If you missed the President’s “speech” on Zillow.com this morning, or are just looking for some analysis on the conversation, you have come to the right place!
At 10 am this morning on Zillow.com/whitehouse, Zillow CEO Spencer Rascoff had the opportunity to sit down with President Obama and host a Q&A session regarding the housing market. The unique aspect to this sit down was that the questions posed to President Obama were submitted by everyday American (such as you and me) through social media services. The goal of the session was undoubtedly to answer the questions homeowners (and prospective homeowners) have regarding the market, however what unfolded was anything but a Q&A; in fact I would go so far as to call it a Q&R (Question and Redirect).
At the risk of receiving piles of hate mail from those who worship the President because pop-culture tells them they should, I am going to provide you with the play-by-play break down and critique of what we just witnessed.
Below, I will paraphrase the questions posed and the answers provided, and at the end of each section you are invited to check off a poll as to whether you believed his answer was helpful or not. Also, please note my comments (I couldn’t help myself ) are marked with an asterisk *.
Q: I refinanced my home loan under HARP (Home Affordable Refinance Program), but I am still underwater by nearly 30%. What will low interest rates do for my property value in the future?
- What we have done with HARP in the past, and through lowering interest rates via the Federal Reserve, has worked but the housing market is still soft.
- We need HARP 3.0 (currently with congress for decision) to be approved and passed.
- Suggested that HARP 3.0 will help homeowners who are underwater to build back equity (*a blatant fallacy as these refinances lower the interest rate but do not touch the outstanding principal balance of a loan; so you end up with a lower payment but you’re underwater the same amount that you were prior to the refinance).
*Does not address anything regarding the over-encumbrance of the property.
Q: What can Obama do to help second time home-buyers, aka homeowners who were foreclosed on in the past and are now looking to buy again, who are faced with home prices that are not affordable due to the dramatic drive up in prices lately?
- Begins by telling a story of his first home with Michelle, and the process he went through when purchasing it.
- Talks about how what he has done has brought house prices back dramatically (*cough cough, shameless plug anyone?)
- Talks about how homeowners who are still in their homes and are underwater will see a rise in their property values because of rise in surrounding property prices.
- Suggests to keep interest rates low (*home prices have been driven up because of low interest rates, and his suggestion to help home-buyers who cant afford to buy at these prices is to keep interest rates low…)
Q: What is happening with HARP 3.0(latest revision to the “underwater refinance program” that allows for non-freddie/fannie loans to qualify)? Is it going to be passed?
*This is the first question he actually addresses.
- Says there is bipartisan support for the bill in congress.
- Says that even though there is support, congress is “broken” currently.
- Digresses into a discussing on how to build a stronger housing market for the future.
- His idea for a stronger housing market in the future is Fannie Mae and Freddie Mac Reform (*cough cough plug for his upcoming legislation)
Q: How is Obama going to help the hardest hit areas get their equity back?
- Talks about a special fund that he had set up to help the hardest hit areas. Goes on to say that this fund he set up did stuff like “counseled” homeowners (*Yes, the people who just saw the value of their home decrease by 50%, lost their jobs, and can’t afford their payment REALLY need someone to talk to – that’s exactly the kind of help they needed, money well spent sir!)
- Says that the efforts they have made in the past have worked.
- Says he is working with Mayors in the hardest hit areas (*does not specify as to what he is working on, or what they are doing).
- Suggests that as investors buy properties and rent them out, property values of surrounding homes will increase due to the decrease in vacant properties (*natural appreciation, cool, I have a spare 15 years burning a hole in my pocket that I can use to wait until my property breaks even).
*DOES NOT ONCE ADDRESS PRINCIPAL BALANCE – no talk at all about bringing balances down to a reasonable level to encourage homeowners to stay in their homes and build back the equity they lost!
Q: I am living at home with my parents, I can’t afford to rent or buy a property because I have student loans. Will I ever be able to buy or rent?
*Personally I think this question should’ve been asked to the caller’s “magic 8 ball”, but that’s just me.
- Says that renting is a great option.
- Says that what he has done in the past few years has worked to bring back home prices.
- Digresses into a conversation about how we need education reform to lower costs for students, because then they will have money to put towards buying a home (*Um, sir, you’re missing one major element here: students are graduating into a climate where they can’t find employment…)
- Begins discussing how we need immigration reform, and how that will bring even more buyers into the market (* uh, wouldn’t that drive prices up even more, and make it even harder to find a rental due to increased demand; thus leaving Timmy here SOL at his parents casa?)
Q: If President Obama suggests reforming Government Sponsored Entities (such as Fannie and Freddie), and decreasing the Government’s stake in them, what model does he suggest will fill the gap? (who will pick up the extra loans that Fannie and Freddie no longer take on?)
- Says that he wants to reduce the Government stake in the GSEs incrementally yet substantially over the course of many years.
- Wants the private market to step in and pick up the slack (excess loans the GSEs would no longer be able to underwrite).
- Suggests that the Government’s role should really only be to ensure that there is a 30 year mortgage option, and that homes which are not higher end and have less value can still be financed (*Yes! As a taxpayer that’s exactly what I wanted to here! Let’s stop using taxpayer money to underwrite the good loans on good properties, and only use it to underwrite the more risky properties! Bravo, why didn’t I think of that!)
* Fails to explain why the private market would be interested in moving back in and picking up the excess loans not snatched up by Fannie and Freddie.
Q: My property is underwater but it is not owned by Fannie or Freddie, how can I refinance?
* Man, if this isn’t a “plant” question then my name isn’t John.
- Great question, this is exactly the purpose of my proposed bill, HARP 3.0!
- It would allow you to refinance your underwater mortgage even if it is not GSE owned.
- Suggests everyone to contact their congressmen and push for the bill to be passed.
Q: I’m a teacher and I can’t afford to rent because the rate keeps going up each year, and while home loan payments would be more stable I have no job stability, how does he plan to help?
- Teachers need to be paid more.
- Government needs to buy and hold more properties so there are more rentals on the market thus lowering rental rates by increasing supply, so that renters can save up to buy real estate.
*I’m sorry Mr. President, I must be confused, I thought she was asking how he was going to create job stability.
- Tells a whimsical story of how he and Michelle lived with his parents when they were first starting out, and then went on to be renters.
- Compliments Zillow for making homeowners/buyers more informed.
All in all I thought President Obama did a wonderful job of displaying his public speaking and agenda pushing prowess. Smooth redirects, and excellent mannerisms worked wonders to divert everyone’s attention from the fact that he really didn’t give us much of anything here.
What I took away from this Question and Redirect was the following:
1. Obama is proud of the work he has done in the past couple years to get us where we are today.
2. He wants HARP 3.0 to be passed.
3. He wants GSEs to be less Government Sponsored, and seemingly wants taxpayers to be on the hook for just the junk loans.
4. He has no idea how to get the private market back into underwriting the majority of home loans once he dials back Fannie and Freddie.
5. Renting is good.
6. The Government should become a property management company.
7. Congress is broken.
8. Barack and Michelle are just like you and I! They had all the same issues coming up.
Thank you Mr. President, may I now have my 30 minutes back???
I look forward to your thoughts below, so please do share!
And, if you’re skeptical as to my paraphrasing skills, please do seek out the actual video and/or transcript for this interview… I assure you, while it may seem hard to believe this “dance” occurred, it really did!