Washington's Failed "Ownership" Housing Policy

Let me be the first to admit that I wish every American could own a home if they chose to, homeownership is a good thing for families and communities. Pride of ownership, tax deductions, and home equity are just a couple of the major benefits of owning a home. Unfortunately, for multiple reasons, not every American is going to own a home. Maybe it is a lack of credit, or a down-payment, or they simply can't afford the expenses, whatever it is, there is usually a good reason why about 1/3 of Americans don't own a home, it is not economically viable for everybody all of the time.

And yet despite historical evidence that supports this, especially in our recent history with the sub-prime fiasco, the government continues to try to shove homeownership down our throats.

Their latest efforts includes an $8,000 first time home buyer tax credit and a reckless Fed monetary policy of plunging mortgages rates below 5%, all in the name of housing affordability and homeownership.

The results so far for Washington's most recent homeownership initiative have been disappointing at best. Despite record housing affordability and a first time home buyer tax credit, home sales remain anemic.

Washington is trying to fix the most recent sub-prime/homeownership fiasco with....more homeownership.

As the chart above illustrates, during the modern era of the secondary mortgage market with Fannie and Freddie, home ownership rates have hovered between 62-65%. As of the 1Q of 2009 the ownership rate, according to the U.S. Census Bureau, was 67.3%, well above historic norms.

Rather than incentivizing Americans to invest in real estate, absorb the excess inventory, and stop home value declines, Washington is once again trying to pursue a failed homeownership housing policy through first time buyer tax credits, low FHA down-payments, falling home values, and reckless mortgage rates.