Obama Seeks Relief for U.S. Housing Market

by John M. Curtis
(310) 204-8700

Copyright February 4, 2012
All Rights Reserved.                                         

             Recognizing the abysmal state of the U.S. real estate market, President Barack Obama urged Congress to pass legislation to help distressed homeowners refinance debt-ridden mortgages.  Obama asked Congress for $5-10 billion in financial aid to help homeowners manage troubled mortgages.  Foreclosures and short sales have driven down real estate prices around the country, with areas like Florida, Nevada, Arizona and parts of California hardest hit because of unsustainable housing booms. With as many as 11 million U.S. homeowners under water, Obama wants to slow the foreclosure crisis that continues to usurp American consumers.  Without a functional real estate market, most economists don’t see lasting economic recovery anytime soon.  Most economists agree that without a growing real estate market, it’s difficult to sustain any kind long-term economic recovery.

            Obama recognizes that economic recovery requires a thriving real estate market.  Healthy real estate markets during former President George W. Bush’s term helped spur consumer spending, accounting for about two-thirds of U.S. Gross Domestic Product.  When Federal Reserve Board Chairman Ben S. Bernanke announced Jan. 25 that he wouldn’t raise rates until 2014, it signaled the economy remained weak.  Despite the Fed’s loose monetary policy, the nation’s GDP remains just over one percent, leaving a double-dip all the more likely.  Keeping the federal funds rate between 0 and .25%, Bernanke has run out of stimulus.  Only slowing the foreclosure rates and promoting homeownership can help rescue the economy.  With the economy adding jobs and the projected federal deficit dropping to $1.1 trillion, Obama now focuses on the real estate market to improve the economy.

            Whatever the Fed has done to stimulate the economy, it can’t compensate for a sluggish real estate market.  Homeownership give consumers added leverage needed to fuel the nation’s GDP.  When financial and real estate markets crashed in 2008, it robbed consumers of the cash to drive the economy.  “The truth is, it will take more time that any of us would like for the housing market to recover from this crisis,” Obama told supporters at a community center in Falls Church, Virginia.  Obama knows that the ongoing hemorrhage in real estate sours many voters around the country.  Hard hit areas like Florida, Nevada, Arizona and Ohio all promise to be swing states next November.  Offering government-backed financing to help struggling homeowners has strong appeal to prospective voters.  Propping up the anemic real estate market pays rich dividends with cash-strapped homeowners.

            Obama’s multi-pronged approach to kick-starting the economy now includes pressuring U.S. and foreign companies to return manufacturing and assembly back to the States.  His Jan. 11 summit with foreign and domestic business leaders put the importance of domestic manufacturing.  Barack gets that expanding U.S. jobs is the fastest way back to balanced budgets, together with stimulating the real estate and stock market.  Since Jan. 1, the U.S. stock market has taken off like a rocket, proving, if nothing else, that when market makers like Goldman Sachs decide to stay long, there’s nothing the Wall Street can’t do.  When former President Bill Clinton and his Treasury Secretary, former Citibank Chairman Robert Rubin, promoted the bull market in the late ‘90s, the U.S. Treasury benefited with unprecedented tax collections, eventually balancing the U.S. budget.

             Promoting more domestic manufacturing, maintaining historically low interest rates, establishing more mortgage financing and encouraging stock market investing should promote economic growth.  “But there are actions we can take, right now, to provide some relief to folks who’ve been making their payments on time,” said Barack, promoting his new government-backed refinance program.  Campaigning in real estate-depressed Nevada, GOP presidential frontrunner former Mass. Gov. Mitt Romney opposed the president’s approach.  Obama’s message in depressed real estate market puts pressure on the GOP to come up with some fix to the nation’s foreclosure epidemic.  Other than letting free markets run their course, Republicans will have to offer alternative plans or face a voter backlash.  Too many voters have direct experience with mortgage defaults and foreclosures.

            Heading into Saturday’s Nevada caucus, Romney walks a tightrope talking up free markets while Obama tries to provide real relief to troubled homeowners.  Too many defaults and foreclosures have soured voters with empty promises about mortgage relief.   With over 11 million homeowners underwater and facing foreclosure, Obama’s mortgage relief plans sends a lifeline to distressed borrowers.  “Rather increase the government’s stranglehold on our nation’s housing finance system, we need to dial it back,” said Rep. Scott Garret (R-N.J.), chairing the House subcommittee that oversees housing finance.  With battlegrounds heating up in real estate-depressed states like Florida, Nevada and Arizona, Barack’s plan provides some relief.  More GOP happy talk about free markets won’t play well with distressed homeowners.  Whether Obama’s plan helps or not, it’s at least a step in the right direction.

  John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.       

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