housing – USA Gov Policy

Americans are persistently told that the U.S. economy is gaining strength, yet there are many indicators that appear to contradict that rosy analysis.

The housing market is an area of mixed indicators. Some prices are up, but other issues remain worrisome.

One such indicator concerns “HELOCS.” According to a TD Bank description, a HELOC is “A home equity line of credit (often called HELOC and pronounced Hee-lock) is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower’s equity in his/her house (akin to a second mortgage).

The Wall Street Journal reports that “A decade after homeowners used a soaring real-estate market to go on a borrowing binge against their own properties, many are now falling behind on payments, threatening to leave banks on the hook for hundreds of millions of dollars…borrowers who signed up for HELOCS in 2004 were 30 or more days late on $1.8 billion worth of outstanding balances just four months after principal payments started kicking in”

Mortgage expert Chris Cabanillas notes that “It’s a real concern and something we have been warning about for a few years.”

There are also other factors hampering the housing market, as well. The Wall Street Journal also notes that “many families lack the incomes or savings needed to buy homes, creating a surge of renters and a shortage of affordable housing.”

Many of those who do own homes face an uncertain future. CNBC reports that “Of the approximately 952,000 borrowers who are 90 or more days past due on their monthly payments, but not yet in foreclosure, 62 percent have already been through some form of home retention program,” so the chances of a successful outcome are not good.

Selling will not be a viable option for many, according to an Atlantic magazine analysis. “Across America about 5.4 million homes are still upside-down on their mortgages…in some areas, negative equity is actually deepening.”
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While providing some optimism, (“Consumer attitudes about the housing market showed marked improvement last month, strengthening the case for a lift in housing activity this year”) the May Fannie Mae survey pointed out cause for concern.

“Those who think it would be easy to get a home mortgage decreased by 2 percentage points to 50 percent, while those who think it would be difficult remained at 46 percent.

” The share of respondents who say the economy is on the right track decreased by 4 percentage points to 38 percent, while those who say the economy is on the wrong track rose by 3 percentage points to 52 percent.

“The percentage of respondents who expect their personal financial situation to get worse over the next 12 months rose to 12 percent.”

The Federal Reserve Bank of New York has also surveyed the housing market. Similar to several other studies, it provided generally favorable indicators, but there were also negative trends regarding home prices and the value of their homes.

“Among homeowners, the expressed likelihood of investing in improvements to the home has declined somewhat relative to last year. Most renters report that they would rather own than rent if they had the necessary financial resources; as in last year’s survey, a majority of them believe that it would be difficult to obtain a mortgage, although responses suggest a slight easing in perceived credit access.

“Home Price Expectations Survey respondents were asked for the current value of a typical home in their zip code, and what they expected the value of that home to be in one year. and in five years. On average, respondents expected home prices to increase by 4.4 percent over the next twelve months—a rate 0.1 percentage point higher than the average rate in the 2014 survey and remarkably close to the mean forecast of 4.37 percent in a January 2015 survey of housing market experts conducted by Pulsenomics. The median expectation in the 2015 survey of 3.0 percent, however, was lower than the 2014 median of 3.3 percent. With regard to longer-term expectations, the average (median) expected annualized change in home prices over the next five years was 2.9 percent (2.4 percent). These figures were slightly lower than the corresponding figures in the 2014 survey, where the mean (median) expected annualized change in home prices over the longer horizon was 3.1 percent (2.6 percent). Thus, overall, respondents expected home price growth to continue, but at a slower pace at a horizon beyond one year.”

Quick Analysis

Ukraine’s Frozen Conflict

As we approach winter in the northern hemisphere, the war in Ukraine is beginning to resemble a “frozen conflict” from many perspectives. Ukrainian President Volodymyr Zelensky recently told the media he hopes the war will end faster once President-elect Trump takes over in January. Opinions in Moscow, however, differ from that of the Ukrainian leader. Russian President Vladimir Putin argues that the North Atlantic Treaty Organization (NATO) needs to exclude Ukraine from joining in “exchange” for peace. If it does not, he says, then no end to the war is in sight. So far there is no Christmas solution. Several NATO countries, according to Vladimir Socor of the Jamestown Foundation, are tentatively considering “coalitions-of-the-willing” to provide security for Ukraine outside of the formal NATO framework. There is, however, no collective mechanism today under which such an arrangement is viable. According to the NATO Charter, while Ukraine is a NATO partner country, it may not join as a full member since it has not fulfilled the requirements for membership. That has not stopped NATO and allies from continuing “to provide Ukraine with unprecedented levels of support, helping to uphold its fundamental right to self-defence,” according to the organization. Socor says that keeping Ukraine out of NATO will not advance peace with Russia. Waiting for a peace settlement, he suggests, would only serve to encourage Moscow to continue the war indefinitely. Although the Biden Administration officially withdrew its support for Ukrainian membership in 2021, NATO maintains an “open door” policy toward membership-seeking countries. The current White House position led the way for European states to oppose Ukraine’s membership saying that a decision should be delayed until “conditions are met.” Biden pushed for changing “open door” to a “bridge” metaphor. It is not intended as an across-the-board NATO policy and has been implemented in the past on a case-by-case basis, says Socor. “The alliance’s open-door policy was not fully insulated from Russia’s non-statutory blocking power, and NATO-aspirant countries’ path toward membership was not always irreversible.” Russia has successfully blocked states like Georgia from joining, first in 2008 and again after the war in Ukraine began in 2014. Russia recognizes the value add of Ukraine to NATO is enormous and that Kyiv has a better case than some other nations. Putin’s invasion was, in part, intended to foreclose that option. By 2021, Moscow was pushing hard to maximize its war objectives, which included further annexations of Ukrainian territory. A main goal for Putin was, and is, to ensure there is no Ukraine left to join NATO. As President-elect Trump prepares to assume office in January, he is faced with the historical challenges presented by the war. Post-conflict security guarantees were the center of several proposals made during the 2023 military stalemate. The incoming Trump Administration has yet to outline how it intends to handle the Russia-Ukraine war. Analysts in Washington believe that the new Administration will expect its European allies to guarantee the majority of Ukraine’s security needs. As we approach 2025, several European nations have acknowledged that they do not view Ukraine as eligible for NATO membership as it would draw the organization into the middle of the conflict. Others want to wait until the war is over or pending a “peace” settlement before considering Ukrainian membership. Socor reports that some “influential voices” are suggesting that “Kyiv should join NATO after “freezing” the war along a stable armistice line, de facto accepting Ukraine’s partition, with NATO security guarantees applying de jure to the government-controlled territory only.” This would mean starting accession talks soon with the actual talks to commence only after a ceasefire is in place. Trump arrives in Washington at a time when Putin’s hybrid strategies of war in Ukraine have eviscerated commonly-held differences between war and peace. “Absent a political consensus in NATO over Ukrainian membership, certain European allies, including France’s President Emmanuel Macron, are holding informal consultations about post-conflict security guarantees to Kyiv by NATO members outside of NATO’s framework,” according to the Jamestown Foundation. The Biden Administration downplayed the discussions on possible forms of military assistance and defense industry cooperation by sending only an Assistant Secretary of State. For a European peace to hold the Trump Administration would need to formally extend the United States’ nuclear deterrence to Ukraine. Options under discussion in Europe include a “coalition of the resolute” to deploy forces to Ukraine as part of a possible armistice package, deterring further Russian attacks, says Secor. European officials are also debating, without any agreement, whether its military forces could perform non-combat logistical roles to free Ukrainian forces to fight. None of the possible courses of action has moved forward as all eyes are waiting on the incoming Trump Administration for clues about its intended level of support for a NATO framework and other non-NATO proposals. Daria Novak served in the U.S. State Dept.