Tweeting a Real Estate Recovery
President Barack Obama once again made use of the power of social media by holding the first ever “Presidential Twitter Town Hall” July 6. While 27% of the questions “tweeted” to him placed focus on the very poor jobs market and the sluggish economy, 6% of the queries zeroed in on the nation’s housing crisis.
One questioner asked what mistakes Mr. Obama had made in handling the economy. He answered stating that “the continuing decline in the housing market is something that hasn’t bottomed out as quickly as we expected.”
Another concern was raised by a tweeter wondering how homeowners can get help from being “underwater” with debt that is greater than the value of their homes.
The president made a point of saying that his administration’s efforts to help homeowners in distress were “not enough … so, we’re going back to the drawing board.”
Still another asked if the real estate market could heal itself. Mr. Obama replied that “given the size of the housing market, no federal program is going to be able to solve the housing problem.”
Seems a follow-up tweet could have been: Does this mean that going back to the drawing board is to turn the problem over to private sector capitalism?
The Troubled Asset Relief Program (TARP) was pushed through in the early months of his administration back in 2009. It placed a strong focus on protecting “home values, college funds, retirement accounts, and life savings; [preserving] homeownership, and promotes jobs and economic growth …”
Just this past March the Congressional Oversight Panel (COP) released a report weighing in with its opinion of the success of the program.
Part of TARP was the President’s Home Affordable Modification Program (HAMP) in early 2009. It was “asserted that it prevent three to four million foreclosures.” The report found that “the program now appears on track to help only 700,000 to 800,000 homeowners.”
Another program for homeowners established in July 2008 known as HOPE was to permit Federal Housing Assistance (FHA) to provide mortgage insurance for distressed mortgages. The Congressional report found the following results:
HOPE for Homeowners was initially expected to help 400,000 homeowners, but managed to refinance only a handful of loans. This was likely due to the program’s poor initial design, lack of flexibility, and its reliance on voluntary principal write-downs, which lenders were very reluctant to make.
Along with the lack of “shovel ready projects,” it appears that the traditionally poor execution practices of government, combined with the high expectations of TARP, missed the mark of being the needed economic recovery boost.
Of course, the burst of the housing bubble a few years ago was only the beginning of a real estate house of cards that has negatively impacted land, commercial and industrial values.
Scouring through the multitude of media outlets, one can find any number of so-called and self-professed experts who claim to know the source for why the global economy hit the skids. Clearly there’s a lot to go around, but how to fix the problem is the clear challenge.
The center of attention seems to be improving the employment picture.
Last Friday billionaire investor Warren Buffett, chairman and CEO of Berkshire Hathaway, Inc., was interviewed on Bloomberg Television. He was asked for his assessment of the Labor Department’s weaker than expected June 2011 jobs report.
Mr. Buffett said that he remains optimistic that there will not be a double-dip recession as many predict and anticipated that jobs will “come back big-time … when residential construction comes back.”
So, when will that be?
Mr. Buffett lays it squarely on the burn off of the excess housing inventory that exploded in the early 2000s. He thinks that could be in a few years … by that time the unemployment rate could fall from the current 9.2% level to as low as 6%.
But can the government do any more than it has already to improve the bust in the housing market?
To this Mr. Buffett responded that he thinks the White House has set its “expectations too high … government can do things to make [the economy] worse, as it did during the great depression.” But while it can also “help some,” history shows that the “system cures itself … By far and away the biggest factor is … [through] the natural regeneration powers of capitalism.”
So, after hundreds of billions of borrowed dollars to fund TARP and other government stimuli that were intended to be the promised cure all … could it be that capitalism has been answer all along?
Rocky Mackintosh is the owner of a land and commercial real estate firm based in Frederick. He is also the editor of the MacRo Report Blog.