A new concept — “fully housed”?

[KingKong]

Economist think the unemployment rate below 5% is considered to be “fully employed”. When the unemployment rate is above that critical point, it means that some people who are willing to work are not finding work. When the unemployment rate is below that point, It means that people who wants to work already has work. In order to further reduce the umployment rate, more incentive must be given to motivate people to come out of idle to work.

I am thinking of a similar measure for the housing. Fannie Mae always promotes homeownership. The national rate was around 65% and recently climbed to 69%.

I think this index is very local. Big cities has more apartments for population movement with young people come in for school and entry level jobs. While the remote area, there is pratically no apartment for rent.

I have not articulate my thoughts well yet. But I think this will be an interesting subject to explore.

[powayseller]

You bring up an important point. For decades, the homeownership rate has stood at 65%. With lax lending, where everyone except an insolvent arsonist qualified for a morgage (I read that somewhere yesterday), we’ve raised the homeownership rate to almost 70%.

What surprises me is that with the lowest interest rates and loosest lending standards since the Great Depression, our homeownership rate is not higher.

Nonetheless, what should trouble us all is the creditworthiness of the new group of homeowners. There’s a reason that they couldn’t qualify before. The data clearly show that the greatest risk of default occurs in the first 3 years of a loan. This new group of homeowners is still in that risky period. They not only have a financial responsibility they probably cannot handle, but they also are in for a surprise when their exotic loan adjusts.

If 5/70 (the people between 65% and 70%) people are in this new group, that would be 7%. Does it seem reasonable that 7% of people will default simply because they are not creditworthy, and should not have been given loans to begin with?

What would a 7% default rate do to home prices?

[Anonymous]

Full employment doesn’t take into account “underemployment”, whereby someone with a college degree who has lost their job due to outsourcing, offshoring, etc. is now working at McDonald’s instead of where they previously worked and they’re not utilizing their education or their job skills most effectively. Yes they’re employed – but that’s not the whole picture. Republicans love to trumpet the low unemployment rate – they just don’t bother to get into the nitty gritty details.

Coming now to the housing market we have a number of people who appear to be “over-housed” so to speak (living in houses they can ill afford and should never have qualified for in the first place). I trust that when the housing market falls apart, the administration will blame Bill Clinton for causing it.

Pete

[PD]

While there are plenty of bad things that can be laid at Clinton’s door, I doubt anybody will try to leave this one there.

[Author]

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