Despite all of the positive media spin out there proclaiming that the housing market has made a full recovery, President Barack Obama left real estate almost entirely out of his 2015 State of the Union Address this past Tuesday. While the omission may be, in part, that the federal government has not really kept up with its promises where housing is concerned – the Home Affordable program suite saved millions fewer homes than projected, the government-run GSEs do not offer principal reductions on loan modifications, and the “national” housing recovery is obviously regional at best – many analysts have different ideas about why housing was missing from this year’s speech. Jed Kolko, Trulia chief economist, went so far as to imply that the housing recovery is old news.
In his response to the State of the Union, Kolko explained that for housing, the urgency has faded. Fannie Mae, Freddie Mac, and the FHA are all posting profits and, according to Kolko, the “excesses” of the housing bubble – that is to say, overbuilding and subprime lending – are largely “corrected.” Furthermore, he said, two-thirds of the much-touted “middle class” are homeowners at this time and as far as they’re concerned, things are good because nationally home values are up. Kolko added that because most housing challenges at this time are local rather than national, it would have been difficult to address them in the State of the Union Address anyway.
Finally, Kolko said, leaving housing out of the speech really was the only way for the president to focus his economic thrust where he wished. “The best housing policy is economic policy,” noted Kolko, adding that the only way to attain a true recovery is to get millennials (the 25-34-year-old age group) employed in jobs with good wages and growth potential, moved out of their parents’ homes, and in possession of enough money for a down payment. While Kolko essentially said – very diplomatically – that by addressing economic issues that affect millennials, the president was addressing housing, we would argue that the president really couldn’t afford to address the millennial problem directly since all research indicates that it is not anywhere near being solved. After all, studies from sources ranging from the Harvard Joint Center for Housing Studies to Coldwell Banker all indicate that millennials are predominantly disinterested in buying in the near future (more than half say that while they might buy in the future, they prefer renting), struggling to gain meaningful employment, and too debt-ridden to take out a mortgage much less save for a down payment.
by Carole VanSickle Ellis