The percentage of people who own a home is steadily declining to its lowest level since 1995, according to a new study by Harvard’s Joint Center on Housing. In an effort to reverse this trend, many people at the academic and government level are pushing looser credit standards and lower FHA premiums, in order to stimulate more ownership.
Now I’m just as eager for business as the next guy but wow have we learned nothing in the last 10 years? Does anyone remember where looser credit standards got us last time? Did it lead us to a happy and stable housing market? (Go ahead and snort here.)
The folks in favor of lower standards (both then and now) are optimistic folks, to be sure, but they seem to be reading The Little Engine That Could a bit too literally. Most of us remember the charming children’s story with the wee little train that saved the day through courage and sheer grit. It’s a noble little tale with some important truth–we are capable of more than we think, particularly when serving others in their hour of need. But of course this does not mean there are no limits to what we can do.
I remember when I went out for the basketball team in school. I was actually a pretty good shooter and had determination enough for five boys. Nevertheless there are certain realities to only being 5′ 5″. On the plus side, one has a more stable center of gravity. One is also better able to stop and smell the roses (being so much closer to them.) But out on a basketball court the ancient proverb applies: “A restless grasshopper ends up in a bird’s teeth.” I’m not sure how this applies but I know I felt like a grasshopper out on the court.
Just as each of us faces inherent limitations, policymakers should face up to the same. Home ownership cannot be improved by mere fiat because not everyone is ready to own a home. The solution to our housing doldrums is not forcing looser credit standards but getting our fiscal house in order so that growth and increased opportunity are available for all.
Speaking of increased opportunity, we all know folks that have gone through a rough patch but would love to be homeowners. I’m an expert at finding the right mortgage tools to help aspiring homeowners, or just sometimes just counseling them for the future. So do them a favor and send them over to the Little Mortgage Broker That Could, with a motto to match: I think I can! And don’t forget to let me know your thoughts when you stop on by…