Interview with William Gloede: “Government does not belong in the housing market.”
Today we bring you an interview with William Gloede of Big Builder Online. Below, Mr. Gloede shares his thoughts on the recovery in housing prices and the government’s role in the housing market.
Mortgage Calculator: I’d like to begin by asking you about your background. What made you decide to join the ranks of housing bloggers? How would you summarize your approach to the (current) housing market, and how has your background informed this approach?
A paycheck. My background is in news. I started in the daily newspaper business in the New York suburbs of New Jersey, then went into the advertising and media trade press, where I wound up as chief editor, at various times, of Mediaweek (a magazine for ad agency media buyers and planners and media companies), Editor & Publisher magazine (the trade journal of the newspaper industry), Cable World (for the cable TV industry) and finally a consumer magazine called Connected, which was about the digital, or wired, home. That folded in 2004, and that’s when I began freelancing for Big Builder magazine, which included a column on technology. I was offered a staff position running Big Builder Online in 2007. Sometime not long after, the company asked me to write a blog. It was entirely unplanned.
The housing market is quite different from the media market, which is protected from most government intrusion by the First Amendment (to the endless chagrin of many politicians). I believe it is the First Amendment that makes the USA the USA in the first place–no government official or politician is beyond the scrutiny of the press. I only wish the press would do more scrutinizing that it does.
Both the housing and the media markets are governed by supply and demand. The difference is that the government is largely prohibited from meddling with the media markets, which operate smoothly and efficiently. Unfortunately, it is increasingly involved in housing, which in large part explains why the market is in such pitiful shape.
Mortgage Calculator: You wrote recently that the effective homeownership rate is probably well below the official rate, if you adjust for borrowers whose mortgages are currently underwater. Do you think that this development is bad (from a social standpoint), and that contrary to the advice of some experts, the government should intervene to prevent the rate from falling any further.
Picking up on that last response, government is characteristically inept when it goes beyond its primary responsibility, which is national defense (at which it often fails as well)…in the U.S., the best and the brightest in society do not gravitate toward government jobs—or politics. From mediocre minds come mediocre ideas. It is government that artificially boosted home ownership rates in the first place, ostensibly to promote home ownership among lower-income minority groups. Since the loose lending standards that policy generated could not legally be confined to only those groups (the equal protection clause in the Constitution applies up the economic ladder as well as down), lending standards eroded to the point at which there were no lending standards. That brought us the housing boom and subsequent bust.
Government does not belong in the housing market. There is no right to own a home, just to buy one if one can afford it. Government intervention should stop at ensuring that anyone who has the wherewithal to buy a home where they want can do so.
Mortgage Calculator: What do you think it will take for people to accept the notion that home prices don’t appreciate much faster than the rate of inflation, over a long-term period of time?
Over the long haul, you are correct. But there are periodic spurts during which big profits can be made on real estate. There was such a boom in the 1960s, again in the 1980s, again in the 1990s and then the big one in the 2000s. Those who choose to speculate on real estate should do so at their own peril, period.
Mortgage Calculator: It has been argued that the mortgage interest tax deduction is expensive, inequitable, and inefficient and that there are better ways to promote homeownership. Do you agree? Under current parameters, do you think it should be a factor in the decision to purchase a home?
What I think doesn’t matter. It is. That said, home builders would likely join with the Realtors in fighting a repeal of the mortgage interest deduction.
Mortgage Calculator: Do you generally believe that renting is more economical (and more sensible!) than buying, even when the ratio of rent to home prices is more in line with long-term averages?
That is an entirely personal choice. It is not unreasonable to expect to pay a premium for ownership.
Mortgage Calculator: You have featured reports and testimony that seem to harbinger a continued decline in housing prices. Especially in light of the expiration of the homebuyer tax credit, can you elaborate on this notion?
I’ll leave that up to the analysts. Professor Robert Shiller, of the Case-Shiller index, believes prices have further to fall. I would defer to him on this subject. That said, I think prices will not fall equally across all markets. I do believe that location will matter more than it has in the recent past. The nearer to good jobs, good schools, decent neighbors, the better the property will fare. There are still many properties for sale in places that most home buyers would not consider living. They skew prices downward and will continue to do so.
Mortgage Calculator: Can you explain how the sovereign debt crisis in Europe (and concomitant investor uncertainty) is impacting the recovery in the US housing market?
I’m not sure it is impacting the housing market so much as it is investor confidence in stocks and bonds here, which in turn affects consumer confidence and home buying. In the parlance of finance, default was always the worst of all possible outcomes. Now it is matter of course. Europe, and the U.S., both the governments and the people, need to get back to that old way of thinking. As long as there is a threat of default, there will be investor angst. People, and nations, need to realize they are responsible for their debt and will have to sacrifice to pay it down. There is no free lunch. Never was, never will be.
Mortgage Calculator: Do you think home prices will fall in the near-term? If so, would you advise borrowers/investors to stay out of the market?
Again, I would defer to Professor Shiller on the prices. As a journalist, I don’t recommend investments or strategies. I would point out, however, that there are myriad intangible benefits to home ownership that may, for some, outweigh the investment in importance. It is, and should be, a matter of personal preference and choice. That said, if governments decide to try to inflate their way out of debt, quality real estate, along with other hard assets, is going to look mighty attractive. But then, so will gold.
Homeowners May Want to Refinance While Rates Are Low
US 10-year Treasury rates have recently fallen to all-time record lows due to the spread of coronavirus driving a risk off sentiment, with other financial rates falling in tandem. Homeowners who buy or refinance at today's low rates may benefit from recent rate volatility.
The following table shows current 30-year mortgage refinance rates available in . You can use the menus to select other loan durations, alter the loan amount. or change your location.
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