{"id":1788,"date":"2007-08-11T08:18:48","date_gmt":"2007-08-11T15:18:48","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=1788"},"modified":"2007-08-11T19:47:49","modified_gmt":"2007-08-12T02:47:49","slug":"thomas-sowell-housing-woes-caused-by-land-use-restrictions-and-federal-micro-management-of-lenders","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1788\/thomas-sowell-housing-woes-caused-by-land-use-restrictions-and-federal-micro-management-of-lenders\/","title":{"rendered":"Thomas Sowell: Housing woes caused by land-use restrictions and federal micro-management of lenders"},"content":{"rendered":"

Hoover Institute Economist Thomas Sowell:<\/a><\/p>\n

Amid all the hand-wringing and finger-pointing as housing markets collapse, mortgage foreclosures skyrocket, and financial markets panic, there is very little attention being paid to the fundamental economic and political decisions that led to this mess.<\/p>\n

The growth in risky “sub-prime” mortgage loans by people buying homes they could not really afford has been a key factor in the collapse of housing markets, when the risks caught up with both borrowers and lenders.<\/p>\n

But why were home buyers suddenly taking out so many risky loans and lenders suddenly arranging so much “creative” financing for these borrowers?<\/p>\n

One clue is the concentration of such risky behavior in particular places and times.<\/p>\n

Interest-only mortgages, where nothing is being paid on the principal for the first few years, enable many people to get started on buying a home with lower mortgage payments at the outset.<\/p>\n

But of course it is only a matter of time before the mortgage payments go up and, unless their income has gone up enough in the meantime for them to be able to afford the new and higher payments, such borrowers can end up losing their homes.<\/p>\n

Such risky mortgage loans were rare just a few years ago. As of 2002, fewer than 10 percent of the new mortgages in the United States were of this type. But, by 2006, 31 percent of all new mortgages were of this “creative” or risky type.<\/p>\n

In the San Francisco Bay Area, 66 percent of the new mortgages were of this type.<\/p>\n

Why this difference in times and places? Because housing prices were skyrocketing in some places and times, so that people of modest incomes had to go out on a limb to buy a house, if they expected to buy a house at all.<\/p>\n

But why were housing prices going up so fast, in the first place? A number of studies of communities across the United States and in countries overseas turned up the same conclusion: Government restrictions on building.<\/p>\n

While many other factors can be involved — rising incomes, population growth, construction costs — a scrutiny of the times and places where housing prices doubled, tripled, Read more<\/a><\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

Hoover Institute Economist Thomas Sowell: Amid all the hand-wringing and finger-pointing as housing markets collapse, mortgage foreclosures skyrocket, and financial markets panic, there is very little attention being paid to the fundamental economic and political decisions that led to this mess. The growth in risky “sub-prime” mortgage loans by people buying homes they could not […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,26,6,5],"tags":[],"class_list":{"0":"post-1788","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-investment","7":"category-lending","8":"category-marketing","9":"category-real-estate","11":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":7402,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/7402\/if-i-never-make-a-single-payment-on-my-super-cheap-fha-loan-do-i-still-get-my-8000-tax-credit\/","url_meta":{"origin":1788,"position":0},"title":"“If I never make a single payment on my super-cheap FHA loan, do I still get my $8,000 tax credit?”","author":"Greg Swann","date":"March 8, 2009","format":false,"excerpt":"WAPO:The last time the housing market was this bad, Congress set up the Federal Housing Administration to insure Depression-era mortgages that lenders wouldn't otherwise make. This decade's housing boom rendered the agency irrelevant. Americans raced to aggressive lenders, seduced by easy credit and loans with no upfront costs. But the\u2026","rel":"","context":"In "Big Mother"","block_context":{"text":"Big Mother","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/big-mother\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":16161,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/16161\/priceless-our-home-ownership-strategy-will-not-cost-the-taxpayers-one-extra-cent\/","url_meta":{"origin":1788,"position":1},"title":"Priceless: “Our home ownership strategy will not cost the taxpayers one extra cent.”","author":"Greg Swann","date":"August 16, 2012","format":false,"excerpt":"The American Enterprise Institute on the premeditated assault on the prime mortgage:When it comes to a government centered society and its deleterious consequences, our Government Mortgage Complex is the undisputed poster child. 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That's going to be a hard concept\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":16298,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/16298\/apparently-insanity-is-buying-the-same-house-over-an-over-again-even-though-you-never-qualify\/","url_meta":{"origin":1788,"position":3},"title":"Apparently, insanity is buying the same house over and over again, even though you never qualify.","author":"Greg Swann","date":"April 3, 2013","format":false,"excerpt":"You just can't make this shit up: Obama administration pushes banks to make home loans to people with weaker credit. Why not? It worked out so well the last time.The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an\u2026","rel":"","context":"In "Big Mother"","block_context":{"text":"Big Mother","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/big-mother\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":17256,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/17256\/the-real-estate-correction-of-2021\/","url_meta":{"origin":1788,"position":4},"title":"The Real Estate Correction of\u00a02021","author":"Brian Brady","date":"October 6, 2020","format":false,"excerpt":"Over 13 years ago, I tried to explain how mortgage securitization would cushion losses to investors and lessen the negative effects of mortgage defaults to real estate prices: Basically, the Titans of Wall Street never had to answer for the performance of these loans because the money managers wanted that\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-content\/uploads\/2020\/10\/tim-mossholder-DZcZ4Kskq6U-unsplash-1-480x320.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":1747,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1747\/the-mortgage-tax-act-of-2007\/","url_meta":{"origin":1788,"position":5},"title":"The Mortgage Tax Act of 2007","author":"Brian Brady","date":"August 5, 2007","format":false,"excerpt":"Michael Cook did an excellent job explaining the two noteworthy debacles of last week. 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