Marble Falls      There’s a lot more that is wrong about the interplay between housing supply and home purchases than the current drumbeating about interest rates.  A hugely superficial argument is being advanced by some reporters and economists that the current squeeze in houses available for purchase is due to an entire segment of homeowners holding onto their properties rather than making them available, because they have fixed interest rates that are lower than the current levels.  There is such a long line of culprits to put in the lineup when looking for those responsible for our affordable housing crisis that many of us might not have even called the 30-year mortgage rate to appear under the klieg lights.

First a disclosure is in order, I suppose.  Reading the whine, I looked at the average 30-year rate as I write, and it’s quoted at 8.2%, which certainly isn’t low and absolutely is higher than it was even a couple of years ago.  At the same time, when I bought my first house, thanks to relocation assistance due to the Wilbur Mills expressway construction from a house, I was renting in Little Rock’s Hanger Hill neighborhood.  I used the money for a downpayment on a place in the Centennial neighborhood, only blocks from Little Rock’s historic Central High School.  I was paying over 9% on that mortgage and lucky to get it for the peanuts in my paycheck.  Later, when we finally bought a house in New Orleans in 1989, I also paid over 9% and did so for more than 20 years until I paid off the balance around 2010.  In short, if you want to blame someone, don’t blame the boomers.  We’ve been there and done that with high mortgage rates.  Furthermore, between taxes and insurance rates in New Orleans now, annual payments dwarf what we were paying throughout that period.

The biggest problem in US mortgages is not the governmental guarantee as a contributor to inequity and shortages, but the huge loss of tax revenue because of the home mortgage deduction, which is by and large our largest governmental welfare program, even if mostly utilized by the middle and upper classes who are homeowners.  Furthermore, the pundits and economists who argue that homeowners with the kind of rates we paid always had the risk-free hedge of being able to refinance, must have never looked at the short- and long-term costs of doing those deals.  Refi marketing by mortgage companies and banks has been wild and sometimes accounted for more than half of their mortgage business, but I, for one, could never figure out a way to make the numbers work, once I would have been adding another decade or more to my payments while paying for points and costs up and down the line.  Refi works if you plan to buy or sale before the term, so I’m not sure that recycled ownership is the best US housing policy.

            The figures below come from Freddie Mac, which began tracking 30-year fixed-rate mortgage rates in April 1971:

Decade	Mortgage rate near the beginning of the decade	Mortgage rate at the end of the decade
1970s	7.33%	12.9%
1980s	12.9%	9.78%
1990s	9.83%	8.06%
2000s	8.15%	5.14%
2010s	5.09%	3.74%
2020s	3.72%	Today is 8.2%

                Why in the world when we look at the rates since the 70s and 80s and see the breaks buyers got in the 2010s and 2020s, partially as banks and real estate companies tried to get people back into homeownership after the 2007-2008 bubble broke, would we blame the millennials who were able to buy houses over the last 15 years as they got on their feet and started families?  Who in their right mind wants to believe that somehow the fact that they are holding on to their houses is the cause of an affordable housing crisis now?  Balderdash!

I’m not reading that instead of the government guaranteeing mortgage and generous tax breaks for homeowners it should be building more public housing and encouraging and incentivizing the construction of more affordable apartment blocks instead of aiding developers of high-end condos and apartments.  Instead, we see private equity with all of their tax breaks swooping in and buying whole tranches of homes for rental.

We need a national housing policy that addresses equity and affordability.  It may not involve the American obsession with homeownership, but it won’t be solved by singling out 30-year mortgage rates.  We have no real housing policy for the majority of Americans.  It would be a good idea to demand one.