Make us your home page
Instagram

Buying a home may take more time, savings as federal subsidies fade away

What if 30-year, fixed-rate mortgages were a luxury rather than a foundation of our housing market?

What if mortgage interest was no longer deductible on federal income taxes?

What if Fannie Mae and Freddie Mac — federal creations gone wild (costing taxpayers $150 billion and counting) that offered "U.S." guarantees and backed the mortgage-backed securities market — slowly disappeared?

What if home buyers had to put down a "substantial" down payment when buying a house, perhaps as much as 20 percent of the home's value?

In the angry wake of the burst housing bubble and amid the hysteria over the federal deficit, these are just some of the possible changes that could sharply alter the housing market and shrink the percentage of Americans who own their homes.

Is this a good thing? Depends on your point of view. Certainly for Florida's still skidding housing market, such changes would hamper the already tepid recovery. But for the growing chorus that wants to shrink the role of the federal government and make the U.S. housing market more self-reliant, it is overdue.

Policy leaders in recent decades grew infatuated with delivering "the dream of home ownership" to anyone with a pulse standing in front of a For Sale sign. Rules relaxed (later growing more perverted) to make getting mortgages easy with no money down, no proof of a steady income and with no need to make regular monthly payments. How? Banks offered interest-only mortgages and tacked on any principal to the back end of the loan.

Who didn't drink housing's Kool-Aid? Home prices were only going higher. Buying a home was smart and padded your financial nest egg.

Then it was over. Home prices plummeted instead.

Home ownership fans long praised the social benefits of more people "owning" (better described as "in hock up to their eyeballs") houses as prices rose. Home ownership, they argued, fostered better educational achievement and civic participation, improved household health, lowered crime rates, and made more stable communities.

That's misleading. Remember "subprime" lending? People who could least afford to buy a home, being high-risk borrowers in the eyes of lenders, got mortgages with the most perilous of terms.

Consider how much less nasty the U.S. economic crisis and home foreclosure fiasco might have been if so many marginal mortgage borrowers had not been approved to buy a home beyond their means?

Yet backers of Fannie and Freddie argue the recession would have been far worse had the current housing subsidies and backstops not been in place to soften the blow.

In 2009, the U.S. median sales price of a single-family home was $172,100. The Center for Responsible Lending argues that "even with a substantial savings commitment" of $3,000 per year, it would take a family 14 years to accumulate the cash needed for a 20 percent down payment.

Okay. But the same family saving $3,500 annually for eight years could put 20 percent down on a lesser home of $140,000.

Qualifying to buy a home used to take time and disciplined saving. Changing the gotta-have-a-home-now mind-set and avoiding the overleveraged home loan may be good public policy after all.

Contact Robert Trigaux at [email protected]

Buying a home may take more time, savings as federal subsidies fade away 03/07/11 [Last modified: Monday, March 7, 2011 9:34pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. Massachusetts firm buys Tampa's Element apartment tower

    Real Estate

    TAMPA — Downtown Tampa's Element apartment tower sold this week to a Massachusetts-based real estate investment company that plans to upgrade the skyscraper's amenities and operate it long-term as a rental community.

    The Element apartment high-rise at 808 N Franklin St. in downtown Tampa has been sold to a Northland Investment Corp., a Massachusetts-based real estate investment company. JIM DAMASKE  |  Times
  2. New York town approves Legoland proposal

    News

    GOSHEN, N.Y. — New York is one step closer to a Lego dreamland. Goshen, a small town about fifty miles northwest of the Big Apple, has approved the site plan for a $500 million Legoland amusement park.

    A small New York town, Goshen approved the site plan for a $500 million Legoland amusement park. Legoland Florida is in Winter Haven. [Times file  photo]
  3. Jordan Park to get $20 million makeover and new senior housing

    Real Estate

    By WAVENEY ANN MOORE

    Times Staff Writer

    ST. PETERSBURG —The St. Petersburg Housing Authority, which bought back the troubled Jordan Park public housing complex this year, plans to spend about $20 million to improve the 237-unit property and construct a new three-story building for …

    Jordan Park, the historic public housing complex, is back in the hands of the St. Petersburg Housing Authority. The agency is working to improve the 237-unit complex. But the latest plan to build a new three-story building for seniors will mean 31 families have to find new homes. [LARA CERRI   |   Tampa Bay Times]
  4. Coming soon at two Tampa Bay area hospitals: a cancer treatment that could replace chemo

    Health

    A new cancer treatment that could eventually replace chemotherapy and bone marrow transplants — along with their debilitating side effects — soon will be offered at two of Tampa Bay's top-tier hospitals.

    Dr. Frederick Locke at Moffitt Cancer Center in Tampa is a principal investigator for an experimental therapy that retrains white blood cells in the body's immune system to fight cancer cells. The U.S. Food and Drug Administration approved these so-called "CAR-T" treatments for adults this month. In trials, 82 percent of cases responded well to the treatment, and 44 percent are still in remission at least eight months later, Locke said. [CHRIS URSO   |   Times]
  5. Regulator blasts Wells Fargo for deceptive auto insurance program

    Banking

    Wells Fargo engaged in unfair and deceptive practices, failed to properly manage risks and hasn't set aside enough money to pay back the customers it harmed, according to a confidential report by federal regulators.

    Wells Fargo engaged in unfair and deceptive practices, failed to properly manage risks and hasn't set aside enough money to pay back the customers it harmed, according to a confidential report by federal regulators.
[Photo by Spencer Platt/Getty Images, 2017]