The U.S. Housing Market in 2014: How Much Financing is Needed, and Who Will Supply It?
James R. Barth
Daniel E. Nolle
Office of the Comptroller of the Currency
April 24, 2012
Each week the ranks swell of those who believe that the U.S. economy is on the road to recovery. However, even amid the growing optimism, it is generally agreed that the greatest obstacle to robust recovery is the still-crippled housing market. The public dialogue about "solutions" has focused on the merits and flaws of specific proposals, such as foreclosure relief and mortgage modification programs.
Meanwhile, the debate over the future role of government sponsored enterprises (GSEs) and, indeed, whether they should have a role, in the housing market cycles from front- to back-page news. Concerned observers can be forgiven for not clearly understanding that both sets of policy discussions are intertwined.
Discussions about the housing market also lack a clear description of the actual context in which specific policies are likely to succeed or fail. We propose starting by asking "How much of a housing market, when we have 'fully recovered,' are we talking about?" Essentially, we need a clear idea of the nature and size of the housing market "target" that policies should "hit." This paper addresses that question by asking and then answering two related questions:
(1) How big will demand for home mortgage financing be when the economy returns to its long-run trend growth?
(2) What roles will the major credit providers likely play in fulfilling that demand?
Number of Pages in PDF File: 35
Keywords: Housing finance, GSEs, Fannie Mae, Freddie Mac, securitization, banks
JEL Classification: G21, G28, G29working papers series
Date posted: May 17, 2012
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