One of the joys of the internet is the ability to jump in the old Wayback Machine and see what was being said a few years back on current issues. What I recently found interesting was seeing how much the housing industry was being pumped by the Bush Administration, starting with President Bush’s promotion of homeownership as The American Dream in 2002.
A good window into the mindset of the Bush administration is seen in comments made by Secretary Mel Martinez of HUD, to the National Association of Homebuilders in Las Vegas, Nevada, January 22,2003. The whole speech is worth a read to put the time in perspective, but these comments in particular are of note:
The homeownership tax credit will provide yet another powerful stimulus to the economy and the Bush Administration is committed to working with you to get this homeownership tax legislation passed.
We also must work in close partnership to dispel the myth that our nation is experiencing a "housing bubble."
Although the United States is the best-housed nation in the world, we as a country still face a housing shortage. In fact, housing experts, economists and analysts met this past week at a conference in California and concluded that the momentum gained from low mortgage interest rates will carry strong home sales through the end of this year.
Not long after 9-11, however, a number of leading experts predicted that the housing bubble would burst. They were clearly wrong. Instead, many Americans chose to simply delay, rather than cancel, their plans to buy. And home purchases ended up reaching an all-time high in 2001. While the final numbers are not in, sales in 2002 are expected to eclipse the 2001 record.
Bubbles of course do burst, but the housing market is not in the same category of other weaker and less competitive sectors of the economy.
Today, demand remains strong, with new households being formed at a rate of more than 1 million per year. To meet this demand, and replace homes that are destroyed or demolished, the nation’s homebuilders will need to construct 1.6 million new homes and apartment units each year.Plus, this Administration is making it easier for people to purchase their own homes – a change that will help drive home development and sales. And, it will help more minorities become homeowners.
Giving every American the opportunity to own a home is the best investment that a family can make. [All emphasis mine.]
I was curious about the 2003 housing shortage, and decided to take a look at the Annual Homeowner Vacancy Rate reported by the Census Bureau. I would think a shortage would be apparent from a decline in the vacancy rate. Here’s the graph:
I have no clue what shortage Secretary Martinez was talking about.
As for that strong demand and the need for 1.6 million units every year, homebuilders met and exceeded it:
Perhaps now is a good time to review this claim:
This Administration is making it easier for people to purchase their own homes – a change that will help drive home development and sales.
If the Bush administration had not been working so hard to drive home development and dispel the myth that our nation is in a housing bubble, perhaps Bush wouldn’t have found himself in the Rose Garden last Friday, trying to undo some of the effects of over-promoting the American Dream:
Mish's Global Economic Analysis
Bubble Meter
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Ohio Fraudclosure
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” Bubbles of course do burst, but the housing market is not in the same category of other weaker and less competitive sectors of the economy.”
In the end every sector whose products/services that are currently being bought on credit will see huge demand drop-offs due to diminishing credit availability. Cheerleading may postpone this drop-off, but will not undo the logical consequences in the end.
Watch out the congress is making new laws to protect the borrower.
http://www.nytimes.com/2007/09/06/business/06dodd.html
Excellent findings twist and valuable information for your readers. By June of 2003, the U.S. was down to their last match in an attempt to kindle a flame under the smoldering economy. The FED lending rate was reduced to 1% in that same month. Often referred to as “the recovery that almost wasn’t”, the predictably unsustainable residential housing sector push was a last ditch effort. Now, the greater U.S. economy is paying the price for this unconscionable manuever.
Where are the talking heads who continually supported the spin that the housing market losses were not large enough to affect the main stream economy? School’s in session.
Mtnmike-
It appears to me that we had hit a sort of “natural ceiling” in homeownership by 2003- hence the worry of a bubble at that point. The housing industry needed a new market for their product- and they turned to those who couldn’t afford it. There was a concerted effort to develop programs to shoehorn in every possible soul into their “own home,” whether it made sense for the individual or not.
I can’t believe anyone sat in meetings and said, “Yeah, they’ll all be in foreclosure by 2007, but we don’t care,” but these programs were ill-conceived, and now not only are the “beneficiaries” being hurt, but the broader economy as well.
Twist,
Infinite consumption is the plan, it ain’t possible is the problem.
From my old bush pilot days, comes this wisdom,”Being low on fuel is not an immediate concern when the engine is on fire.”
What was the Bush administration “thinking”? OK, that’s too easy, I’ll leave that one alone.
“I cant believe anyone sat in meetings and said, Yeah, theyll all be in foreclosure by 2007, but we dont care,” I doubt many actually said it out loud either, but I’m sure plenty were thinking it.
Anyway, it is ridiculous to pretend that any business leaders in America have a scintilla discipline. China was putting its trade surpluses in our economy to prevent their own from overheating, and our brilliant free market entrepreneurs couldn’t resist the temptation to cut taxes, spend lavishly on politically connected defense contractors, and make a few medium-term bucks off the suckers.
Ironic that the same people who brag about defeating communism walked right into a trap set by Red China that could hobble our capital markets for a long time.
A trap by China??? I think your tin foil slipped a little
In all seriousness, January ’03 is pretty far back, the data back then wouldn’t have shown what was to come. Plus, this was due mostly to the fed and their 1% interest rates, not any governmental policy. Let’s also remember that the GSE’s helped too, and they aren’t in Bush’s back pocket (not placing blame on either side, just saying…).
Re-reading things, this looks like just another of those “sounded good at the time” programs from our massive government. Yay.