Biden and Vox are using covid as the excuse for the next mortgage meltdown
June 18, 2021
Today Vox illustrated two of the great weaknesses of progressive ideas.
Progressivism is always in search of problems that need a solution, and those problems are usually created by previous solutions imposed by a government that creates more problems than it solves.
Vox is celebrating the Biden administration’s message to Congress to build more houses to help alleviate both a housing shortage and high housing prices that have been exacerbated by, but, pre-dated Covid.
“Now, in a memo authored by Deputy Secretary of the Treasury Wally Adeyemo,” says Vox writer Jerusalem Demsas, “he makes the case for an increased focus on supply-side interventions. Simply put: We need to build more homes.”
“Adeyemo is right: The supply problem is the biggest problem in the housing market,” continues Demsas. “Not only is it the fundamental cause of skyrocketing prices over the last year, it was responsible for the burdensome cost of rent and homes before Covid-19 ever hit the United States and it opens the door to increased discrimination.”
The problem, of course, is that back in February, before people were outraged by inflation and rising home prices, Demsas was pointing the finger not at housing supply primarily, but at the demand problem.
Demand has been hotted up by artificially low interest rates and an unprecedented money supply created by the government.
“Daryl Fairweather, Redfin’s chief economist,” said Demsas in February, “told me that she believes the increase in home values is mostly a demand story: People are scrambling to take advantage of plummeting mortgage rates that make the cost of buying a home much cheaper.
“Due to falling mortgage rates,” Demsas continued “the cost of borrowing money to buy a house is dropping. Mortgage rates have been falling steadily for a while, but they fell dramatically in 2020 — reaching a record low of 2.65 percent in January 2021.”
That means that people were already buying bigger, better houses then finally, Covid slowed down new buildings.
However, since a huge Covid-created decline in April 2020, the housing market has recovered and, in March 2021, has posted the largest number of new housing starts since the Great Recession.
The market is beginning to catch up to the government shutdowns back in April 2020 and really doesn’t need the government to intervene. Higher prices are a powerful way of getting home builders to build more houses.
The other problem is the housing market in 2008 was heated up by the very same government intervention programs that tried to address “increased discrimination” in the housing market.
Essentially, Vox and the Biden folks want it to be easier for lower-income people to buy and rent houses.
They will accomplish this task by using Federal government tax credits, subsidies and public spending that eventually will be monetized by the banking community into mortgage loans that people otherwise wouldn’t be able to afford.
These loans, before 2008, were known as subprime loans.
And the circle will repeat itself.
So when people are outraged by the next housing market collapse and ask “How did this happen?,” tell them to ask Vox and Joe Biden.