Freddie Mac CEO Donald Layton recently told an audience at the Mortgage Bankers Association annual convention in San Diego that loans with down payments as low as 3% are a net positive and that more low down payment products could be on their way. Layton lauded the programs because they have boosted homeownership, but why is homeownership still at its lowest level since 1967? Well that’s easy. Housing is too expensive, and it’s thanks to these very loan products that Layton praises!
If were allowed to have a real market in housing, maybe housing could come down to prices that wouldn’t require these phony products to begin with. Let me explain. Suppose we had real prices that weren’t propped up by the government and artificially low interest rates. Interest rates would increase to 1990 levels, and most of these housing prices would be cut by at least half. A $200,000 house would drop to $100,000 or less. The down payment, property taxes, and mortgage insurance would all become more affordable. Rents for properties would drop, so Americans saving to buy a house could do so faster. They wouldn’t have to live in a place they don’t own while coughing of up a sizable portion of their net income each month. But none of this is allowed to happen because government has set out to make housing more “affordable.”
Just like health care, college and everything else the government touches, prices skyrockets leaving the poor and middle class with a lower standard of living. Government is like a reverse Rumpelstiltskin spinning gold into string, and it’s the the youngest working generation who will pay the price. Due to all the big government Americans now love, many millennials will be working well into their 70s before retirement is an option. Don’t get me wrong. I think work is great as long as you’re doing what you love. The fact is that most millenials will be working not because they want to, but rather because the have to. According to Landon Dowdy, “A new report predicts that young workers will need to work until they’re 75 on average to save enough for retirement. Researchers at Nerdwallet, the financial site that published the report Wednesday, blamed rising rents and student debt levels.”
That’s just half the problem. Millennials will also be expected to support the social security, health care and housing Ponzi schemes that their parents voted for. Thanks Mom and Dad. Of the three frauds mentioned, social security is probably the worst. Money is stolen from you over the course of a 30 or 40 year career with the promise that good ‘ol Uncle Sam will support you during your golden years. But even ordinary Americans are beginning to question Sam’s creditworthiness. Nick Giambruno reports, “Recently, the government announced that there would be no Social Security benefit increase next year. That’s only happened twice before in the past 40 years. You see, the government links Social Security benefit increases to their own measure of inflation. If the government says “no inflation” then there are no benefit increases. It’s like letting a student grade his own paper.”
We can only hope that this government flunks out of school soon enough to give millennials a real chance at retirement.