I spent this past week outside the Washington, D.C., Beltway.
The stark contrast between the federal government-fueled affluence in our nation’s capital and the economic situation facing those who pay for that affluence is almost startling.
In “real America,” the house across the street is foreclosed and the bank is offering it at a distressed price.
In “real America,” the neighbor next door is a renter who walked away from his mortgage because his wife lost her job, and he couldn’t afford the mortgage.
In “real America,” the real estate agent who only sells foreclosures has 50 houses in his current inventory with more waiting to be released by the bank, all in a town of fewer than 40,000 people.
Of course, my sampling of “real America” is anecdotal, but the housing reports generated nationally reveal that life outside the Beltway doesn’t have much resemblance to life inside it.
Each month the U.S. Census Bureau releases a report on residential sales across the nation detailing a flat-lined housing market showing that supply of homes on the market greatly exceeds demand to purchase those homes at the prices they are offered.
The April 25 report showed that the supply of new single-family homes currently on the market would not all be sold until October.
Last month’s National Association of Realtors (NAR) report on existing home sales reveals an even more startling reality. In 2008, the average sale price of existing homes was $198,100; in March 2011, the average sale price of existing homes was $159,600. To highlight the continuing decline in home values, the average sale price last year was an eye-popping $172,900.
In spite of collapsing home prices, the same NAR report reveals that the supply of existing homes has risen 5 percent since March of 2010. The sad fact is that the market has not yet hit bottom, as potential buyers wait for prices to drop even further.
This is the Obama administration’s nightmare scenario.
Homeowners are more likely to vote than renters, and rightly or wrongly, tie much of their feeling of economic security to the value of their home.
This explains Obama’s desperate attempt to force the recently taxpayer-bailed-out banks to accept billions of the paper losses incurred by homeowners who bought at the market’s peak.
Force the bank shareholders to feel the pain rather than voters who now regret the price they paid for their homes. If big banks need another bailout, Dodd-Frank provides it, and Congress doesn’t even have to vote.
In “real America” people are hurting, but the answer isn’t government coercion of banks to act against their shareholders interests, and the answer isn’t more artificial home purchase credits.
The key to a true housing recovery is allowing the market to adjust naturally over the next two to three years so the supply of homes available no longer exceeds the demand for those homes — a proven solution instead of the snake oil the president is currently offering.
Rick Manning is the communications director of Americans for Limited Government. You can follow him on twitter @rmanning957.