Housing Market Not as Bad as Media Projects and not Nearly as Bad as the 1980s.

U. S. housing official puts current mortgage problems into perspective.

September 25, 2007 – Palm Coast, Florida – Much of the mainstream media’s focus is on the present. Today’s bad news sells. Good news is boring. Analysis and perspective are too much work and take too much time. This is apparent in their reporting of the burst of the housing bubble and the resulting demise of the housing industry. Many, including myself, believe that such reporting exacerbates the problem, creating a self fulfilling prophesy. No denying the fact that the housing market is down. No denying the fact that many individuals, investors as well as those with little financial reserves or changed financial circumstances, are suffering greatly. It’s easy for the media to find such stories. But as bad as it seems today, it was worse in the 1980’s.

Recent comments made by U.S Housing and Urban Development Assistant Secretary, Darlene Williams, help put things into the proper prospective:

• Concerns over the “crisis” in the subprime mortgage markets have been blamed for the 8.2% drop in the Dow Jones Industrial average. But the Fed’s subsequent rate cut has returned nearly half of that loss.
• Subprime mortgages play an important role in increasing home ownership. “Subprime mortgages democratize credit, and so we don’t want to throw that option away.” She said.
• Although subprime mortgages represented an increasing percentage of mortgages during the boom, only about 5% of all U.S. mortgages are subprime, and only 20% of these are at risk.
• “Our economic fundamentals are strong. Loan defaults are half of what they were in the 1980s and interest rates are low compared to the double-digit rates of 20 years ago.”
• She supports promoting financial literacy and housing counseling programs. She says that most people who are in trouble with unaffordable subprime loans did not have counseling. And most did not read their contract.

Such news is of little consolation to those currently in trouble. But it does reveal that things have been a lot worse in the past. We recovered then. We’ll recover now. In the absence of one-sided media coverage, we’d recover more quickly.