Barney Frank asking Fannie/Freddie to loosen lending standards on condos

[paul34]

Condos are on their way out, anyway... during the housing boom, so many apartments were being rapidly converted into condos, new condos were being built like crazy, etc.

Now that more people are looking to rent, and in general, housing is still down, financially supporting a condo project is a risky proposition even with otherwise good financial backing.

[mtcraigco]

Originally Posted by Etta Place

You're right. I tend to agree with you. I just wanted the original poster to comment more on what he thought about what Frank was proposing and why that was a bad idea. Maybe he just thought it was obvious.

I don't think our leaders have learned their lesson from this financial meltdown - either side of the aisle.

I'd say the OP supposed it to be obvious.

And yes, BOTH sides of the aisle certainly have their share of incompetents and miscreants, if not outright crooks.

Fire 'em all!

[Etta Place]

Originally Posted by paul34

Condos are on their way out, anyway... during the housing boom, so many apartments were being rapidly converted into condos, new condos were being built like crazy, etc.

Now that more people are looking to rent, and in general, housing is still down, financially supporting a condo project is a risky proposition even with otherwise good financial backing.

Renting is supposed to be the wave of the future, according to urban theorist and author, Richard Florida.

Suburbanization—and the sprawling growth it propelled—made sense for a time. The cities of the early and mid-20th century were dirty, sooty, smelly, and crowded, and commuting from the first, close-in suburbs was fast and easy. And as manufacturing became more technologically stable and product lines matured during the postwar boom, suburban growth dovetailed nicely with the pattern of industrial growth. Businesses began opening new plants in green-field locations that featured cheaper land and labor; management saw no reason to continue making now-standardized products in the expensive urban locations where they’d first been developed and sold. Work was outsourced to then-new suburbs and the emerging areas of the Sun Belt, whose connections to bigger cities by the highway system afforded rapid, low-cost distribution. This process brought the Sun Belt economies (which had lagged since the Civil War) into modern times, and sustained a long boom for the United States as a whole.

But that was then; the economy is different now. It no longer revolves around simply making and moving things. Instead, it depends on generating and transporting ideas. The places that thrive today are those with the highest velocity of ideas, the highest density of talented and creative people, the highest rate of metabolism. Velocity and density are not words that many people use when describing the suburbs. The economy is driven by key urban areas; a different geography is required.


The Next Economic Landscape

The housing bubble was the ultimate expression, and perhaps the last gasp, of an economic system some 80 years in the making, and now well past its “sell-by” date. The bubble encouraged massive, unsustainable growth in places where land was cheap and the real-estate economy dominant. It encouraged low-density sprawl, which is ill-fitted to a creative, postindustrial economy. And not least, it created a workforce too often stuck in place, anchored by houses that cannot be profitably sold, at a time when flexibility and mobility are of great importance.

So how do we move past the bubble, the crash, and an aging, obsolescent model of economic life? What’s the right spatial fix for the economy today, and how do we achieve it?

The solution begins with the removal of homeownership from its long-privileged place at the center of the U.S. economy. Substantial incentives for homeownership (from tax breaks to artificially low mortgage-interest rates) distort demand, encouraging people to buy bigger houses than they otherwise would. That means less spending on medical technology, or software, or alternative energy—the sectors and products that could drive U.S. growth and exports in the coming years. Artificial demand for bigger houses also skews residential patterns, leading to excessive low-density suburban growth. The measures that prop up this demand should be eliminated.

If anything, our government policies should encourage renting, not buying. Homeownership occupies a central place in the American Dream primarily because decades of policy have put it there. A recent study by Grace Wong, an economist at the Wharton School of Business, shows that, controlling for income and demographics, homeowners are no happier than renters, nor do they report lower levels of stress or higher levels of self-esteem.

And while homeownership has some social benefits—a higher level of civic engagement is one—it is costly to the economy. The economist Andrew Oswald has demonstrated that in both the United States and Europe, those places with higher homeownership rates also suffer from higher unemployment. Homeownership, Oswald found, is a more important predictor of unemployment than rates of unionization or the generosity of welfare benefits. Too often, it ties people to declining or blighted locations, and forces them into work—if they can find it—that is a poor match for their interests and abilities.

As homeownership rates have risen, our society has become less nimble: in the 1950s and 1960s, Americans were nearly twice as likely to move in a given year as they are today. Last year fewer Americans moved, as a percentage of the population, than in any year since the Census Bureau started tracking address changes, in the late 1940s. This sort of creeping rigidity in the labor market is a bad sign for the economy, particularly in a time when businesses, industries, and regions are rising and falling quickly.

The foreclosure crisis creates a real opportunity here. Instead of resisting foreclosures, the government should seek to facilitate them in ways that can minimize pain and disruption. Banks that take back homes, for instance, could be required to offer to rent each home to the previous homeowner, at market rates—which are typically lower than mortgage payments—for some number of years. (At the end of that period, the former homeowner could be given the option to repurchase the home at the prevailing market price.) A bigger, healthier rental market, with more choices, would make renting a more attractive option for many people; it would also make the economy as a whole more flexible and responsive.

Next, we need to encourage growth in the regions and cities that are best positioned to compete in the coming decades: the great mega-regions that already power the economy, and the smaller, talent-attracting innovation centers inside them—places like Silicon Valley, Boulder, Austin, and the North Carolina Research Triangle.

Whatever our government policies, the coming decades will likely see a further clustering of output, jobs, and innovation in a smaller number of bigger cities and city-regions. But properly shaping that growth will be one of the government’s biggest challenges. In part, we need to ensure that key cities and regions continue to circulate people, goods, and ideas quickly and efficiently. This in itself will be no small task; increasing congestion threatens to slowly sap some of these city-regions of their vitality.

Just as important, though, we need to make elite cities and key mega-regions more attractive and affordable for all of America’s classes, not just the upper crust. High housing costs in these cities and in the more convenient suburbs around them, along with congested sprawl farther afield, have conspired to drive lower-income Americans away from these places over the past 30 years. This is profoundly unhealthy for our society.

How the Crash Will Reshape America - The Atlantic (March 2009)

[Etta Place]

Florida says:

And not least, it created a workforce too often stuck in place, anchored by houses that cannot be profitably sold, at a time when flexibility and mobility are of great importance.

I know this is true in my industry. We recently had a large layoff of technically-skilled people. They needed to be flexible enough to move to other cities where there may be more job opportunities at the moment. If you have to sell your house, that really ties you down - especially in a down real estate market.

[paul34]

Well, I don't know that renting is really the future; remember when we were all supposedly supposed to be living in crowded urban centers, all in super nice apartments in buildings that went 100's of stories high? And when we wanted to go somewhere, we'd just hope into our flying car and zoom off?

I'm sure that the demand to rent will never appreciably go down - that's been the case throughout organized human civilization. But I think there's something that appreciates some privacy, and solitude. Individual home ownership will always be around in a significant form.

Of course, some alien could be reading this post 400 years from now and think how silly this paul34 guy was for saying that.

Actually, off-topic, but supposedly none of our digital information will make it that long. In fact, even DVDs don't lost past 20 years. You'd think this age would be perfectly preserved but as it turns out, it might be even more lost to future historians than the ancient Romans or Greeks today.

[Etta Place]

Originally Posted by paul34

Well, I don't know that renting is really the future; remember when we were all supposedly supposed to be living in crowded urban centers, all in super nice apartments in buildings that went 100's of stories high? And when we wanted to go somewhere, we'd just hope into our flying car and zoom off?

I'm sure that the demand to rent will never appreciably go down - that's been the case throughout organized human civilization. But I think there's something that appreciates some privacy, and solitude. Individual home ownership will always be around in a significant form.

Of course, some alien could be reading this post 400 years from now and think how silly this paul34 guy was for saying that.

Actually, off-topic, but supposedly none of our digital information will make it that long. In fact, even DVDs don't lost past 20 years. You'd think this age would be perfectly preserved but as it turns out, it might be even more lost to future historians than the ancient Romans or Greeks today.

I hear what you're saying about wanting peace and quiet. But the commutes to and from those places are pretty hellish, don't you think? Is it an acceptable trade-off - more space, but less time to enjoy it?

[ForTehNguyen]

renting is going to be popular since housing prices are falling. No one wants to take a mortgage out and watch the value drop.

[billbrasky]

Originally Posted by Etta Place

Pretty much. Along with the politicians that work for them.

you cant sell greed with out a greedy buying public.

You refuse to admit millions of middle class folks made a fortune and flipped houses for astronomical profits for the better part of ten years.

[billbrasky]

Originally Posted by Etta Place

But are these requirements arbitrary? I'm not saying I agree with Frank. I'm just saying that requiring a condo project to have 70% occupancy and less than a 15% delinquent rate on HOA dues might be something set up just recently, and could be overkill. I don't know.

again, stuff you refuse to learn, and admit even exists.

hard math that would melt your brain. Its not really that complex, but at a certain point when you have nothing to loose, you dont care.

The goal is to have peoples whole life wrapped up in making payments so they in fact HAVE to care.

If you put nothing down, and have nothing in a house, you can walk away. No biggie. And when millions of folks do something bad and hurtful, evil leftist politicans race to erase reprocussions, cause they will sell their soul for the vote of a the foolish masses.

Well dang, if millions of folks did it .... it cant be bad. Lets erase the last 60 years of precedent and standards and make it easy on the folks who put us in this mess. They dont deserve to be punish. Other people were mean to them.

Life is supposed to be fair.

You are supposed to be rewarded for good decisions ... and if you make a bad decision ... you simply yell DO OVER, like little etta does at recess.

This is big people stuff etta. Not the playground.

No nothing should be relaxed.

If its such a good idea, let the builders personally finance the loans, not banks, not the government, 100 % builder financing.

This government manipulation of lending practices is what got us here, not wall street, not rich evil old white men you hate simple for the fact they are rich white and old.

Whats so dang hard about living in a modest house you can easily afford. Its quite simple.

Its people wanting to impress everyone, and run out and buy mc mansions they cant even afford to furnish, or put in landscaping or buy window treatment, cause they LITERALLY put every last dollar into the $700,000 house in the burbs to impress folks.

I personally am not impressed when i see sheets tacked up for window treatments, or no landscaping, and if dad doesnt get overtime at work, the whole plan crases and EVERY bill the family has is late. Thats not the way folks should be living.

[billbrasky]

Originally Posted by paul34

Condos are on their way out, anyway... during the housing boom, so many apartments were being rapidly converted into condos, new condos were being built like crazy, etc.

Now that more people are looking to rent, and in general, housing is still down, financially supporting a condo project is a risky proposition even with otherwise good financial backing.

I know of folks who bought condos 5 years in nice parts of town.

they are selling for about 1/5 the selling price 5 years ago.

When one takes into account inflation, the opportunity cost of other things you could have bought and the net difference, and the fact folks like the realtors association say on average a homes value doubles every 8 years.

Well these folks bought condos 5-6 years ago, instead of doubling or almost doubling .... its worth only 20 % of original price. When you factor in interest they dutifully paid for 5-6 on the loan, and inflation, they basically pissed away a couple hundred grand in 5 years and have ZERO to show for it.