After Obama’s historic economic recovery following the financial crisis of 2007-08, real estate prices have resumed their natural upward trend. Both the Federal Reserve and the Obama administration have put in place a range of policies that continue foster this housing recovery, and Americans continue to reap the benefits to this day. However, many on the right are now advocating policy changes that threaten this recovery, despite the fact that for the average American, their house is their most valuable asset.
Like stock indices, real estate is one of the few investments that is guaranteed to be profitable in the long term, as long as fiscal and monetary policy remains sound. The Federal Reserve ensures that interest rates remain low, allowing Americans to afford larger mortgages and pay ever higher prices for homes. In addition, a thriving mortgage backed securities market, backed by Freddie Mac and Fannie Mae, transforms these mortgages into tradeable instruments, which creates jobs for thousands of people on Wall Street, and adds trillions of dollars to the economy. Many Americans have got rich simply by buying one or more properties and watching their value increase by 10’s and 100’s of thousands of dollars. For many, the increase in the value of their property dwarfs the income they receive from their regular job. The real estate market is so big in America, and employs so many people, that in the smallest towns in the most sparsely populated areas you can still find at least four or five real estate agencies. Studies indicate that real estate makes up 15 – 20% of the economy, and if prices were to fall, millions of jobs and trillions of dollars would be lost.
Many young people complain that property prices are too high and that they cannot afford them. But what they don’t understand is that with low interest rates and subsidized mortgages for first time buyers, they’re free to take out a mortgage as large as they like, with no risk. Parents, teachers and the media actively encourage young people to get a large mortgage as early as possible as an ‘investment’, which will help them pay back their student loans.
The fact is, real estate has become the most lucrative and democratized industry in America and across the world. Paying 10 – 20 times your income on a home is not only sensible, but essential to your long term financial well-being. However, in order to make sure this market remains profitable and continues to employ millions of people, we need to ensure that prices continue their steady perpetual rise. People who support policies that threaten this market are enemies of the American dream, and threaten the livelihoods of hundreds of millions of Americans. For the sake of our country, they need to be stopped.