When the poor get their hands
on a little piece of land and stick up some
modest 2 bedroom ranch or (gasp!) a double
wide, they are contributing to "sprawl". It's
much more aesthetically pleasing when they
can live in "planned" housing. In the old
days that simply meant living on the other side
of the tracks or over some ridge. Nice to see
democracy come back and bite the beautiful people
where it hurts.

By the way, did you catch that PBS documentary
on "class" in America. It was actually fairly
interesting how they gave Barbara Ehrenreich's
neo-marxist critique short shrift in favor of
what essentially amount to "class as lifestyle" and "class as genetic determinism" arguments.

The segment about the Burlington Food Coop vs. Shaws controversy was particularly fascinating.

I guarantee that a zero-down programme will have a much higher rate of default than with conventional loans, but HUD is right, it can be run at a break-even point, and even if not, it might still be worth doing.

The biggest danger is that it won't be run the way it would have to be, to break even. Future politicians might claim that it's an unnecessary burden and a hardship for families in the zero-down programme to be paying mortgage rates 2% over those of conventional loans.

This is social engineering and central planning. Let the marketplace drive the marketplace. There are some people who shouldn't be homeowners, just as there are people who shouldn't be in the farming business. 3 pecent down encourages the establishment of thrift and goal setting, and sets a minimal standard on the behaviors of potential borrowers. With zero down, any deadbeat can get into a home. He's trying to subsidize responsible behavior with money, which is a moronic concept. It won't raise the level of behavior, it will just cheapen ownership.

Been there, done that. Didn't much care for the result.

However, the marketplace is doing nothing for this segment.

Something's gotta give.

Harry, what segment are you talking about? Poor people?

Robert:

If "There are some people who shouldn't be homeowners" that group does not include people who are perfectly capable of making home payments--which are likely to be not much different than their rent payments--as long as they don't have to come up with upfront money.

Robert Duquette:

It's social engineering, but not central planning.
Nobody's talking about telling folks in this programme where to live. (Except Kerry, who apparently wants entire developments of low-income real estate).

What's wrong with cheapening ownership ?
We're not talking about ending some aristocratic privilege. It won't affect your own homebuying experience.
In fact, it'll raise the value of your home by increasing the pool of potential buyers.

If you want the market to be unsullied, then let's end the Federal mortgage interest income tax deduction, as well as the VA, HUD, and FHA programmes.

Finally, this really is the market at work.
Banks have been offering high-interest, shorter-term loans to cover a missing down payment for years. It's entirely possible for a person with good credit to buy a home for nothing down right now, provided that they were willing to pay dearly for the privilege.
This programme would just extend that service to people with riskier credit ratings.

Also, this will encourage young couples to have kids, if they can move into a house without having to save a down payment from their meager salaries, and that's pure economic gravy for America.

I'm talking about couples with gross incomes under 80% of the local median -- $48K/yr around here, but more than the average wage -- $26K/yr here.

That's somewhere around a quarter of everybody, and, counting those whose incomes are too low ever to aspire to own much, at least a third of the entire working population.

I understand, from our discussions of Coolidge prosperity, that were talking economic triage here, and the lower third is expected to fall on its sword for the benefit of the rest of us.

Orrin keeps citing construction of 2,500-square-foot houses as 'market response' to 'housing demand.'

Only if you don't count everybody as wanting to live under a roof.

Harry:

After reading your last post on the other housing thread, I understand what your perspective is, but the same thing can happen even with people who've made a big down payment.

Ask people in Detroit what their homes were worth, and if they could afford to, (or even wanted to), make the payments after half the auto plants shut down, or people in the south after the textile mills moved away.

Any time a thirty-year contract is signed, it's an act of faith.
Sometimes we lose.

However, most people don't. Even during the Great Depression, most people kept their homes.
Zero down programmes let more people grab at the brass ring.

Also, your experience isn't the norm, due to the peculiar circumstances of your surroundings.

I've lived in places such as Junction City, Kansas, and Augusta, Georgia, where anyone with a full time job, regardless of wage, could afford to make house payments, and where there's a pretty big stock of older, smaller, cheaper homes.

In Toledo, Ohio, they're practically paying people to take the houses.
'Course, then you have to live in Toledo.

"It's social engineering, but not central planning."

If the administration is setting goals for increasing home ownership by 150,000 in the first year, then it's central planning. It's not the government's role to set home ownership goals for the economy.

"Finally, this really is the market at work.
Banks have been offering high-interest, shorter-term loans to cover a missing down payment for years. It's entirely possible for a person with good credit to buy a home for nothing down right now, provided that they were willing to pay dearly for the privilege.
This programme would just extend that service to people with riskier credit ratings."

If the market deems that only the good credit risk should get the zero down loan, then there is a sound economic reason to do so. For the government to offer loan guarantees for borrowers that the market wouldn't touch would be a non-market decision. The government can't be the market, only the market can be the market.

Even with rates at an all-time low, defaults and bankruptcies are running at record high rates. Poor credit risks are not just poor people who are otherwise just as dependable as their middle class neighbors. In most cases they are by nature or habit or temperament undependable. Withholding of credit is a market mechanism for disciplining the behavior of market participants. Subsidizing bad credit risks is subsidizing bad behavior. This is what I mean by cheapening ownership. As Orrin has pointed out in the past, economics was originally a branch of moral philosophy, and a free market relies on self-limiting, self-controlling, disciplined behaviors on the part of individuals. Ownership means self-discipline, responsibility and commitment. The government can't give that to 150,000 people by the stroke of a pen.

Robert:

If you still think it isn't the government's job to house you then you missed the 20th Century.

Harry:

You have a 33% homelessness rate?

I understand the differences, Michael. I'm just trying to persuade Orrin of the obvious fact that the market, subsidized or not, is not answering demand for housing.

We weren't talking about homelessness, Orrin, but home ownership.

But, yes, housing here is pretty dire. About 2% (my guess, nobody knows) completely unhoused, nearly 2% living in homeless shelters (we have the snazziest in the country), and close to 50% crowded into expensive, often substandard, rental housing that is so expensive that all your fantasies about health savings accounts and other 'ownership' strategies might as well be about aspiring to decorate the kitchen with genuine Faberge eggs.

A friend of mine, whose gross income is around $40K, which is well above average, recently had to move. The cheapest rental on the island -- not good or acceptable rental, just rental -- was $1200/mo.

We do have this weird system called 'ohana' housing, by which, while most people cannot own houses, almost all those who do own a house have two.

So a few roomates and it's quite reasonable, no?

That's how the young people do it.

They don't stay, though.

Hard to raise a family that way. I live among the rich people now, but when I first came here I lived in Dream City, which was working class. As I walked around the neighborhood in the evening, you would see the husbands and wives sitting in their cars on the streets, talking. It was the only way they could get any time to themselves.

Few, if any, would have said, 'This is good enough for me. Why should I want any more house?' Yet the market failed then and continues to fail to provide any.

Then they'll move, which is the mareket working too.

If any result, no matter how undesirable, is 'the market working,' then who wants markets?

Don't results count?

Harry:

No. That's why we don't allow a truly free market anywhere.

And that's why no one who actually has to operate in a functioning economy pays any attention to the ravings of St. Hayek.

Making men worship markets is upside down.

Yes, they need to worship God, but use markets to help realize a good society. The market is a means, not an end.

Wouldn't it be more accurate to say that the government failed ?

If it were legal to do so, (and I don't know if it is or not there), wouldn't some developer have put some small trailers cheek-by-jowl in lots, as one can see in many mainland states ?