home ownership Archives - Dr. Rich Swier

President Joe Biden turned 81 years old on Monday, and he was greeted with the lowest approval rating ever recorded by NBC News at 40%. While a large part of the number is due to Democrats’ disapproval of Biden’s handling of the Israel-Hamas conflict, it’s also likely a reflection of an economy that continues to struggle under the weight of persistent inflation, skyrocketing mortgage rates, a decline in full-time jobs, and ever-expanding federal debt.

The president has continued to tout “Bidenomics” in recent weeks, despite stating last week that he acknowledges there is a “disconnect between the numbers and how people feel about their place in the world right now.” Polls show that the American public is indeed not connecting with the White House’s messaging on a massive scale. A Fox News survey taken last week revealed that almost 80% of Americans rate the economy negatively.

As economists are pointing out, the raw economic numbers are a tremendous cause for concern. Joel Griffith, a research fellow in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation, joined “Washington Watch” last week to give a snapshot of where things currently stand.

“The typical family has lost more than $4,000 in real inflation, just adjusted income since President Biden took office, and that $4,000 pay cut is not even taking into account the rising home ownership costs,” he observed. “… [A]s [we]’ve seen real income decline, we’ve also seen credit card balances hit an all-time record $1 trillion. That’s about a $3,000 a family increase over the past year and a half, even as savings rates have plunged near all-time lows. Bidenomics has been a disaster for American families.”

Polls show that Americans are continuing to feel economic pain when they compare their income with prices. An Associated Press poll last month found that “three-quarters of respondents described the economy as poor,” with two-thirds saying their expenses have risen and only one quarter saying their income had also gone up. Compounding the problem is that the prices of many of the items that Americans most commonly buy have inflated substantially. Since February of 2020, the average price of a gallon of milk is up 23% ($3.93), a pound of ground beef is up 33% ($5.35), and a gallon of gas is up 53% ($3.78).

As Griffith went on to explain, one of the primary reasons for the decline in real income currently being experienced by Americans is the exploding cost of home ownership.

“If you’re looking to get a mortgage right now on a standard middle class home, that mortgage payment is costing you about $1,000 per month more than it would have cost you just a year and a half ago,” he noted. “… These are the worst economic conditions since the 1970s. … [T]hat was a time when we also had declining real income, and we also had sky high inflation. So arguably, it’s even worse now than it was then because it’s never been less affordable to buy a home. If you look to buy a home, it costs you about half of your income just to make the mortgage payments and the property taxes. It has never been this bad in terms of home ownership.”

Griffith further illustrated how reported job growth numbers are misleading. “[E]very month, the Biden administration loves to tout these jobs growth numbers. But what they fail to tell us is actually that over the last six months, we’ve actually seen a decline in full-time jobs. The only reason why we have seen the top line jobs growth numbers positive is because we’ve seen a surge in part-time jobs, meaning we have a lot more people today working double jobs just to pay the bills.”

As the national debt approaches $34 trillion, Griffith underscored how runaway federal spending is leading to unyielding inflation.

“[S]pending is out of control — it’s been out of control a long time,” he said. “The interest we’re paying right now on the federal debt is $10,000 per family per year. The amount of money that we’ve borrowed over the prior year is $25,000 per family of four. We cannot keep this up. A big part of the reason why families today are suffering from this inflation … is because for the last three years, we have spent wildly beyond our means, and we relied on our central bank to print the dollars to buy that debt.”

“We have to change this trajectory now, and I’m hopeful Congress will actually attempt to do so once they come back from Thanksgiving and Christmas break,” Griffith concluded.

AUTHOR

Dan Hart

Dan Hart is senior editor at The Washington Stand.

The Washington Stand is Family Research Council’s outlet for news and commentary from a biblical worldview. The Washington Stand is based in Washington, D.C. and is published by FRC, whose mission is to advance faith, family, and freedom in public policy and the culture from a biblical worldview. We invite you to stand with us by partnering with FRC.

The Wealth Building Home Loan (WBHL), a new approach to home finance, opened to rave reviews at the American Mortgage Conference held September 8-10. Six leaders of national stature made favorable comments from the podium.

Lewis Ranieri, considered the “godfather” of mortgage finance, in his keynote address praised the WBHL: “Fundamentally, what I find exciting is the wealth building nature of the product. Anyone who knows me knows how concerned I am that too often the mortgage has been utilized as an ATM for a boat or big screen TV, as opposed to building equity; if we’re to meet the needs of Americans who desire a home, this type of SAFE experimentation will be critical.”

Carol Galante, FHA commissioner,David Stevens, Mortgage Bankers Association CEO and former FHA commissioner, Joseph Smith, monitor of the National Mortgage Settlement of the State Attorneys General and Lenders, and James Lockhart, former director of the Federal Housing Finance Agency also made note of the innovative approach taken by the WBHL.

Bruce Marks, CEO of the Neighborhood Assistance Corporation of America (NACA), announced that the WBHL, which provides low-income borrowers a straight, broad highway to building wealth based on a 15-year, fully amortizing, fixed-rate loan, will be available in an initial rollout undertaken by NACA and the Bank of America within 60 days.

Long-time industry observer Tom LaMalfa, in an email, stated:

“In an industry in which few agree on much, there was remarkable agreement on the value of the WBHL among an array of industry leaders speaking at the AMC this week.”

Stephen Oliner (codirector of AEI’s International Center on Housing Risk) and I announced that additional WBHL pilots are in the works with lenders around the country.

Smith spoke extensively about the challenge in providing access to credit and home ownership, particularly among low- and moderate-income borrowers. He asked:

“[I]s the thirty year fixed-rate mortgage what we need? Contrary to the opinion of many people whom I admire and respect, the thirty year fixed rate mortgage is neither a Constitutional nor human right…. While it is a proven ‘affordability product’ of long standing, the thirty-year fixed-rate mortgage does not build equity very quickly. Further, a lot of things can happen to a borrower over those thirty years – job loss, health problems, divorce. [a]s Monitor of the National Mortgage Settlement, I have done a lot of listening in the last two and a half years; including to distressed borrowers, the people who represent them, and public officials who deal with the fallout from increased foreclosures and bankruptcies. What I have heard confirms what I know from prior experience: that one or two of those life issues – or, in many, many cases, the trifecta – have resulted in real financial crisis on a large scale. Absent substantial home equity at the outset, the thirty-year fixed rate mortgage increases the fragility of a borrower’s overall financial position and puts the borrower at risk for a very long time.”

Smith went on:

“The traditional answer to the concerns I have just expressed is to require a substantial down payment. That’s certainly effective – for the people who can afford it. But it reduces access to credit and home ownership, particularly among low- and moderate-income borrowers. If we want to keep homeownership an option for an expanding portion of the population, we should build some additional features into the mortgage product to reduce fragility. At the very least, we should consider the inclusion of product features that allow and even encourage early equity build-up. In that regard, I am pleased to note AEI’s Wealth Building Home Loan.”

Steve and I created the WBHL to serve the twin goals of providing a broad range of homebuyers – including low-income, minority, and first-time buyers – a more reliable and effective means of building wealth than currently available under existing policies, while maintaining buying power similar to a 30-year loan.

A WBHL has a much lower foreclosure risk because of faster amortization and common-sense underwriting. Its monthly payment is almost as low as 30-year, fixed-rate loan while providing the buyer with more than 90 percent of the buying power. It requires little or no down payment and has a broad credit box, meaning sustainable lending for a wide range of prospective homebuyers. While the WBHL is designed to reduce default risk for all borrowers, this is a critical importance for borrowers with FICO scores in the range of 600-660.

The WBHL will help these borrowers reliably and sustainably build wealth.

EDITORS NOTE: The featured image is courtesy of SNMC.

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Rave reviews for the Wealth Building Home Loan