Tuesday, May 7, 2013

Thomas Sowell on the political obsession with homeownerhip

Thomas Sowell on the political obsession with homeownerhip:
home
From Thomas Sowell’s column today:
In pursuit of those higher home ownership rates, especially among low-income people and minorities, the many vast powers of the federal government — from the Federal Reserve to bank regulatory agencies and even the Department of Justice, which issued threats of anti-discrimination lawsuits — were used to force banks and other lenders to lower their standards for making mortgage loans.
Lower lending standards of course meant higher risks of default. But these risks — and the chain reactions throughout the whole financial system — were like the traffic ignored by a small child dashing out into the street in pursuit of their bouncing ball. The whole economy got hit when the housing boom became a housing bust, and we are still trying to recover, years later.
What makes all this painfully ironic is that the latest data show that the rate of home ownership today is lower than it has been in 18 years (see chart above). There was a rise of a few percentage points during the housing boom, but that was completely erased during the housing bust.