Over the next six months, the U.S. government plans to wind down many of its emergency programs for housing. Then it will become clear whether the market can function on its own. People in Elkhart are pretty sure the answer will be no.
President Barack Obama has traveled twice to this beleaguered manufacturing city to spotlight the U.S. government’s economic stimulus program, which helped stabilize a housing market whose fall had rippled around the globe. The employment picture here has indeed begun to improve over the past nine months. But Elkhart also symbolizes the failure of government efforts to turn around the housing slump at the heart of the economic crisis.
Housing in this community has become almost entirely dependent on a string of government support programs, which are nonetheless failing to prevent a decline in prices and a rise in mortgage delinquencies. More than one in 10 mortgage holders in Elkhart are seriously behind on payments. The median sales price has plunged to the level of a decade ago. Many homeowners owe more than their home is worth, freezing them in place for years. Foreclosures recently hit a record level.
To the extent that the real estate market is functioning at all, people here say, it is doing so only because of the emergency programs, which have pushed down interest rates on mortgages and offered buyers a substantial tax credit. Equally important is an expanded mortgage insurance program run by the Federal Housing Administration, which encourages private lenders to accept borrowers with small down payments.
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