No Home Ownership for You!

We should have seen it coming.

After Medicare passed in 1965, the class-warrior plutocrats realized that the New Deal programs that built the American Middle Class were not going to be overturned overnight. Returning the country to the serf-powered rule-by-the-rich of the Gilded Age would require a long-term campaign of back-stabbing and sabotage.

First they poured sand in the engine of American prosperity by eliminating unionized manufacturing jobs.

Then they fanned racial resentment to keep the attention of the unemployed on fellow workers instead of the real enemy: the bosses.

Then they undermined the manufacturing foundation of the American economy by diverting investment away from real businesses that fuel Main Street into exotic financial gambles on Wall Street.

And then they blew residential real estate into a monster bubble that exploded and took the whole economy with it.

Now, all that's left is to round up everyone and stuff them back into the tenements where they belong.

karoli at Crooks and Liars reveals yet another layer in the destroy-the-middle-class onion:

In the wake of the mortgage meltdown, a dangerous theme is emerging. On its face, it seems perfectly reasonable and even attractive, especially to the youngest generation of workers, who is already mired in student loan debt, credit card debt, and struggling to find a job. It goes like this:

The U.S. has long seen home ownership as an unquestioned virtue, dating to a 1918 government "Own Your Own Home" campaign. Herbert Hoover, Franklin Roosevelt, Bill Clinton and George W. Bush all talked as if owning a home was the only way to join the middle class. Not only did it promote social stability—recall Mr. Bush's "ownership society"—and build well-maintained neighborhoods, home ownership became a hedge against inflation and a way to save for retirement. Until it didn't. [read more ...]

And also:

Some of those new homeowners, including those sold outrageously inappropriate subprime loans, should have remained renters. Many couldn't afford to maintain the houses they bought. Others were dependent on refinancing to keep their homes, an approach that worked only as house prices kept climbing. They didn't. At last tally, the U.S. home ownership rate was at 67.2% and sinking.

Even NPR has jumped on the story.

"The world we live in today is not quite the world that existed in 1950," he noted. "The nature of households and the rate at which they dissolve and reform, the nature of work and its transient nature across geographies are all things that suggest that maybe, just possibly, a middle-class American shouldn't stake themselves to an illiquid, very large, concentrated, leveraged asset —- that is to say, a house." [read more...]

Everything old is new again. Both of these articles blame Fannie Mae and Freddie Mac for the mortgage meltdown, when the opposite is true. It isn't the middle class, minority or lower income buyers who caused the meltdown. In fact, the wealthy walked away from their mortgages when they found themselves upside down in a weak housing market -- not the middle class.

SNIP

Make no mistake, someone will be an owner and someone will be a renter. The owner will make money and add to his wealth and portfolio. The renter will have a roof over his head for the time he or she pays the rent. The renter will be at the mercy of the owner -- will rents fly sky-high when property takes off again?

There was always more to property ownership than some pretty political platitude about white picket fences and the American dream. Home ownership is one of the best ways for the middle class to accumulate some assets for retirement, to not have to worry about where they'll live or what they'll have to pay to live in their retirement. It puts the individual in charge and in control.

SNIP

Home ownership isn't a boom-or-bust proposition. It can actually be approached sensibly, with moderation and common sense. This whole push against home ownership strikes me as another way to disenfranchise and de-fund the middle class.

Read the whole thing.

Why You Should Be Glad Your Neighbor Gets Mortgage Help and You Don't

First, fall on your knees and thank your lucky stars you have a good enough job and good enough health to be able to afford your mortgage.

Second, realize that if your neighbor qualifies for mortgage help under President Obama's new housing rescue plan, it's because your neighbor has suffered financial setbacks like losing a job or incurring major medical expenses of which you shouldn't be envious.

Third, observe your neighbor's house for a few minutes and consider how it would affect your own property value if that house were empty, neglected, trashed by squatters or taken over by drug dealers.

Hilzoy has a terrific simple explanation of how President Obama's housing rescue plan really works.

The second of these steps is the only one that could possibly be said to help people who took out loans they cannot afford at the expense of the rest of us. (The first and third are aimed at different problems entirely.) You don't have to be in default, or late making payments, in order to qualify for it. You do, however, have to be paying more than you can realistically afford.

Some people are paying more than they can afford because they knowingly took out mortgages that were too big -- perhaps counting on being able to refinance or sell their home once their teaser rates ended. Some are paying more than they can afford through no fault of their own: they lost their jobs, had unexpected health crises, etc. Some are probably in between these two camps: people who talked themselves into accepting loans that they probably couldn't afford, or could afford only if everything went right, and then things went wrong. And some were probably defrauded.

Under normal circumstances, I'd be opposed to the government stepping in to encourage banks to modify these loans, except in cases of fraud. But these are not normal circumstances. The economy is melting down, and foreclosures are a big part of the reason why. Foreclosures always impact people other than the people foreclosed on, for instance by driving down neighborhood property values. But now, of all times, they are having massive impacts on the rest of us. And the Obama plan, which does not just wave a magic wand and make people's excess debt disappear, seems to me like a good start on addressing them.

Read the whole thing.

Cross-posted at They Gave Us A Republic ....