Message
     
    "All loan rates should be capped per type of loan. Get rid of the credit score system which is a legal way of gouging people"

     

    I think that you should lend your money to people with FICO scores of 450 at 1% interest.

     

    Oh, you mean OTHER people and banks should be forced to do it...I see.
    14 Jul 2013, 05:26 PM Reply Like
  • Jake2992
    , contributor
    Comments (825) | Send Message
     
    Why not get rid of the mortgage interest deduction as well? It's just another unfair subsidy that renters don't have access to.
    14 Jul 2013, 05:16 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio:

|