The U.S. Treasury seized Fannie and Freddie in 2008, and said that housing finance would be differently organized in the future.
It is now more than eight years later. There is still no plan for how housing finance is going to be different. Would you make a thirty-year fixed nominal rate loan to anyone in such an environment?
I think it is a miracle that Wells Fargo is willing to make mortgage loans.
I think that U.S. residential investment is one place where regulatory uncertainty may genuinely be having massive effects. We now have had nine years of seriously depressed residential construction–nine years’ worth of household formation of pent up demand. And yet U.S. residential construction continues to be substantially subnormal. Housing prices have recovered to 2004 mid-boom levels. Yet construction has not.