Tuesday, September 29, 2009

$35 Billion Slated for Local Housing - WSJ.com

WASHINGTON -- The Obama administration is close to committing as much as $35 billion to help beleaguered state and local housing agencies continue to provide mortgages to low- and moderate-income families, according to administration officials.

The move would further cement the government's role in propping up the housing market even as some lawmakers push to curb spending at a time of rising debt.

The effort, which could be announced as early as this week, is aimed at relieving pressure on government-operated housing finance agencies, which have been struggling to find funding amid the downturn. These agencies, or HFAs, are a small part of the housing market but are critical to many first-time and low-income home buyers, who can get lower-rate mortgages through an HFA than they could through a private-sector lender. Rates are typically 0.5 to one percentage point lower than commercial lenders.

In case there was any doubt that the current administrations IQ hovers safely in the two digit range, this is it.

One thing that is as inevitable as night follows day is that when the government subsidizes something, that thing gets more expensive, requiring larger subsidies, ad infinitum*.

The best way to have affordable housing, is to let housing prices return to rational levels, which in spite of the "housing collapse" they still have not. The Journal over the weekend described a rather fancy 20s era house (built by an auto industry exec) that recently sold for $10,000**. Now that's a reasonable price, and the house, once restored a bit, will certainly be worth more. Only problem is that it is in a part of Detroit that nobody in their right mind wants to live... reasons listed: high taxes combined with high crime and few services... duh! It sold to a church, who plans to do the renovation in hope of reselling the house at a profit. I wish them luck. And who knows, once Detroit and similar cities get over grieving over the loss of industries that they helped drive offshore, maybe there can be some sort of urban renewal that will last beyond the artificial pumping of funds into the area.

* It's tempting to mention health care here, but let's leave that for another time.

** Interestingly, that's about what the house was considered worth when it was built, only then, $10K was considered a fortune.

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