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Funny Numbers on Housing

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Sunday, 26 January 2014 09:04

One of the reasons that the housing bubble caught so many people by surprise was that the media relied largely on people who had an interest in pushing housing as their sources in reporting. This still seems to be the case today as indicated by a NYT piece on the housing market.

At one point the piece cites economist Mark Zandi, telling readers:

"Tighter lending standards are shutting out close to 12.5 million consumers who would qualify in normal times."

It's difficult to attach any meaning to this statement. We currently have 75 million home owning households and 40 million renting households. Is Zandi saying that among the 40 million renting households we have 12.5 million people who would in other times qualify for mortgages but do not today? Many renters do now qualify for a mortgage. If we say that a quarter of renters could now buy a home if they wanted, then Zandi's claim would be that 12.5 million of the 30 million remaining renters (42 percent) would in normal times be able to get mortgages but are unable to do so because of tight credit conditions today. That one is a bit hard to believe. (It's possible that the number includes people who can't refinance because they have little or no equity in their home, but that is a very different issue.)

In the same vein, the piece tells readers:

"Mortgages are roughly seven times harder to get than they were five years ago, according to the Mortgage Bankers Association’s credit availability index, and they show few signs of getting easier."

The seven times harder refers to an index that the Mortgage Bankers Association constructed that is at one seventh of its value five years ago. It doesn't mean that a person has one seventh the chance of getting a mortgage.

Incredibly this piece never mentions the role of the Federal Housing Authority (FHA). While the FHA virtually disappeared as a factor in the housing market at the peak of the housing boom, because it did not relax its standards, its role hugely expanded after the crash. When the housing market was bottoming out in 2009 and 2010 it guaranteed more than 20 percent of new mortgages. It still insures close to 15 percent. Many people who would not meet the standards for a Fannie Mae or Freddie Mac mortgages can get one insured by the FHA.

fha

                                 Source: Business Insider/HUD.

Comments (6)Add Comment
Think of the alternative, Dean
written by ifthethunderdontgetya™³²®©, January 26, 2014 12:19
.
"Incredibly this piece never mentions the role of the Federal Housing Authority (FHA). While the FHA virtually disappeared as a factor in the housing market at the peak of the housing boom, because it did not relax its standards, its role hugely expanded after the crash."

It's not incredible to believe someone in our corporate press would write this.

Think of what he/she/corporate_bot would have to write, instead: "The government did a better and more responsible job of providing mortgages than the private sector."

Even you so-called liberal NYT (let alone the Jeff Bezos WaPo) would have to fire him, immediately.
~
An example of a Newspaper boycotted by advertisers (car dealers) for their consumer coverage
written by John Wright, January 26, 2014 4:57
The Real Estate Industry probably can influence newspaper content just as some car dealers did in the 1990's when the San Jose CA newpaper printed a guide on consumer negotiation with car dealers, a guide the dealers did NOT like.

Here is an article from the American Journalism review about the car dealers' response.

http://ajrarchive.org/article_printable.asp?id=2149

A line from the article:

""Ronald Collins, a George Washington University law professor who has studied advertiser attempts to shape media coverage, says he finds it surprising that the daily ran Schwanhausser's piece in the first place.

"Usually, the editor will kill that kind of story or the reporter knows certain areas are no-nos," he says.""

FHA
written by William Christiansen, January 26, 2014 11:16
FHA is actually the Federal Housing Administration-not Federal Housing Authority.
back to business as usual
written by dave, January 27, 2014 12:08
During the bubble, the chief economist for the NAR was one of the most frequently quoted economists, and no matter what anyone else said about a bubble, he always claimed the market was better than ever.

A journalist buddy of mine interviewed him multiple times, knew his information was biassed, but he also knew his bosses wanted to see him quoted. My buddy made a very low salary ans was just glad to have his job, so you really can't blame him. Always blame the senior editors.
almost a bubble, now bring on the unqualified to cement the deal
written by pete, January 27, 2014 6:09
Prices are bubblicious, per Dean, and the standards are tighter. Thus, more income will be needed to purchase a home, and you need like 3 years of W2s and so forth. Very time consuming. While James "I have no recollection" Johnson is no longer around to rally Congress to loosen standards, I am sure there will be somebody soon...there are already some of the same rumblings as there were in the late 90s.
Congress didn't set the standards for Goldman Sachs and Merrill Lynch
written by Dean, January 27, 2014 7:51
Pete,

you're bringing the Lochness Monster and other mythical creatures to this blog. Far and away the worst loans were securitized by the Wall Street investment banks, even the AEI folks acknowledge that one. The story that Fannie and Freddie were forced to securitize bad loans by a Republican controlled Congress (somehow Barney Frank gets the blame here) is a silly fairy tale for children and reporters.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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