And Obama can make all the difference.
Early in 2012, the U.S. housing market quietly woke up from its postcrash coma and began the recovery we'd all been waiting for. Today, home prices are rising, foreclosures are falling, and construction crews are back in business.
So what's left for President Obama to do, now that he has been reelected despite a checkered record on helping homeowners? Plenty. The administration could take a number of steps that might ease the debt burden on millions of families and jump-start our all-but-frozen private lending markets. And, even better, Obama might be able to take many of these actions without waiting for Congress.
Housing's comeback has been steady but fragile. According to CoreLogic, a data-crunching consultancy, nearly 11 million homeowners are still underwater, owing more on their mortgages than their homes are worth. New lending has slowed to a crawl. With banks skittish about credit risks, the Federal Housing Administration or the government-sponsored entities Fannie Mae and Freddie Mac now back about 90 percent of new mortgages. Without Washington, in short, there would be no market to speak of.
All of this is crimping our chances for a robust recovery. In past economic revivals, housing has arguably been the single most important source of momentum. This time around, the Federal Reserve Board has kept interest rates at historic lows, in part to goose homebuyers and to return money to consumers' pockets by letting them refinance debt at cheaper rates. But making mortgages inexpensive means bubkes if the banks won't lend. And refinancing without government help is all but impossible for underwater families, who are at greater risk of foreclosure should the economy sink back into recession.
The Obama administration's early attempts to fix the housing market smacked of a bored kid toying with a Rubik's Cube--halfhearted, prone to trial and error, and ultimately futile. But the White House seems to have learned its lessons. Officials have quietly suggested that the president plans to sack Edward DeMarco, the intransigent acting director of the Federal Housing Finance Agency, Fannie and Freddie's overseer. He refused to let the two mortgage giants forgive portions of their severely underwater loans, despite evidence that doing so would save the companies--and possibly the taxpayers who basically own them--money by staving off defaults.
Appointing a new director would clear the way for those reductions in principal, which would avert future foreclosures and act as a form of economic stimulus. It would also free up Fannie and Freddie to expand a mortgage-refinancing program that counts as one of the Obama administration's more successful efforts to bring the housing market back to life.
Regulatory changes could help, too. A swarm of rules covering everything from underwriting standards to securitization are pending at a slew of federal agencies. Many economists believe that banks, fearful of being sued, will be slow to lend until these regulations are final. That may be simply a bankers' excuse, but we won't know until the rules are in place.
Housing brought us the recession. It's the key to the recovery. And it's largely in Obama's hands.