Five years into the housing crisis, and with almost one in three mortgages underwater, the worrying news that residential property prices are once again falling is a sure sign that things aren’t getting any better. In fact, they could be about to get a whole lot worse, as falling property prices will no doubt lead to even more foreclosures before this crisis runs its course.
What with a presidential election due next year, you’d be forgiven for thinking that such a drastic problem would be one of the major issues for candidates to be squabbling over. Surprisingly though, it hasn’t. In fact the whole housing debate was, up until very recently, totally ignored by the Republican candidates until GOP front runner Mitt Romney caused such a stir when he claimed that foreclosures should simply be allowed to run their course.
The housing issue is actually a critical vulnerability for the Obama administration, thanks to the abysmal failure of his HAMP program and numerous other initiatives to address plunging property markets. This much is evident from the fact that Obama is still desperately searching for a solution to the housing crisis. Last month, Obama announced measures to make mortgage refinancing even easier for homeowners, in an attempt to stem the flow of foreclosures. Meanwhile, the government is also attempting to make a deal with banks so that up to 500,000 foreclosed homes now in the bank’s possession can be rented instead of sold.
So why is Obama so desperate for a solution if the Republicans don’t seem to give a damn about it anyway? One reason might be that the GOP candidates do care about housing, they just see Obama’s ‘solutions’ as totally inept, actually doing more harm than good. Mitt Romney’s opinion is that the crisis can’t be solved by government intervention:
“Let it run its course and hit the bottom. Allow investors to buy homes, put renters in them, fix the homes up and let it turn around and come back up.”
So it seems that the Republican policy is just to do nothing, let them homes that are going to foreclose, foreclose, and then once it’s done and dusted the housing market will pick itself up again. It’s a harsh tactic to be sure, but there is a certain undeniable logic to Romney’s plan.
Housing may not be an issue right now as the Republican candidates battle it out for the nomination, but you can bet your bottom dollar it will be once the election campaigning proper begins in earnest. Obama made big noises about solving the housing crisis at the start of his term in 2008, and the fact he has failed miserably to do so will surely be too good an opportunity for his eventual opponent not to take advantage of.
But with the Republican’s seemingly brutal plan to just “do nothing” sure to upset thousands of desperate homeowners, it will be interesting to see how they can exploit it.