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Economist Breaks Down Why Obama Omitted Housing Policy From State of the Union Address

President Barack Obama State of the Union AddressAside from a brief reference to his announcement two weeks ago that the Federal Housing Agency (FHA) would be lowering its mortgage insurance premiums, President Barack Obama did not mention housing policy Tuesday night during his hour-long State of the Union Address.

Instead the president chose to focus his remarks on the progress of the nation’s economic recovery, and in particular job creation, in the last few years since he has been in office.

The Obama Administration has heavily touted housing policy and expanding access to credit in recent months. In addition to the lower insurance premium announcement, in early December the Federal Housing Finance Administration (FHFA) announced it would be lowering the mortgage down payment requirement to 3 percent for qualifying buyers on Fannie Mae and Freddie Mac mortgages. In a report released last week, Fitch Ratings predicted a big year for housing in 2015 based on the government’s actions in recent months. Obama spoke in Phoenix earlier this month for the express purpose of praising the housing industry’s progress toward recovery.

So with all the administration’s talk and actions surrounding housing policy in the last year, why was the topic noticeably absent from the State of the Union Address?

Trulia chief economist Jed Kolko suggested three reasons why housing policy was omitted from the address: the urgency has faded; the most pressing housing challenges are local, not national; and the best housing policy is economic policy.

  • The urgency has faded. In Trulia’s latest housing barometer released last week, home sales, home prices, and delinquencies were measured at more than three-quarters of the way "back to normal" (i.e. pre-recession levels). The GSEs and the FHA are enjoying profitability again and the excesses of the housing bubble (overbuilding and loose lending) have been corrected, according to Kolko. "And, with the homeownership rate near two-thirds, most of the middle class are homeowners who care about their home values, which areup year-over-year in 97 of the 100 largest metros," Kolko wrote.
  • The most pressing housing challenges are local, not national: Kolko asserts that the challenges facing today's housing market such as foreclosures and affordability are "ultimately local." The states with the highest foreclosure rates are generally judicial foreclosure states (such as Florida and New Jersey), meaning the process has to go through the courts to be completed and therefore takes much longer. Affordability has returned to near pre-crisis levels in many major metros in New York and California, according to Trulia. "An essential solution to high housing costs – building more – depends on local rules and regulations, not national policy," Kolko wrote.
  • The best housing policy is economic policy. Many analysts and economists, including Kolko, believe that full housing recovery depends on millennials (the 25- to 34-year-old age group) finding good jobs and moving out of their parents' houses. It also depends on income growth that will allow first-time buyers to save enough for a down payment, which is the top obstacle to homeownership. Employment among millennials was the one indicator in Trulia's housing barometer that was lagging (less than 50 percent back to normal). "The housing market depends most on the economic recovery – and economic policy was a centerpiece of tonight’s speech," Kolko wrote.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.

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