Mortgages Blog

Finance Blogs » Mortgages Blog » Housing numbers revolt professor Sanders

Housing numbers revolt professor Sanders

By Holden Lewis ·
Thursday, July 15, 2010
Posted: 12 pm ET

"Ugh!" is the first line of an e-mail I got from Anthony Sanders, professor of real estate and finance at George Mason University. He's talking about mortgage purchase applications, which have fallen to puny levels last seen in December 1996.

Sanders continues:

"The Obama tax credit caused a blip in home purchases, but it seemed to simply sap applications from the future. But lower interest rates aren't helping home sales or loan applications. This does not bode well for the housing market … or Fannie and Freddie losses.

"But look at the decline in purchase loan applications AFTER April 30 when the tax credit program expired. (They've fallen by almost half.)

"The general declining interest rates have been a generator of mortgage refis. But that is about all the action the government can generate -- refinancing.

"Perhaps the new slogan for Fannie, Freddie and the FHA should be 'Making Loan Refinancing Affordable.' Since they don't seem to be helping the housing market in terms of home sales."

I pointed out this phenomenon in today's mortgage analysis, too. Now, when you read the above, it sounds like Sanders believes that the slow pace of home sales is a bad thing, and that it's Washington's fault. But that isn't what he means.

The mistake, according to Sanders, was trying to stimulate home sales with the tax credit. He's not criticizing the Obama administration for the depressed level of home sales, he's criticizing the administration for trying to manipulate home sales in the first place.

The other day I asked Sanders if we should get rid of the home interest tax deduction. "Of course! Don't be silly," he said. "It so overly skews housing investment toward owner-occupied. ... There's only so much capital in the United States and the world, and if we just keep promoting homeownership, we skew capital into housing. We could have used that capital for other uses."

Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
1 Comment
Elizabeth Gayle
July 16, 2010 at 4:39 pm

Great idea! I really like this Sanders guy. What would happen if we stopped rewarding home ownership, not to mention those darling deductible children?