September 18, 2012 by Nash Riggins
President Barack Obama has taken a lot of flak this month for the state of America’s real-estate market.
Indeed, the campaign of Republican Presidential hopeful Mitt Romney has attempted to capitalise on the market’s rampant instability via the production of several cantankerous political advertisements – all of which undeniably strive to connect a series of dots suggesting that Barack Obama is at fault for the depressed home values, lost jobs and high foreclosures in swing states across the country. Are these claims true?
In actuality, the administration has indeed done far too little by way of marginalising the impact of said issues; however, the notion that President Obama and his administration are somehow ‘responsible’ for the consequences of America’s housing crisis is a gross oversimplification of a problem that can be traced long before Barack Obama was ever sworn into the Oval Office.
In the state of Florida, for example – where such political advertisements are most poignant – real estate rose sharply throughout 2003-2005, before an abrupt peak in May 2006. The average value for a home in Florida that month was $257,800. Six years on, that figure has withered by a drastic 51.2% – with the average home in Florida now valued at $125,700. As a result, it cannot be argued that home prices have not plummeted under the less-than-watchful eye of the Obama administration; however, the seeds of destruction were, in fact, sewn into Florida’s real-estate market years earlier.
First and foremost, attack-happy Republicans tend to ignore the fact that the prices of Florida homes have declined by around 22.3% under President Obama – versus a substantially higher decline of 35.5% under the administration of George W Bush. In addition, the Romney Campaign’s advertisements surrounding Florida’s housing crisis also gingerly ignore the fact that, after hitting rock-bottom in October 2011, real estate prices under Mr Obama’s leadership are slowly increasing once more – experts are forecasting a 6% increase in prices by year’s end.
As for the effects of the housing crisis on Florida’s job market? This attack cannot necessarily be pegged as a different approach to an already overly dynamic issue. The number of construction jobs in the state of Florida enjoyed steady growth up to 2006 – by which time said number had reached a peak of around 691,900. Following the decline of housing prices that May, such jobs inevitably declined, as fewer houses needed to be built. By October of 2007, 100,000 jobs had been lost – as were an additional 100,000 jobs in the months running up to Barack Obama’s election. Since President Obama was sworn into office, some 138,000 construction jobs have been axed.
As a result, it is not untrue to say that jobs in the real estate industry have been lost under Barack Obama’s leadership; however, it is blatantly misleading to assert that said decline matched that of Mr Obama’s predecessor – especially when taking into consideration that the loss of these jobs was a direct consequence of the crisis that was allowed to develop throughout the preceding two administrations.
With regards to Romney’s accusations that there has been a sickening increase in home foreclosures under Barack Obama’s administration, it cannot be ignored that there is indeed relative truth in these claims. From May 2007 to January 2009, the state of Florida entertained 519,977 new filings for foreclosure – whereas there have been 866,938 new foreclosures in the state since President Obama took office in 2009. Yet similar to Mr Romney’s attack surrounding job losses, experts maintain that Florida’s rampant increase in home foreclosures cannot be pinned on Mr Obama, either.
In fact, the dramatic increase in foreclosure rates as experienced in Florida are not a result of President Obama’s lack-lustre performance with regards to restorative measures, but are in fact a natural and inevitable consequence of the monstrous 51.2% decline in housing prices – that is to say, when prices decrease rapidly, supply outweighs demand. As a result, said imbalance will always leave a despairing amount of negative equity, going on to fuel new foreclosures across the state.
Even though President Obama was not at fault for these issues, he did attempt to respond to the crisis. As his first order of business, Obama passed the Fraud Enforcement and Recovery Act – which successfully sought to decrease mortgage fraud in an effort to prevent later inevitable foreclosures; meanwhile, his simultaneous temporary foreclosure moratorium in 2009 – which sought to save many people out of foreclosure – ultimately saved very few from losing their homes, and merely ended up providing said families with additional time in order to find alternative arrangements. The following year, the President’s proposal to make vital changes to bankruptcy laws would have unquestionably made a significant difference in the number of state foreclosures – had the bill not been killed by Republicans in Congress.
That being said, figures indicate that the Obama administration has admittedly found little success towards substantially increasing real estate prices or reducing property foreclosures; therefore, it is this aspect, and this aspect alone, of Barack Obama’s role in the housing crisis in which Mitt Romney should attack – whereas anyone who makes the assertion that President Obama is in any way responsible for the depressing state of Florida’s real estate prices, job market or foreclosures undoubtedly suffers from a case of complete and utter stupidity.
Speaking of the latter, what does the Mitt Romney Campaign propose in order to correct the Obama administration’s minimalistic corrective policies?
According to Mitt Romney, “President Obama’s only plan to address the housing crisis was the same plan he used to try to fix the economy: spend more taxpayer money on big-government programs. To address the housing crisis, President Obama rolled out an alphabet soup of more than ten housing finance programs rather than offering a real solution. Meanwhile, credit-worthy borrowers are struggling to get a loan as a result of the uncertainty caused by the President’s policies.”
In response to the President’s apparent failures, Mr Romney outlined his own plan earlier last week, in which he calls for a market-saving, four-step approach: sell all government-owned foreclosed homes, introduce foreclosure alternatives for distressed borrowers, reform Fannie Mae and Freddie Mac and do away with complex rules in order to hold banks more accountable – which he claims will stimulate lending to credible borrowers. Unsurprisingly, the plan lacks detail as well as vision.
“In towns across the nation, foreclosed homes sit empty, depressing the value of entire neighborhoods,” Romney’s Campaign asserts. “The government owns about 200,000 of these homes, or almost half of all of the foreclosed homes in the country. Mitt Romney will responsibly get the government out of the homeownership business and return these vacant homes to productive uses that will increase neighboring home values.”
Yet apparently unbeknownst to Mr Romney, adding 200,000 homes onto the market will not increase housing prices across the country – if anything, it will cause them to fall further still. After all, if a market already suffers a supply that outweighs its demand, what good will emerge from increasing an unwanted supply further still? Should vacant, government-owned properties be resold? Yes, because America’s Treasury needs every last penny; however, that’s not a platform on which any candidate should try to run a campaign – it’s really just common sense.
Meanwhile, what would a President Mitt Romney do in order to combat mortgage issues in states like Florida? In what sounds eerily similar to the “government-centric” approach that Mr Romney has blasted his opponent for pursuing throughout the past year, the Republican candidate’s official platform states that he will “put in place smarter regulations to restore a functioning marketplace that holds banks accountable and restart lending to creditworthy borrowers.”
Although more regulations and increasing business liability sounds admittedly un-Republican, the American people may do well to place faith in the vague mortgage advice of the former governor – after all, he should be considered an expert on mortgages, given the number of holiday homes he’s purchased throughout the last 30 years. Unfortunately, any attempts to critique Mr Romney’s plans to mend Florida’s real estate market ends there – as any further details surrounding the Presidential hopeful’s platform are currently unavailable.
Due to the decade-old recklessness of banking institutions and equity firms, hard-working Americans are forced to give up their homes every day. The US government has a responsibility to its citizens in order to ensure that such rampant corporate irresponsibility is not allowed to continue, and should simultaneously seek to extend a helping hand to citizens in need.
As of yet, the Obama administration has failed to produce the calibre of results in which the American people so crave; however, blaming Mr Obama as a root cause – or even a perpetuation – of these issues is not only factually inaccurate, but a blatant insult to the intelligence of the American public. Indeed, if Mitt Romney has real solutions to offer the weary homeowners in states like Florida, it would behoove those voters to listen intently – but in the meantime, the Romney campaign would do well to base their attacks on the Obama administration in fact rather than fiction.