May 26, 2018

We Can Do Better Than 12% Mobility

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We Can Do Better Than 12% Mobility

If regulators fail to restore rules that honor the important roles of free enterprise and private property ownership, some may be unable to climb the economic ladder.

Harry Reid, John Boehner, Herman Cain, Elizabeth Warren, Marco Rubio, Gary Locke. They’re public figures of different political stripes but with something in common: Each started out in relatively humble circumstances. All worked or had a parent who worked in some kind of janitorial occupation, and all strived for something more.

One of the great things about America is that individuals who work hard can often improve their prospects. Those who do have often needed to relocate in the process. Historically, one-fifth of the population has moved each year. But in the past 25 years, the mobility rate has steadily declined. Last year only 12 percent of the population moved, a troubling economic indicator.

Inside View

Learn what the latest economic indicators mean for the real estate industry at NAR's Economist's Outlook blog.

Our lawmakers and policymakers in Washington should remove unnecessary barriers to economic expansion. One such barrier is the proposed bank capital standards, which are creating uncertainty among lenders and making it difficult for entrepreneurs to get funds to start businesses and buy and lease commercial real estate. Another is something most real estate practitioners can relate to: the difficulty even credit­worthy households have obtaining mortgage financing, thanks in part to proposed residential mortgage rules that are casting a pall on lending. Buying a home within one’s means and steadily paying down the mortgage is a familiar path to accumulating wealth in America.

To be sure, the pendulum swung too far the wrong way when prices were high and loans were easy for anyone to obtain. Underwriting standards should be tighter when prices are high and more accessible when prices are low. Instead, mortgage loans have become impossible for many qualified buyers to obtain because of overly restrictive underwriting standards.

Will the present state of affairs mean fewer people will ascend the economic ladder? It might, unless we convince regulators to apply capital and lending rules that honor the important roles of free enterprise and private property ownership.

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