Last night, President Barack Obama took to the podium to deliver his annual State of the Union address before a packed house of his Congressional peers, esteemed White House guests, and millions of Americans who tuned in to the live broadcast.
Obama outlined his plan for economic growth, with an overarching theme of creating an America “where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.” While job creation, education, and clean energy initiatives dominated most of Obama’s economic plan of action for his hopeful next term, the issue of the ailing housing market was not side-stepped. “While government can’t fix the problem on its own, responsible homeowners should not have to sit and wait for the housing market to hit bottom to get some relief,” Obama said.
Zillow Chief Economist Dr. Stan Humphries shares a similar view: “Housing presents a bit of a conundrum for Obama,” said Humphries. “People care a lot about it and it will figure prominently in this election year, but there isn’t much the government can do without addressing the main issue of negative equity, which is a $750 billion dollar problem. There aren’t any easy solutions to make it go away.”
What the President did propose to Congress was an expanded refinancing plan “that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low rates.” Despite an immediate bed of skepticism to the new refinancing plan, the revamped program has the potential to “help a lot of people and represents a decent amount of stimulus for the economy,” said Humphries, who has previously discussed the potential benefit of such a program. But, expectations for this stimulus need to be kept at realistic levels. “It‘s important to note however that it isn’t going to fundamentally change the pace of foreclosures or the trajectory of the housing market,” Humphries continued. “Unfortunately, the plan is going to require Congressional approval, which makes it exceedingly unlikely to happen this election year.”
The second bullet item on Obama’s housing agenda tasked the Attorney General to create a special unit to further investigate abusive mortgage and lending practices that led up to the housing crisis. According to Dr. Humphries this special task force “is an effort to satisfy demands for greater accountability for wrong-doings during the housing boom. That’s fine, but it isn’t necessarily a proactive effort to change things going forward. Foreclosure and short-sales are state issues so there isn’t much the federal government can do.”
What else can be done about housing? What actions can the government realistically take to help turn the market around? A more in-depth analysis from Zillow’s Chief Economist outlines six ideas that could not only push the housing market in the right direction, but are ideas both Democrats and Republicans could support (this seems to be the catch).
There is a consensus that housing and home ownership lie at the base of American values and will play an important role over the next 9 months leading up to the election. Obama showed this in his speech last night and, for now, we’ll continue to absorb what each Presidential hopeful has to say before the big voting day.