The American Housing Disaster

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Affordable housing must be front and center of activist struggles here in the US. Here are some articles that address the problem clearly for most of us non economic wonk types:

* Home foreclosures surge—no housing boom for poor families in the US
By Naomi Sheehan Groce
13 June 2005
World Socialist Website

A little-reported aspect of the housing boom in the US is the corresponding surge in home foreclosures. Amidst a sharp rise in median housing prices, more and more Americans are finding themselves unable to meet monthly payments and are being forced into foreclosure. For many working class homeowners, the potential for financial catastrophe, including home foreclosure and personal bankruptcy, is one illness or missed paycheck away

(snip)

The housing sector is at present a principal prop of the US economy. Since 1999, the average price of existing homes has risen 48 percent. The 2005 median home price has soared to $206,000, 15.5 percent over the same period in 2004—the largest yearly increase since 1980. The Department of Housing and Urban Development listed 26 areas in the US where home prices have inflated by more than 20 percent, with half of those areas actually experiencing a doubling in market price. Meanwhile, employment and real wages have declined, creating a precarious situation for many American homeowners dependent on credit.

One much-touted force sustaining the housing market has been low mortgage interest rates—currently the fixed 30-year mortgage rate stands at a 45-year low of 5.56 percent. However, the rise in housing prices means that for many Americans even these low interest rates are difficult to meet. Many Americans have been hooked by financial firms pushing option adjustable rate mortgages, or option ARMs, which usually promise initially low interest rates that vary from month to month. Introductory rates can be as low as 2 percent, but if interest rates increase, those who have only made the minimum monthly payment face a bloated and sometimes insurmountable loan balance....
http://www.wsws.org/articles/2005/jun2005/home-j13.shtml


* Playing Monopoly in Charm City
by Lila Rajiva
Dissident Voice, June 11, 2005

A powerful essay on faux American optimism and the house of cards that is the American housing market, told from the kind of first-hand experience most readers will resonate with all too well....
http://www.dissidentvoice.org/June05/Rajiva0610.htm


* Home Insecurity: How Widespread Appraisal Fraud Puts
Homeowners At Risk
March 15, 2005
By David Callahan
Demos Institute

Many Americans have reduced the equity in their home to pay off credit card debts and cover day-to-day expenses. More troubling still is evidence that many appraisers fraudulently inflate property values during the buying or refinancing of homes. This paper explores the implications of appraisal fraud.
http://www.demos.org/pub485.cfm


* A House of Cards
Refinancing The American Dream
January 9, 2005
By Javier Silva
Demos Institute

Since the refinancing boom began in 2001, American homeowners have cashed out over $330 billion in home equity to cover rising living expenses and credit card debt, putting at risk their most important asset - their home.
http://www.demos-usa.org/pub409.cfm


* Generation Broke: The Growth of Debt Among Young Americans
October 13, 2004
By Tamara Draut and Javier Silva

Average credit card debt among indebted young adults increased by 55 percent between 1992 and 2001, to $4,088 (2001 dollars).

The average credit card indebted young adult household now spends nearly 24 percent of its income on debt payments, four percentage points more, on average, than young adults did in 1992.

Among young adult households with incomes below $50,000 (2/3 of young households), nearly one in five with credit card debt is in debt hardship -- spending over 40 percent of their income servicing debt, including mortgages and student loans....
http://www.demos-usa.org/pub295.cfm


* Studies document housing disaster for millions in US
By Tim Tower
22 September 2003
World Socialist Website

Three recent studies have exposed a rapidly worsening housing crisis in the United States. Millions of families are living in substandard conditions, are homeless, or are making choices each day to spend money on housing and do without health care, child care, or other basic necessities. With virtually no affordable housing being built, the crisis can only intensify.....
http://www.wsws.org/articles/2003/sep2003/hsng-s22.shtml

[Coastie for Truth]

1. Not just the "Poor" and the "Homeless"

Congress is waking up at last to the fact that millions of poor families are no longer able to buy or even rent decent homes. In the House, bipartisan support is coalescing around a proposal that would create an affordable-housing fund by setting aside a small portion of profits from Fannie Mae and Freddie Mac, the federally sponsored mortgage finance giants.

The plan is contained in legislation that will need to overcome opposition from the Bush administration and some members of Congress. But the basic idea - to put money earned on housing right back into the same area - makes perfect sense.

The House version, which could move to the floor this month, is contained within broader legislation that would provide tighter federal oversight of both Fannie Mae and Freddie Mac. It would require the two entities to set aside 5 percent of their after-tax profits for the affordable-housing fund, which could eventually generate as much as $1 billion a year. The money would be used to increase home ownership and create more decent rental housing. Similar funds have operated successfully at state and local levels for a long time.

The White House believes that the regulatory part of the legislation is not strong enough. Other critics argue that taking money from Freddie Mac's and Fannie Mae's profits would prompt them to become even more aggressive in the mortgage market, putting pressure on banks that already believe the two companies are too domineering.

It's not just the poor or the homeless. It's also the working poor and the "priced out." As noted in the editorial, money to house the poor, and to promote home ownership in depressed areas, has to come from somewhere. Since the private sector seems unable to address the crying need for decent and affordable housing, Congress needs to step in.

[adnelson60087]

3. Congress won't step in...

these sick Cons won't lift a finger to get universal healthcare from CHILDREN, much less be concerned for housing. If many of them had their way, they would simply have people live in "corporate housing", where you work for the company, who then in turn, provides you with a place to stay. Needless to say, they deduct your housing from your pay. We are so going backwards in time....

[Coastie for Truth]

6. THAT'S EXACTLY WHY WE HAVE TO RETAKE

THE SENATE AND THE HOUSE AND THE PRESIDENCY - BEFORE THE "COMPASSIONATE CONSERVATIVE" "RAPTURE RIGHT" TAKES US BACK TO MCKINLEY'S "GOLDENT AGE" - WHICH WASN'T SO GOLDEN EXCEPT FOR THE ROBBER BARONS.

[pdurod1]

7. Kinda like in "Alien"

The ship, the mission, everything was provided by "the corporation."
Just kidding, one would have to ask if the military was privatized.

Yeh, I've read stories like the one you've brought up. They keep the person in poverty: house them to put in a 16 hour day, take it out of their pay. Corporate slavery.

[EST]

8. Fiefdom, anyone?

Probably the only way it's all gonna work out, given the direction of apparent progression. Turn all farming into mechanized corporate farms, then, as the machinery wears out, hire entire families or even towns to work the acreage.

The indentures (which everyone would be, by that time-since the company/church had earlier stepped in and provided food, shelter and medicine -on credit, of course) are then allowed to claim an interest in the newly opened truck acreage, providing that the indenture can produce the minimum for the company and keep the rest for himself.

Out of his share come taxes (paid weekly to quarterly,) tithes to the church/front office, and the remainder can be scrip, redeemable at the company store, to afford any products not produced locally, which will be the high quality, rock-bottom priced goodies from China.

Perhaps this may actually turn out to be the only viable system when there are twelve billion people on the planet, no where to run and no real jobs. Cradle to grave, the Lord giveth and the lord taketh away, Blessed be the name of the lord. The church with it's faith-based initiatives, combined with the corporation (Wal Mart, Sam's club, the only organization capable of handling the manufacturing, transportation, and financing,) and the "ownership society" owners, government, and planners - the top one percent who own everything, will all be the fabled kings and queens who command the other ninety nine percent.

Yeah, maybe it'll turn out that way but it's way too stark and dark for me, I would probably start looking for something to blow up.

[adnelson60087]

2. Home mortgage rates and the National Debt?

Does anyone know how these two things are related? I know that as the National Debt increases, it forces interest rates higher, but is it reflected in mortgage lending?

[pdurod1]

5. Good question...

some hokus pokus, seems like they'd be going up.

[no_hypocrisy]

9. Welcome to DU adnelson60087. And good morning.

[eridani]

4. A possible solution

http://www.truthout.org/docs_2005/061405N.shtml
Just beneath the surface of conventional media concern, the groundwork is quietly being laid for a powerful new strategic initiative: a progressive "ownership society." Traditional liberal approaches may be blocked for the moment at the national level, but there are increasing openings for serious action at the state and local levels, with longer-term nationwide implications. What is striking is that the idea that wealth should benefit the community directly is quietly becoming a commonplace. This community-oriented concept is the polar opposite of the Bush ownership principle that wealth should be concentrated among individuals (especially those at the top).

The alternative idea--a community-benefiting ownership strategy--takes a variety of forms. At one level are enterprises largely or entirely owned by employees who live in the communities in which those enterprises are located. At another are community-building neighborhood corporations. At still another level are nonprofit efforts that undertake economic activity to support community-service missions. Beyond these are publicly owned enterprises that provide jobs and services but also make money for cash-starved local municipalities. Still other efforts include large numbers of cooperatives, community land trusts and hybrid community-oriented economic efforts. Moreover, a number of public-pension and other investment strategies either help nonprofit efforts (especially in housing) or contribute to local community finances by strengthening the local tax base. Some invest in worker-owned companies.

It is often held that public ownership is inherently inefficient. Studies of municipal electric utilities belie this view. One out of seven Americans--about 43 million people--relies on power from the 2,010 public utilities now operating. Although the majority of publicly owned systems are in smaller communities, they are also found in large urban areas like Los Angeles, San Antonio and Memphis. Residential customers of investor-owned utilities (IOUs) commonly pay electricity rates roughly 10 percent higher than those paid by public power customers. Commercial IOU customers pay rates 7 percent higher. Industry studies establish that most of public power's price advantage is due to the fact of public ownership itself: Locally controlled public utilities can be especially responsive to customers' needs and do not need to pay dividends to private shareholders.

The basic principle at work in municipally owned real estate development is that appreciation of land should be turned to public advantage. Community land trusts help produce stable and affordable housing for low- and moderate-income residents. One of the earliest and most influential is the Burlington (Vermont) Community Land Trust, organized with bipartisan support when an early-1980s economic boom caused housing costs to spiral out of reach for many long-term residents. Land is owned by BCLT and leased to homeowners. Member-residents devote no more than 30 percent of their income to rents or mortgages. Those benefiting from the resulting low costs sign contracts agreeing that future housing resale prices will not increase beyond a certain percentage, thereby allowing other low- and moderate-income families to benefit from BCLT's efforts.

[fencesitter]

10. There's no housing problem..

The last big estate in my township is being sold to developers and they are going to put in 550 homes. They'll be a bargain to us ordinary folks. They're to be priced between 400,000. - 900,000. See? no problem!