OPINION:
Homeownership is at the foundation of the American dream. Unfortunately for growing numbers of Americans, there is less chance that dream will become reality.
Last week, during his pre-vacation speaking tour, President Obama said, “It will probably take this year and next year for us to see a slow appreciation again in the housing market.” Gains in housing prices, however, have already come and gone on Mr. Obama’s watch. The rolling collapse in home prices that started in 2007 was a leading indicator of the general economic calamity that struck late in 2008. Home prices recovered somewhat in 2009-10, but according to the Case-Shiller Home Price index, U.S. home prices fell 3.6 percent nationally in the fourth quarter of 2010 and another 4.2 percent in the first quarter of 2011. This back-to-back decline generated headlines about the advent of a double-dip recession in housing and coincided with declining rates of growth in gross domestic product. The most recent data show prices improving slightly, but they are still at mid-2003 levels.
These should be boom times for the housing market. Thirty-year mortgage rates recently hit all-time lows, and lower home prices in general should mean housing is more affordable. But according to data from the National Association of Realtors, existing-home sales dropped in July and new-home sales have fallen three months in a row. The Commerce Department projects 298,000 new-home sales this year, which would be lower than the 323,000 homes sold in 2010, which set a record for the lowest rate since numbers were first collected in 1963. Housing starts also were down in July, which doesn’t bode well for the rest of the year.
One factor is that banks are less willing to take risks granting mortgages, which is a positive development. Easy credit and an unbridled mortgage market, which were largely the result of the federal government’s push for “affordable housing” for riskier low-income families, created the debt bubble that popped so violently. Now the middle class is paying the price for government meddling in the housing market. New Commerce Department data show that July home sales actually increased for luxury homes; working families are the ones feeling the squeeze.
This all speaks to the country’s general economic malaise. The housing market is a useful barometer for the overall state of the economy. When times are good, houses sell. Declining home sales mean families don’t have the means to pursue their dreams of a better life or are unwilling to risk such large, long-term investments in these uncertain times. Some doom-and-gloom commentators warn that the American “social experiment” with housing is over and that it’s unrealistic for future generations to expect to become homeowners.
The subtitle of Mr. Obama’s 2006 book, “The Audacity of Hope,” was “Thoughts on Reclaiming the American Dream.” He now presides over the creeping demise of the American dream’s most important symbol and the American family’s most cherished possession: the family home. Next year, Americans will have the opportunity to vote to rebuild the U.S. economy - and the American dream.
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