Denver Presidential Debate and Housing: Experts React to the Issue That Wasn't
Housing a Hot Potato in First Presidential DebateDaren Blomquist, vice president of online foreclosure marketplace RealtyTrac:
President Barack Obama and Mitt Romney agreed on a few things in last night's debate, but one of the clearest areas of agreement came in what they said little about: the housing market.
Both presidential candidates treated housing like a hot potato, touching on it briefly in passing but not willing to grab on with both hands and crack open the issue for a deeper look.
That's despite some staggering numbers when it comes to the housing crisis: Since Obama took office in January 2009, more than 6 million homeowners have started the foreclosure process and 3.2 million have lost their homes to banks. Meanwhile, home values have plummeted 30 percent from their peak even with recent home price gains, leaving more than 12 million homeowners seriously underwater, owing at least 25 percent more on their mortgages than their properties are worth.
I caught only two explicit references to some variant of the word "house" or "home," one by each candidate. And it's not surprising that Obama's reference was positive while Romney's reference was negative.
"Housing has begun to rise," Obama cautiously offered during his opening remarks, quickly moving on to more solid evidence that his presidency has improved economic conditions in the country.
Romney did not dispute that carefully worded assessment, given that such a tepid endorsement sounded remarkably similar to the ground the Romney-Ryan camp was willing to give in its recent white paper offering up its solutions to the housing crisis, which acknowledged that "there have been some recent signs of life in the housing market."
Despite these recent signs of life, however, the Romney-Ryan white paper went on to claim that "our economy remains stuck in neutral with 23 million Americans struggling to find work" and "persistently high unemployment that has stayed above 8% for a record 43 consecutive months, and real household incomes falling more than $4,000 over the past four years."
Romney hammered away at that message in the debate, reminding the audience over and over again that "my priority is jobs," with the implication that an improving job situation will help mitigate future foreclosures and the lingering housing slump.
His only explicit reference to the housing crisis also came early on, during an anecdote about a woman he talked to in Ohio whose husband had burned through four jobs over the past few years, resulting in the couple losing their home.
Linking the foreclosure crisis to job loss is logical, and in many cases job loss does contribute to an eventual foreclosure, as I found out on a Super Shuttle ride to the Sacramento airport. That also allows Romney to provide a fairly simple solution to the housing crisis: create more jobs -- and he has promised to create 12 million if he is elected president.
The only problem with such logic is that high unemployment was not the catalyst for this foreclosure crisis. The catalyst was a gold rush on real estate driven by speculative homebuyers and investors, enabled by bad loans with bad underwriting ... created to satisfy a seemingly insatiable appetite for those loans from Wall Street.
That has left many homeowners with loan payments they struggle to afford -- even if they do have a job -- and aren't in line with the now-deflated value of their home.
During the debate, Obama provided a fairly similar prognosis for the financial meltdown in which housing was the first domino to fall. But despite an accurate prognosis, Obama has not been able to come up with effective solutions to stop the bleeding.
Foreclosure prevention programs implemented by the Obama Administration have attempted to address the bad loans piece through an evolving series of loan modification (HAMP) and refinancing (HARP) initiatives, but have fallen short of expectations because, at the end of the day, they are voluntary and cannot force lenders to address the root issue of negative equity by requiring modifications and refis to include write-downs of principal loan balance.
The mortgage settlement between 49 state attorneys general and the nation's five largest lenders, finalized in April, may be changing that by requiring those lenders to offer some modifications with principal balance reduction.
Maybe that's something Romney could use to his advantage in the next debate as more evidence that state governments should be doing more and the federal government should be doing less.
Apparently, This Housing Crisis Is OverJed Kolko, chief economist of online listing service Trulia:
If I had a housing-debate bingo card, I would have tossed it out halfway through the debate. In the only debate focused solely on domestic policy, the candidates never mentioned foreclosures, refinancing, Fannie Mae or Freddie Mac. Instead, Romney gave a shout-out to "qualified mortgages" -- which was definitely too obscure for my bingo card. What happened Wednesday night? Two mentions of housing.
First, in his opening remarks, Obama said "housing has begun to rise." He's right: the housing market is in better shape today than when he took office in 2009. More surprising was that Romney didn't argue. Romney did point out several ways that broader economic performance worsened during Obama's presidency, but the housing market wasn't one of them. Had Romney wanted to point to the ongoing pain from the housing crisis, he could have pointed to the stubbornly high foreclosure rate in many states or the fact that the market is still not even halfway back to normal. But he didn't.
Second, Obama and Romney were more focused on preventing the next housing crisis than getting out of this one. They mentioned housing only in their brief debate over government regulation. Obama cited banks' risky lending practices in the past as reason for why regulation is important for the future. Romney got into the weeds, agreeing that mortgage regulation is important and, in fact, blamed the continued uncertainty over the Dodd-Frank "qualified mortgage" rules for banks' reluctance to lend today. (What is a "qualified mortgage," anyway? Those will be mortgages meeting standards that automatically "count" as being within a borrower's ability to repay, for legal and financial purposes.) Two cheers to the candidates for focusing on rules to prevent the next housing crisis.
But that was about it for housing. There's a long list of what the candidates didn't say about housing. Not a word about refinancing, principal reductions, selling government-owned foreclosed homes, or the mortgage interest deduction -- all hot-button housing issues. Why wasn't there more debate over housing? Three reasons:
The worst of the housing crisis is behind us.In almost every way, the housing market is improving: Prices, sales and construction are all increasing; vacancies, inventories and delinquencies are all falling. Housing policy doesn't feel as urgent as it did two, three or four years ago.
Housing isn't really a winning issue for either candidate. As the incumbent, Obama needs major housing policy successes to point to; as the challenger, Romney needs compelling fresh new housing ideas to put forward. Unfortunately, neither candidate has what he needs to make housing a winning issue for him.
Economic policy is the best housing policy. The housing market recovery depends on the broader economy. Jobs lead to housing demand; economic confidence leads to more lending and construction. Whichever candidate is better for the economy is almost certainly the better candidate for the housing market.
But the biggest news is that Romney didn't argue with Obama's claim that "housing has begun to rise" -- and that both candidates were focused on regulations designed to prevent the next housing crisis. They're clearly ready to put this housing crisis behind them.
Romney's and Obama's Housing Policies
Election 2012: Will It Affect Your Decision to Buy a Home?
Barack Obama's and Mitt Romney's Homes
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