The New York Times recently published an editorial written by Chris Mayer, a professor of real estate and senior vice dean of Columbia Business School. The editorial, entitled “Help Housing” states that “at the heart of the financial crisis is an unprecedented decline in house prices,” to which Mr. Mayer says the government bailout has simply served to “prop up insolvent financial institutions while doing nothing about the underlying housing problem.” The good professor suggests the government should instead treat the “infection with antibiotics” and not a “cold compress” by directly stabilizing the housing market. Mayer sets up his step program for an appropriate and effective plan as such:
Step 1- reduce mortgage interest rates closer to the “1.6 percentage points above the interest rate for 10-year Treasury notes” as is normal in a functioning market, not the 2.5% we currently have.
Step 2- “government should provide temporary down-payment assistance for buyers…for
example, match the amount of money that buyers use for a down payment, up to $15,000”(possibly provided directly at closing).
Step 3- Those refinancing “their current mortgages should also receive assistance, allowing them to avoid foreclosure.”
Step 1- reduce mortgage interest rates closer to the “1.6 percentage points above the interest rate for 10-year Treasury notes” as is normal in a functioning market, not the 2.5% we currently have.
Step 2- “government should provide temporary down-payment assistance for buyers…for
example, match the amount of money that buyers use for a down payment, up to $15,000”(possibly provided directly at closing).
Step 3- Those refinancing “their current mortgages should also receive assistance, allowing them to avoid foreclosure.”
The effects of the above stated plan Mayer claims would “draw buyers into the housing market and reduce the backlog of unsold and vacant homes.” Mayer suggests that investors and speculators should be ineligible, only families in jeopardy of loosing their home would benefit from said assistance. Price stability, as Mayer sees it, would “more directly achieve the goals of the Wall Street bailout: increase the value of mortgage-backed securities (by increasing the value of the underlying houses) while injecting government capital into the financial system.”
Mayer goes on to reject the ideas some have brought to light such as “allowing homeowners to go to bankruptcy court to lower their mortgage payments,” saying that this will only discourage lenders from granting lines of credit. In addition, Mayer says to allow this option clogs the courts, hits owners of mortgages harder, and allows only the extreme “indebted and, in some cases, financially irresponsible homeowners” to benefit. Professor Mayer concludes that the credit crisis won’t cease until home prices stabilize, and “Direct assistance for home buyers and homeowners is the best, and the fairest, way to make this happen.”
Wow, I finally agree with a column written about financial matters. Aside from the fact that I personally agree with the above argument, I have heard the same commentary from the mouths of a few close family members whose profession is in the real estate market. My father in particular has been a contractor, realtor, private real estate investor, homeowner, and firm Republican longer than I have been alive. Yet, even he can see how important it is to make the distinction of helping individuals in danger of joining the homeless rather than investors and financial institutions alone as the right course of action. Regardless of my personal background, I found the article to be particularly well put together. Professor Mayer made his points clear and used verifiable evidence to support his claims. The professor steered clear of using generalizations, inflammatory language, and fallacies in logic. He addressed opposing arguments with tact and a compelling message. The professor gains credibility with his credentials as a professor of real estate and a senior vice dean of a business school. Thus, Chris Mayer’s message should be well received by the intended audience; if it had been a financial institution or group of investors as the target audience, this column would most certainly have been less effective. However, Mayer’s use of actual measurable figures and statistics is to his credit, although I would have preferred to have the sources of these statistics. All being equal, I believe this editorial to be a reasonably believable and well thought through argument.
On a more personal note, as a homeowner myself, I would love to see this advice be headed as so many are struggling. Whatever the path, let’s all hope that the worst in the present economic crisis is behind us, and that the government will act in the best interest of all citizens, not simply the very rich.
Mayer goes on to reject the ideas some have brought to light such as “allowing homeowners to go to bankruptcy court to lower their mortgage payments,” saying that this will only discourage lenders from granting lines of credit. In addition, Mayer says to allow this option clogs the courts, hits owners of mortgages harder, and allows only the extreme “indebted and, in some cases, financially irresponsible homeowners” to benefit. Professor Mayer concludes that the credit crisis won’t cease until home prices stabilize, and “Direct assistance for home buyers and homeowners is the best, and the fairest, way to make this happen.”
Wow, I finally agree with a column written about financial matters. Aside from the fact that I personally agree with the above argument, I have heard the same commentary from the mouths of a few close family members whose profession is in the real estate market. My father in particular has been a contractor, realtor, private real estate investor, homeowner, and firm Republican longer than I have been alive. Yet, even he can see how important it is to make the distinction of helping individuals in danger of joining the homeless rather than investors and financial institutions alone as the right course of action. Regardless of my personal background, I found the article to be particularly well put together. Professor Mayer made his points clear and used verifiable evidence to support his claims. The professor steered clear of using generalizations, inflammatory language, and fallacies in logic. He addressed opposing arguments with tact and a compelling message. The professor gains credibility with his credentials as a professor of real estate and a senior vice dean of a business school. Thus, Chris Mayer’s message should be well received by the intended audience; if it had been a financial institution or group of investors as the target audience, this column would most certainly have been less effective. However, Mayer’s use of actual measurable figures and statistics is to his credit, although I would have preferred to have the sources of these statistics. All being equal, I believe this editorial to be a reasonably believable and well thought through argument.
On a more personal note, as a homeowner myself, I would love to see this advice be headed as so many are struggling. Whatever the path, let’s all hope that the worst in the present economic crisis is behind us, and that the government will act in the best interest of all citizens, not simply the very rich.
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