A front page story in today’s edition of the Post contains the news that the city of Winona may soon be getting into the residential housing business. If the City Council approves it, the Community Development Office will apply for up to $250,000 in 2% interest loans from the Greater Minnesota Housing Fund. The CDO could then buy and rehab foreclosed houses and resell them to first-time home buyers. GMHF has a second program which offers $15,000 in deferred loans to the lucky first-time home buyers, thus facilitating both sides of the deal. Buyers would not qualify unless their household incomes are at or below 80% of the statewide median income.
Does any of this sound familiar? Let’s see...the government gets into the real estate market, offering cheap loans to poor or underqualified buyers who can then purchase houses with no money down and will therefore need to make payments for years before they develop any equity in their property. This interferes with the private markets, distorts the value of real estate, and causes an artificial boom in prices. When what went up inevitably comes down, the happy beneficiaries of enlightened government policy owe more money on their homes than they are worth, and walk away.
Now the lenders that hold the mortgages on these properties can’t resell them for what they owe, nor soon, for any price at all. This triggers a banking crisis which rocks the economy and society from top to bottom, creating a truly scary recession with ruinous unemployment, crash of the stock market, collapse in the values of pension and retirement funds, and an average workweek of little more than 30 hours for those lucky enough to still have jobs.
It is said that those who don’t know history are destined to repeat it, but the current recession is not even history yet, and here is government pursuing the same ruinous policies that brought us to this wreckage, the end of which we can not yet see. The same is occurring on the national level, with congressman Barney “I-was-suckered” Frank, up to his bushy eyebrows in responsibility for the current situation, calling for more of the same with a relaxation of mortgage lending in the condominium market.
The dominant liberal media have partially succeeded in placing blame for the present recession on Wall Street and a lack of bank regulation, but that is a story for dopes. It is Capitol Street that is to blame, Congress in collaboration with the Clinton administration back in the ‘90s, which poked its nose into the mortgage lending business, mandated relaxed (leading to nonexistent) standards, and consequently brought all this down on our heads. The city of Winona should studiously avoid following in those idiot footsteps.
Currently, our local real estate market is struggling to find a corrected price structure, with a good many homes for sale, and a surprising number of buyers. This will take place naturally, according to the inevitable justice and equity of the marketplace, but only if the interfering, mischievous hand of government stays totally away.