Fed’s proposal may provide lift market needs
THERE MAY be more hope for the effectiveness of the Federal Reserve chairman’s proposal to address the housing crisis than Edward L. Glaeser suggests in his Jan. 13 op-ed “Fed’s housing ideas won’t fix market.’’ Glaeser argues that housing prices remain depressed, citing the Case-Shiller index, which recently indicated declines in 16 of 20 markets. However, he might have derived more optimism from consulting the equally valid though less known Federal Housing Finance Agency index, which showed home prices increasing in 262 of 384 metropolitan areas.
While recovery has been slow, there are many places with growing employment, home prices, and housing construction. The Federal Reserve’s proposal could help ease the pain where severe housing distress has prevented recovery from taking hold. This would include highly desirable warm locations, where homes that are vacant now will be able to attract buyers again. In the meantime, a strategy to maintain these homes and put families in them makes economic sense.
In addition, Glaeser fails to acknowledge that one-third of today’s rental homes are single-family, and the share is rising, led by households that suffered foreclosure and prefer relocating to suburban properties. Successfully managing homes on scattered sites may take a different approach from managing apartments, but it’s not as difficult as Glaeser believes. Many investors in single-family homes have figured out how to make this business profitable.