Housing Insanity

[CatholicGerman]

From The Atlantic:

If you want to know why us libertarian types are skeptical of the government’s ability to prevent housing market bubbles, well, I give you Exhibit 9,824: the government’s new $1000 down housing program.

No, really. The government has apparently decided, in its infinite wisdom, that what the American economy really needs is more homebuyers with no equity.

From a source article at The Washington Independent:

“Buy new with $1,000 down,” the advertisement says, the words resting atop a trim green clapboard house offset by a bright blue sky. “The time has come. Stop wasting rent check after rent check and start building equity in your own home. And with only $1,000 down, affordable monthly payments and no private mortgage insurance required, the dream is closer than you think.”

It sounds too good to be true. But it is true. This offer does not come from a subprime lender, looking to reel in thousands of unqualified and ill-advised homebuyers, only to slap them with add-ons, fees and variable rates. It is not a teaser or a trick. The advertisement references a program initiated by the National Council of State Housing Agencies and Fannie Mae, the taxpayer-backed, government-sponsored enterprise that buys up mortgages from lending banks.

The pilot program is called “Affordable Advantage,” and it has now been adopted by three states — Massachusetts, Wisconsin and Idaho. (Other states, such as Pennsylvania, California and Colorado, have similar state programs.) The initiative is small, reaching just a few hundred people so far. But it is looking to expand. Given the dangers of these types of mortgages and the specter of the housing bubble, where unconventional loans wreaked disaster, it is also raising questions from wary housing experts and legislators.

 

[Good_News_1]

From the article:

Low-income housing advocates argue that the state programs have much lower default rates than the national average, because the state HFAs had good track records of checking out prospective candidates and offering loans only to good ones. Kate Venne, of the Wisconsin HFA, says its default rate is just 1.83 percent.

If that’s correct, then the program isn’t insanity - it’s working to get people into homeownership. If it isn’t correct, then maybe McArdle should check it before writing her article.

McArdle:

If you want to know why us libertarian types are skeptical of the government’s ability to prevent housing market bubbles…The important thing, however, is that this is how the government thinks about housing.

If the HFA spokesperson is correct, then their track record is a hundred times better than the record of private lenders in the United States over the past few years. A government program vastly outperforms the private sector, if that figure is correct, but because we had a housing bubble fueled by much larger government and private entities, we should all be skeptical of and bash this modest successful government program?

 

[JimG]

Why spend money on rent when you too could be building negative equity in your home? It’s never too late!

 

[curlycool89]

If you don’t have enough money (actual money) to put 10% down on a home when you buy it, then you can’t afford that home. It’s as simple as that. If you can’t save enough money before buying the house then there’s no way that you can afford the mortgage payments.