December 24, 2011 in Editorial, Opinion

Editorial: Lesson from rise, fall of housing should linger


The Spokesman-Review Editorial Board

Members of The Spokesman-Review editorial board help to determine The Spokesman-Review's position on issues of interest to the Inland Northwest. Board members are:

Housing is better, but far from well. We don’t want it too well.

Statistics released this week showed home construction bounced back strongly in November, mostly on the strength of the continued boom in apartment construction. Americans unwilling or unable to buy a home are turning to multifamily living. Apartment construction has also been among the most desirable markets for lenders anxious to put deposits to work, but with fewer takers capable of meeting more stringent credit standards.

There’s a chance residential construction might be among the sectors contributing to the nation’s anemic economic growth in 2011, and not the drag it has been the last few years.

Also encouraging in its way is the continued work by state and federal regulators to undo some of the damage done by the very worst actors in the home-mortgage business.

Bank of America agreed to pay $335 million to resolve allegations the lending practices of Countrywide Credit discriminated against black and Hispanic borrowers, who often paid higher fees than whites for the same loan products. BofA bought Countrywide in 2008 and has gotten little but grief out of the $4 billion deal, which then bank chief executive Ken Lewis called a “rare opportunity.”

Washington state regulators spied the discrimination back in 2008 and won 123 victims payments ranging from $997 to $26,176.

BofA has more hurdles to clear, as do many other financial institutions.

The U.S. Securities and Exchange Commission has also filed complaints against six former executives of Fannie Mae and Freddie Mac for misrepresenting their holdings of subprime mortgages. Taxpayers have absorbed $150 billion in Fannie/Freddie losses, the single biggest hit the government has taken as a result of the financial crisis.

Lobbyist/historian Newt Gingrich got a little bit of that.

In truth, regulators and prosecutors will never bring to justice everyone who had a greedy hand in government, investor and homeowner pockets. The financial services industry blocked major reforms in Congress, and Republicans have neutralized some that were enacted by refusing to approve a head for the new Consumer Finance Protection Bureau.

Locally, lucky Spokane buyers with 4 percent mortgage deals continue to push home prices down, by 7 percent in November compared with a year ago. The picture in Kootenai County is much the same.

The U.S. economy rode housing for all it was worth until 2008. It has ridden the same elevator down since then, a journey whose pain has been underscored by razing of new subdivisions in California and old neighborhoods in cities like Detroit and Cleveland.

Signs of stabilization are encouraging. But if we have learned a lesson, the nation will never again allocate so much capital into shelter instead of productive assets like laboratories and factories.

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