The sluggish pace of the U.S. recovery from the financial crisis and Great Recession has been well-documented. However, it is less well-recognized that 15 states have not recovered to their pre-recession levels of employment.
Fannie Mae continues to engage in behavior that could place taxpayers and the economy at risk. The Washington Times reported the news this morning, and the agency’s risky behavior was detailed in today’s report by the Inspector General of the Federal Housing Finance Agency (FHFA).
In the aftermath of the financial crisis and Great Recession, U.S. housing markets were beset by two problems. In some areas; notably Ohio, Michigan, and other parts of the center of the country; poor economic growth had driven homeowners to use their homes as ATMs and the pricey first plus second mortgages proved too difficult to service as the economy worsened further. In the “sandy states” of California, Nevada, Arizona, Florida and the like, a boom in housing prices lured buyers into highly leveraged housing financial packages that proved unsustainable when the house-price bubble burst. Homeowners found themselves “underwater,” with homes worth less than the mortgage balance.
The Census Bureau reported yesterday that the fraction of Americans who own their homes was 64.4 percent in the third quarter, the lowest level since the first quarter of 1995.
Economic recovery following the Great Recession has been mediocre at best. However, states that lead in energy production have performed much better throughout the recovery than those that import the majority of their energy from other states. AAF’s research finds that since 2009, major energy producing states have:
Double the rate of income growth than energy importers, Over double the rate of job growth than energy importers, and Robust housing markets, with faster price appreciation and more stable home construction than energy importers.
In the depths of the Great Recession, a prominent scenario for the recovery went something like this: aggressive housing policies would rid the market of owners underwater on their mortgages, the sale of existing homes would quickly recover, and movement of homeowners into more attractive properties would drive prices back toward normal and generate incentives for new home construction.
Now years after the worst of the housing crisis, many are left wondering why the housing market appears stuck in neutral. The short answer: wages have not grown and many prospective buyers do not have the incomes or feel economically secure enough to purchase a home. Monthly job gains have finally picked up, but wages have been largely stagnant.
A key piece of economic news was yesterday’s Case-Shiller Home Price Indices which showed a nationwide deceleration in the rate of home price appreciation. The national average is now rising at a rate of 6.2 percent over the past 12 months. The release generated some hand-wringing about the possibility that the housing recovery might stall, something that has clearly happened in Phoenix and other metropolitan areas.
President Obama devoted much of his press conference yesterday to declaring an interim victory in Iraq, due to Kurds taking control of a key dam near the town of Mosul. The momentary relief from the threat posed by ISIS may or may not prove to be a significant foreign policy moment.
The Dodd-Frank Act limps into its fifth year of implementation, saddled by an unconstitutional recess appointment, several setbacks in federal courts, and an expensive regulatory portfolio. The Act imposed 398 new regulations that have thus far added more than $21.8 billion in costs and 60.7 million paperwork burden hours. These measures have transformed the financial industry, overhauled mortgage lending, and directly affected the availability of credit. With roughly one-quarter of the law still left to implement, it’s safe to say that the true economic impacts won’t be understood for years.
Treasury Secretary Lew announced today yet another extension of the Making Home Affordable (MHA) program, this time through 2016, while touting its successes. He further called on Congress to extend the Mortgage Forgiveness Debt Relief Act and pass housing finance reform and announced a Federal Housing Administration program of lowered interest rates for multifamily housing. Now eight years since the housing bubble burst and five years since the Obama administration first rolled out dozens of programs all designed with the aim of helping hurting borrowers stay in their homes, the administration continues to push programs that have had decidedly mixed results. Lew’s announcement comes on the heels of Federal Housing Finance Agency’s (FHFA) new outreach efforts for the Home Affordable Refinancing Program (HARP).
Yesterday the administration announced new rules for carbon emissions by existing electricity generation facilities. (There is a separate set of proposed standards for newly-constructed power plants.) The top-line objective is to reduce carbon emissions in electricity generation by 20 percent by 2020 and 30 percent by 2030. Electricity generation is responsible for around 35 percent of U.S. carbon emissions, and coal-fired facilities constitute just under 40 percent of power generation. Coal-fired generation is the clear target of the new rules.
The U.S. housing recoveries — recoveries, not recovery, because there are hundreds of regional and metropolitan housing markets with different trajectories — continue to make slow, painstaking progress. See, for example, Andrew Winkler's excellent summary of the Florida experience. Unfortunately, the only thing moving slower is reform of the Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac that were at the center of the bubble and collapse.
150 million hard-working Americans file their income taxes with the IRS each year. On tax day, many wonder whether the government is spending their money wisely, effectively, and efficiently.