In front of a large audience consisting of students, teachers and many others at Desert Vista High School, President Barack Obama proposed a plan he said can keep the growth of the housing market on track while avoiding another bubble.
During the Aug. 6 speech, Obama told the audience, which spontaneously serenaded him with a rendition of “Happy Birthday” in acknowledgement of his 52nd birthday two days ealier, at the Ahwatukee school’s gymnasium that the housing market had made strong strides since the nadir of the market crash that began in 2008. Among the statistics he cited were a double-digit jump in home sales and the lowest foreclosure rate the country has seen since 2006.
Those, he said, come in tandem with the steady gains made in the economy as a whole, and he mentioned the auto bailout that kept GM afloat and allowed the company to build facilities like its new Chandler site, in order to build “some of the best cars in the world.”
Despite the progress made, Obama said the work needed to improve the housing market and economy as a whole is not done yet.
“As any middle class family will tell you, we aren’t where we need to be,” he said.
A prominent piece of that plan is the winding down of Fannie Mae and Freddie Mac — the government-sponsored mortgage firms that provided many of the loans that led to the economic downturn and were eventually bailed out by the federal government during the recession. He said the system in place prior to the recession allowed Fannie Mae and Freddie Mac to make large profits at the expense of homeowners in the midst of a “heads we win, tails you lose” game. Exacerbating the issue, he said, was the organizations’ ability to engage in risky practices he said inflated the housing market that “killed Main Street” while having the bailout option in their back pocket.
“That puts the whole country at risk, and we’re ending those days. We’re not going to do it anymore,” he said.
To replace the loans offered by Fannie and Freddie, Obama said he wanted private capital firms, both large and small, to become the backbone of the loan system.
Another prominent aspect of Obama’s plan was tied to the ongoing immigration debate, as he said fixing the immigration system would add to a strong home-buyer base and increase home prices. He credited Arizona Sens. John McCain and Jeff Flake for their support of immigration reform that passed in the Senate.
Also part of Obama’s plan was to help families re-finance their home loans before the loan rates increase again, which he said can save homeowners an average of $3,000 a year. It’s also one of a few parts of his plan that requires approval by Congress.
“We need to get that done; we’ve been trying for a year and a half, two years; we need to get that done,” he said.
Other parts of his proposal he highlighted included making it easier for qualified homebuyers to get a mortgage, finding affordable places for people to rent and rebuilding the areas that were hit the hardest by the housing crash. Obama said the lattermost can improve both the housing market by tearing down abandoned homes, which would increase property values, and the entire economy.
“We can put people to work right now and improve the housing stock that’s out there,” he said.
As the housing market improves, Obama said the goal too is to prevent the formation of another bubble that could bring down the economy again. That, he said, can be accomplished by ending Fannie Mae and Freddie Mac, kyboshing predatory loan practices that forced many people to purchase a home that weren’t ready, curbing the practice of flipping houses for quick profit and stopping people who are unqualified for home loans from getting them.
He added the factors mentioned above were practiced across the country, and the ramifications were felt in the greater Phoenix area that he said was, “ground zero for the housing bubble burst.”
“All of this created a housing bubble, and especially in places like Arizona, it was devastating when that bubble burst,” he said.
Obama also addressed the high school members of the audience, and said the steps he wants to take can guarantee them the ability to purchase their own home as they get older in a fashion more akin to the way his grandfather did after World War II than in recent years.
“A home is the ultimate evidence in America that hard work pays off,” he said.
After the speech, Phoenix mayor Greg Stanton praised Obama for the speech he said came at the right time, and echoed Obama’s sentiment that a home is meant to be a “long-term investment.”
W.P. Carey School of Business at Arizona State University Center for Real Estate Theory Director Mike Orr, who reviewed the details of Obama’s plan prior to the speech, said Obama’s policies can improve the housing market, including immigration reform.
“I think immigration reform will be stimulus for housing if it goes through,” he said.
Orr, however, said while the aspects of the plan Obama has direct control of could come into affect quickly, the parts that require Congressional approval could prove trickier given the body’s recent track record. Stanton expressed a similar lack of confidence in Congress’ ability to come to a bi-partisan agreement about those proposals.
“I’m not optimistic about that,” Stanton said.
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