Tight credit and increased regulation have cost housing — and the economy at large — some 1.2 million mortgages per year since the housing bubble and bust, according to a new study by the Urban Institute.
Is that a bad thing?
It’s a hard question — especially in the inside-baseball world of mortgage finance and housing, with another refi boom over and big mortgage shops cutting back again because of hit-and-miss home purchasing, with builders in most parts of the country still dragging recession mud.
Increased regulation was meant to keep another bubble from forming — meant to stop the kinds of unwise lending practices lenders had mostly already abandoned. And it is keeping lending down, according to critics of reform, particularly the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act.
The entire economy is affected, according to the Urban Institute study, available at www.urban.org/UploadedPDF/413052-Where-Have-All-the-Loans-Gone.pdf. Not incidentally, the study says that black and Hispanic people have been affected more than non-Hispanic whites and Asians.
“It means fewer individuals will become homeowners at exactly the point in the economic cycle when it is advantageous to do so, depriving these individuals of the chance to build wealth,” the researchers wrote. “It means the housing market will recover more slowly because there is a more limited pool of potential buyers for each home.
“Ultimately, it hinders the economy through fewer new home sales and less spending on furnishings, landscaping, renovation and other consumer spending that goes along with home purchases. Indeed, this analysis speaks to the urgency of expanding the credit box, an issue that needs to be addressed quickly by policymakers.”