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Voters may hold the key

Posted: December 18, 2013 2:00 a.m.
Updated: December 18, 2013 2:00 a.m.

If voters get their way the 30-year home loan will be here to stay, yet retention of what has been an invaluable tool in building the nation’s middle class while opening home ownership to generations of citizens may now be more a function of politics than economics.

That was one of the central conclusions to emerge from a recent roundtable featuring top experts in the field of economics and finance.

Realtors recently convened a high-level discussion about real estate market conditions, mortgage finance, national housing policy and the ongoing financial recovery. The conversation with academics is featured in an executive reported titled, “The Future of Housing Finance: Economic and Policy Insights.”

Panelists at this private roundtable organized by the California Association of Realtors included Professors Janice

Eberly, Edward Leamer, Richard Green, and David Min. Joel Singer, C.A.R.’s chief executive officer, moderated the panel discussion.

The report highlights the insights of these experts on the most pressing issues facing the housing industry. The following are among the central conclusions shared by the participants:

• The Future of the 30-Year Mortgage — Housing finance’s future under the 30-year mortgage may be a function of politics rather than economics, as the sway of voters may suggest the popular financing tool is here to stay. Political pressure and conventional wisdom cultivated over decades of familiarity support the tenability of the 30-year mortgage. Allowing a fixed payment over a long period of time has allowed Americans to bet on their future and build wealth while contributing to the health of the economy. The ability of qualified buyers to receive financing remains a growing concern to the residential real estate industry.

• Finance Reform Requires Clarity — Uncertainty clouds the future of America’s housing finance system. The lack of clarity around government’s role has impacted credit availability and access to low interest rates. Multiple legislative proposals are on the table, yet Americans and political leaders would be wise to consider the value of a consumer-friendly loan and, by extension, the government backstop it requires.
Discussions about finance reform thus far have rarely differentiated the government’s role as a backstop versus a subsidy. A government role has been necessary to prevent the re-emergence of the onerous mortgage terms that existed prior to the era of the New Deal.

• Lagging Household Formation — Housing starts are well below normal even as the country sees the recovery of housing prices. The lack of a solid economic recovery also has hindered household formation, which came to a crashing halt around 2007. Overall, about 3 million households are missing.

Bob Khalsa is President of the Santa Clarita Valley Division of the Southland Regional Association of Realtors. David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty related professionals.



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