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<ul class="summary-list"><li>Real estate experts told BI that the office sector will experience a wave of distress in coming years.</li><li>Run-down, vacant offices could be sold in fire sales as owners cut their losses.</li></ul>A <a target="_blank" href="https://www.businessinsider.com/commercial-real-estate-big-trouble-crash-bank-crisis-2024-2">seismic event is brewing in a corner of the commercial real estate market</a>, with many office buildings facing distress as they approach a wall of maturing debt and struggle against enduring work-from-home trends.Those factors — which have left some of the worst office buildings nearly deserted — are about to spark a handful of fire sales, potentially kicking off a wave of office-to-apartment conversions that will add more housing supply to the pipeline, real estate pros said.Richard Barkham, the chief global economist of commercial real estate investment firm CBRE, says he sees an upheaval of Class B office buildings — a segment of office properties that struggle to attract tenants, mainly due to being older and in need of renovation.These second-tier properties have vacancy rates as high as 80%, he said, predicting that many could be ripped down or transformed over the next decade."The banks are going to have to dispose of that real estate," Barkham told Business Insider in an interview. "So we will see. I think over the next — and this will pay out over two to three years — I think we'll see a wave of offices going back to banks, and I say, they'll be firesold and either demolished or converted."That chain reaction already looks to be in the works, with <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/commercial-real-estate-debt-crisis-credit-crunch-bank-loans-default-2023-8">banks quietly shedding</a> troubled office properties from their balance sheets and <a target="_blank" class="" href="https://www.businessinsider.com/how-nyc-office-buildings-towers-became-housing-2023-9">conversions</a> starting to trickle into the mix.The <a target="_blank" href="https://fred.stlouisfed.org/series/CREACBW027SBOG">total amount of commercial real estate loans</a> held by commercial banks declined to $2.9 trillion, down from a peak of $3 trillion earlier this year.Large banks have been pulling back on lending to the sector, with 74% saying they tightened <a target="_blank" href="https://fred.stlouisfed.org/series/COMREPUSQ159N">standards for nonresidential commercial real estate loans</a> in the second quarter of 2024, Federal Reserve data shows.Meanwhile, the number of <a target="_blank" href="https://www.rentcafe.com/blog/rental-market/adaptive-reuse-office-to-apartments-2024/#:~:text=From%20Boardrooms%20to%20Bedrooms%3A%20A,Conversions%20Expected%20in%20Major%20Cities&amp;text=From%202021%20to%202024%2C%20the,increased%20from%2012%2C100%20to%2055%2C300.">office spaces scheduled to be converted into apartments</a> rose to 55,000 in 2024 — the highest number of office-to-apartment conversions recorded in four years, and a 357% increase from levels recorded in 2021, according to Yardi Matrix data cited by RentCafe.John Vavas, a real estate finance attorney at Polsinelli who works with commercial real estate lenders, has worked on a handful of office-to-residential conversion deals this year. He had never worked on that kind of deal prior to the pandemic, he said. <a target="_blank" class="" href="https://www2.deloitte.com/us/en/insights/economy/spotlight/office-sector-in-commercial-real-estate-lending.html">Offices account for around 20%</a> of the square footage of all CRE properties, and the worst-performing buildings account for around 10% of the total office supply, Barkham estimated.There's around <a target="_blank" href="https://www.yardimatrix.com/Publications/Download/File/6080-MatrixOfficeNationalReport-August2024?eml=jsor%40businessinsider.com&amp;frm=4&amp;key=86DF904366A655EFD483DCB636266BC4922525FA">1.2 billion square feet worth of office space</a> that could be spun into residential space, Yardi said in a separate report.A CBRE analysis of planned, ongoing, and completed office-to-residential conversions since 2016 estimates that 1.38 billion square feet worth of office space could be converted. Barkham said the evolution could take around a decade to fully take place in cities.To be sure, these kinds of conversions are costly and difficult. In New York, architects have <a target="_blank" class="" href="https://www.businessinsider.com/how-nyc-office-buildings-towers-became-housing-2023-9">cut holes in skyscrapers to rearrange square footage</a>, and Silverstein Properties, one of New York's largest commercial landlords, <a target="_blank" class="" href="https://www.businessinsider.com/a-new-york-developer-is-spending-15-billion-to-turn-offices-to-apartments-2022-12">is spending $1.5 billion</a> to convert some of its office buildings. Still, for landlords facing a glut of unwanted space, it could be worth it to try to covert it. "There's a solid base of really badly performing offices that's going to go bust over the course of 2025," Barkham added. "It's quite clear that we don't need as much office space in the United States as we did."<h2 id="5bc9d833-39a3-40c9-a071-6c0d943a3acd">The office market's new era</h2>While most high-quality buildings are being filled, demand for offices has generally sagged since the pandemic, when remote work became much more widespread. The <a target="_blank" href="https://www.commercialedge.com/blog/national-office-report/#:~:text=The%20national%20average%20full%2Dservice,Diego's%20by%20310%20basis%20points.">US office vacancy rate was 19.4%</a> in August, according to the data provider CommercialEdge, up 200 basis points from the prior year.<a target="_blank" href="https://fred.stlouisfed.org/series/DRCRELEXFACBS">Late payments on commercial real estate loans</a> have climbed to 1.42% in the second quarter, the highest rate in nearly 10 years. <a target="_blank" href="https://fred.stlouisfed.org/series/COMREPUSQ159N#0">Commercial real estate prices</a>, meanwhile, dropped another 9% year-over-year in the first quarter, Fed data shows.But real estate investors have warmed up to the sector over the past six months, Vavas says, thanks partly to buildings being sold at steep discounts and banks attempting to dump loans from their balance sheets. He recalls a deal he worked on recently, where the property owner priced the building at a 20%-30% discount."The people who owned it, the building was heavily vacant and they just wanted to, I think, cut their losses," he said.Many defunct offices are expected to be converted into residential properties given the shortage of housing in the US, Vavas says. The office-to-residential conversion is the most common type of conversion project, according to Yardi data, accounting for 38% of all conversions in the works."The idea of people being in the office three days a week versus five days a week was the exception, not the standard. And now it's the opposite," Vavas said. "If you do that across a company, by definition, your demand is going to drop. And when it drops as a result of this post-pandemic thought of being back in the office, then I think you have to start to look at, well, I have this space. What are the needs for the community, for the location? And in New York, it just happens to be residential."Washington DC, New York City, Dallas, Chicago, and Los Angeles have recorded the most office-to-apartment conversion starts this year, with a combined 19,462 conversions in the pipeline, Yardi data shows.Commutes will likely be shorter on average, and cities with many vacant offices could see more stores, restaurants, and theaters creep into the mix, Barkham says. He notes, though, that changes won't happen overnight."You will see vacant buildings, and you will see see-through offices for some considerable time," Barkham said.

America's offices are about to see a wave of distress that could result in a billion square feet of fresh housing supply

It may not feel like it yet, but the housing market's <a target="_blank" href="https://www.businessinsider.com/housing-market-ice-age-higher-home-prices-fewer-sales-inventory-2023-5">Ice Age</a> is finally thawing.Would-be buyers and sellers have found themselves stuck over the past couple of years. For-sale signs stood frozen in front yards as home shoppers balked at prices. Wild swings in mortgage rates discouraged almost everyone from venturing out into the market. Many <a target="_blank" href="https://www.businessinsider.com/economy-housing-market-mortgage-buying-car-interest-rates-new-jobs-2024-3">felt as if they had no option but to stay put</a>. But when I talk to housing experts these days, they speak cautiously of a shift in the weather, a warming in store for American real estate.Green shoots are popping up everywhere. The typical borrowing rate for a 30-year home loan is near the lowest it's been in two years, which could nudge more sellers to emerge from hibernation. The pool of available homes on the market is larger than at any point since the early days of the COVID-19 pandemic. While the median home price nationwide is up by 3% to 5% compared with a year ago, that's actually within the range that economists typically look for in a well-balanced market. If things keep trending this way, we should expect to see this coming spring, the time of year when transactions typically pick up, that more people are ready to get moving again.Would this mean we're back to normal? Definitely not. Things may be more stable than they were during the peak of the home-trading frenzy or the depths of the slowdown, but that doesn't mean the housing market's problems are solved. It'll be hard for both buyers and sellers to shake off the pessimism of the past few years, especially when budgets are stretched so thin and home prices remain so high. That reality shouldn't obscure the encouraging signals, though. As I wrote earlier this year, a <a target="_blank" href="https://www.businessinsider.com/denmark-mortgage-rates-lock-in-effect-home-buying-selling-easier-2024-5">gummed-up housing market</a> — the Ice Age I was talking about — is good for nobody. In half a year's time, we may be looking at a healthier one.There's a tendency to look at housing in binary terms: Is it a better time to be a seller or a buyer? But a lot of people fall into both camps; most sellers have to turn around and purchase another home to live in. Recently, this fact of life has created what Skylar Olsen, Zillow's chief economist, calls the "musical chairs" problem: People can't jump up and find a new home if their neighbors aren't making similar moves, so everyone's stuck in their seats.A big reason Americans find themselves trapped in place is what's known as the "lock-in effect." When mortgage rates hit multidecade lows during the pandemic, millions of people were able to snag or refinance their way into cheaper monthly costs. But starting in the spring of 2022, the rate for a typical mortgage soared, more than doubling from those pandemic-era lows. While it's come down from a two-decade peak last October, the prevailing loan terms are still about twice as expensive as they were back in 2021, which means a buyer could have to pay hundreds of dollars more each month toward interest than they would have a few years ago. A lot of people don't want to give up a good deal, so they don't make a change unless they absolutely have to. One paper from the Federal Housing Finance Agency suggested that the lock-in effect prevented a whopping 1.3 million home sales between mid-2022 and the end of 2023. A mere 2.5% of America's housing stock traded hands in the first eight months this year, according to Redfin, the lowest rate in at least three decades and 31% lower than in 2019.The recent drop in the typical rate for a 30-year loan — from about 7.2% in early May to 6.1% in early October — won't erase the lock-in effect, but it's an encouraging sign for buyers who have been grasping for anything that could ease the burden on their wallets. Even after a <a target="_blank" class="" href="https://www.businessinsider.com/mortgage-rate-increase-since-federal-reserve-cut-interest-rates-housing-2024-10">uptick in the last few days</a> following the unexpectedly strong jobs report, more interest-rate cuts from the Federal Reserve, which signaled last month that it was <a target="_blank" href="https://www.businessinsider.com/fed-rate-cut-explained-inflation-labor-market-conditions-outlook-recession-2024-9">turning its focus away from battling inflation</a>, could further bring down mortgage rates, <a target="_blank" href="https://www.businessinsider.com/personal-finance/mortgages/how-does-fed-impact-mortgage-rates">though there's not a direct connection between the two</a>. Fannie Mae, for instance, predicts the rate for a typical home loan could end next year at 5.7%. That'd be within spitting distance of what the experts at John Burns Research and Consulting, a housing-research firm, call the "magic mortgage rate." Among homeowners and renters who said they planned to use a mortgage to purchase their next home, 47% told the firm in September that they'd be willing to sign up for a rate between 5% and 5.49%. Even if rates continue their downward trajectory, changes in mortgage payments typically take about six months to show up in home-sales activity, Ralph McLaughlin, a senior economist at Realtor.com, told me. So movement now could set the stage for a stronger uptick in sales next spring. Fannie Mae has also predicted that the total number of sales will be up by 10% in 2025 compared with this year, with most of that increase coming in the second half of the year.<div type="image" title="house for sale sign" height="1414" width="2121" msid="114076822" hostid="261" sizebytes="84578"></div>While mortgage-rate movement can be a helpful guide for future activity, to get a full picture of what's actually happening in the real-estate market, you need to look at two data points: inventory, or the number of available homes on the market, and new listings, or the number of homes hitting the market. Olsen, the Zillow economist, likens inventory to a swimming pool and new listings to the spigot that keeps water flowing — as with any pool, too full or too empty is a problem. A balanced market is one in which there are enough new homes to meet the demand from buyers, but not so many that prices plummet. We're still a long way from refilling the pool of homes on the market: Inventory in September was down by about 23% from pre-pandemic levels, according to Realtor.com. But there is clear improvement taking place here, too. The number of active listings in September was up by 34% from the same month a year ago, increasing to its highest level since April 2020. The number of homes newly listed for sale in September was also up by 11.6% from last year. By slowing down home sales, higher rates have given inventory time to build back up from pandemic lows — homes are lingering on the market longer with fewer buyers, so the pool's water level has steadily climbed.More homes to choose from, lower mortgage rates — that's a "powerful combination," said Lawrence Yun, the National Association of Realtors' chief economist, adding that sales should move higher in the coming months as a result. Buyers can take heart in another data point, which is that far fewer homes are being snapped up as soon as they hit the market. According to the housing-data firm Altos Research, there were about half as many "immediate sales" in late September as there were in 2022. "It looks like that frenzy is finally gone," Altos' president, Mike Simonsen, said in a recent video update. The baseline expectation for the spring, the Redfin economist Chen Zhao told me, is a modest uptick in sales and new listings. Most economists don't expect mortgage rates to fall dramatically, meaning sellers will slowly start to reenter the market as they decide it's time to make a change. New listings this year increased by about 5% a month on average compared with the same months in 2023 — you might expect to see that climb a little next year, Zhao told me, to maybe 10% year-over-year growth. The total number of homes on the market each month tended to be about 10% or 15% higher than last year, but you might see that rise to 20% or 25% when you compare 2025 with this year. This is the housing's version of a soft landing; there won't be dancing in the streets, but it would be a marked improvement from the past couple of years."Even though the housing market is recovering, the recovery is going to be very slow," Zhao told me. "We're not going to see anything like the activity that we saw in 2021 or 2020 — or even 2019, 2018 — for a while."Still, if buyers are feeling better about their prospects, that should grease the wheels of America's housing market.It is important to note that forecasts are just forecasts. There's a lot that could change in the next year. The <a target="_blank" href="https://www.businessinsider.com/hiring-slump-professional-white-collar-jobs-recession-high-salary-2024-4">strength of the job market</a> is a big question mark — people won't move if they don't feel sure about their next paycheck. There are huge regional differences to consider here, too. Builders have finished a lot more new housing in Sun Belt states in the lower half of the US, for example, which has made it harder for homeowners there to sell at their desired prices than for their counterparts in the Midwest or the Northeast. Affordability is still a huge pain point. An August survey by Fannie Mae suggested consumers were feeling remarkably optimistic about the future of mortgage rates, but only 17% of respondents said it was a good time to buy a home. Any one of these issues could chill the market and slow America's exit from the Ice Age.That said, it's impossible to ignore the signs of a shift underway. Mortgage rates are a key piece of the equation. I'll also be keeping a close eye on inventory and the pace of new listings hitting the market, which should heat back up starting around February and March. But all this focus on the numbers can obscure the simple fact that people have to move for all kinds of reasons that have nothing to do with a few digits and a percent sign.I recently spoke with Mark Palim, the chief economist at Fannie Mae, who left me with a salient piece of advice: "Leave timing the bond market to the hedge-fund guys." In other words, trying to predict mortgage rates — and buying or selling a home accordingly — is a fool's errand. Budgets matter, absolutely, and monthly payments are a crucial consideration for any buyer. But buyers and sellers should remember that their home isn't just an investment vehicle or a bet on where the economy is headed. At the end of the day, you have to live in it."All sorts of things can happen," Palim told me. "Rates may move. Home prices may go up, home prices may go down. But would you be happy living there for a while? Does it meet your needs?"<a target="_blank" rel="" href="https://www.businessinsider.com/author/james-rodriguez">James Rodriguez</a> is a senior reporter on Business Insider's Discourse team.

The Housing Ice Age is thawing

Global markets are looking ahead to the US Fed's meeting scheduled for Thursday, November 7, 2024, expecting the Jerome Powell-chaired FOMC (Federal Open Market Committee) to slash interest rates further by 0.25%. In September this year, the Fed surprised the markets by cutting interest rates by a massive 0.5%, for the first time in 4 years. As per the <keyword id="23807624" type="General" weightage="20" keywordseo="CME-Fed-Watch-Tool" source="keywords">CME Fed Watch Tool</keyword>, there is now a 99.5% chance that the Fed will reduce the interest rates by around 25 basis points, bringing it within the range of 4.5% to 4.75%. Only 0.5% believe that the Fed might leave the rates unchanged, within their present range of 4.75% to 5%. As for the Fed's December meeting, scheduled for December 18, per the CME Fed Watch tool, 79.5% believe that interest rates would be in the range of 4.25% to 4.5%. Another 20.4% believe that yields will remain in the range of 4.5% and 4.75%. Only 0.1% see the interest rates staying within their current range of 4.75% to 5% <h2>No major changes anticipated</h2>However, it is unlikely that this quarter-point rate cut would bring about any significant financial changes in the US economy. The Fed is again expected to bring down the interest rates by another 25 basis points in their December meeting. This would imply a total rate cut of about 50 basis points by the end of this year. So, why is the Fed not bringing down interest rates by 50 basis points in one fell swoop this time around? Why wait till December to bring down the rates by another 25 basis points? Experts believe that it could stoke inflation, which has seen a sharp decline in the recent past. A steep slash of borrowing rates could accelerate borrowing activity and inject significant cash into the economy at once, pushing up inflation. Per the Fed's recent projections, a total of 4 rate cuts are anticipated in 2025. On a YoY basis, inflation in the US dipped to 2.4%, close to the Fed's target of 2%. With inflationary pressures reined in, the economy growing at the rate of 2.8% during the third quarter of FY24, and the unemployment rate down to 4.1%, the markets see much merit in bringing interest rates down. This is especially important to boost spending, particularly in sectors such as housing and automobiles, where even a slight tinkering in interest rates can drastically impact the amount and volume of loans taken to own them. Data suggests that during Trump's presidency tenure, i.e., between 2017 and 2021, inflation averaged at a rate of 1.9% a year. During the Biden administration, where Kamala Harris served as VP, the inflation is on track to average around 5% a year. Shrisha Acharya, Vice President, Anand Rathi Global Finance, also notes that the results of the impending US elections, which are likely to be declared tomorrow, will impact the yields and stock markets. "The Trump card, coupled with potential Republican control, could mean higher bond yields due to anticipated increases in deficit spending, inflation risks, and potential tax cuts. This could very well jiggle the confidence in U.S. Treasury bonds and thus start a chain effect that will possibly impact global market stability and lead to short-term volatility. On the other hand, Harris’ rise has been met with a stock market rally glued on expectations of economic stability and controlled inflation, with more predictable fiscal policy likely to help in a soft landing," he explains.

What can you expect from the US Fed meeting later this week? Here's all you need to know

<ul class="summary-list"><li>Buying a house right now is difficult for a whole bunch of reasons, Dave Ramsey said.</li><li>But some people can't afford one as they waste money and rack up debt, the radio host said.</li></ul>Buying a house has become <a target="_blank" href="https://markets.businessinsider.com/news/commodities/home-prices-outlook-housing-market-affordability-crisis-inventory-supply-shortage-2023-8">especially hard</a>, but some people can't afford one because they're mismanaging their money, personal finance guru Dave Ramsey says."It is mathematically tough right now, it is economically tough. But I think more than those two, it's psychologically tough right now because there's just this perception, this dark cloud over the subject of buying a house right now," he said on a <a target="_blank" href="https://www.youtube.com/watch?v=o2H20kz4nsY&amp;t=1s">recent episode</a> of "The Ramsey Show."House prices have surged to record highs, and the interest rate on a typical 30-year fixed-rate mortgage has jumped from below 3% in late 2021 to around 7%, fueling an <a target="_blank" href="https://markets.businessinsider.com/news/stocks/housing-market-unaffordable-mortgage-home-prices-rates-fed-mba-finance-2023-6">affordability crisis</a>.People are also spending more on basics like food, fuel, and rent thanks to high inflation — and paying more each month for their car loans, credit cards, and other debts after the Federal Reserve raised interest rates to curb rising prices.Ramsay's point is that consumers face a <a target="_blank" href="https://markets.businessinsider.com/news/stocks/big-short-michael-burry-jpmorgan-consumer-inflation-rates-banking-crisis-2023-4">painful combination</a> of lofty home prices, more expensive mortgages, steeper living costs and debt payments, stagnant wages and layoffs in several industries, and ongoing recession fears.The result is that for many people, it feels harder than ever to save enough money, secure sufficient financing, and plunk virtually their entire net worth into a single asset, even if they plan to live in it.<h2 id="d97b8b58-ed1a-43c7-b709-47b3177ac46a">Overspenders can't complain</h2>Despite those challenges, the talk show host and author called out people who make bad financial decisions and then complain they can't afford a house."You're <a target="_blank" href="https://www.businessinsider.com/consumer-spending-us-economy-outlook-inflation-recession-fed-interest-rates-2024-2">spending money you don't have</a>, to do crap you don't need to be doing, and you go in debt to do it," he said."You're sitting there with stinking car payments around your neck, a bass boat payment, and paying for last year's Disney vacation on your credit card, and you can't figure out why you can't afford a house," he said. "Well I just told you why you can't afford a house: Your stinking overspending."Ramsey advised people against making a home purchase until they've paid off their debts and built an emergency fund that covers three to six months of expenses.He recommended they make a 20% down payment if possible, never take on a mortgage with a monthly payment exceeding 25% of their take-home pay, and stick to a fixed-rate mortgage that protects them from rate increases, as they can refinance if rates fall.<h2 id="b5ea0254-e953-436c-b1e2-38f2a17b72e7">Blessing, not a curse</h2>Ramsey also urged prospective buyers to account for closing costs and ownership expenses like home insurance, maintenance, and utilities."I want the house to be a blessing, not a curse," he said. "When you are broke and in debt, don't have an emergency fund, and sign up for a mortgage payment you can't afford, that is not smart real estate. That's going to slow down your wealth building, bring anxiety to your home, stress to your relationships."Ramsey also cautioned that many people's wages have risen less slowly than prices and interest rates, which means "you can probably no longer afford the home you thought you were going to get."He said the upshot is that buyers will probably have to compromise on things like the neighborhood and commuting distance to the city if they want to secure a home in their price range.It's worth noting that some people have found success in buying a home by <a target="_blank" href="https://www.businessinsider.com/ignoring-dave-ramseys-advice-buy-my-home-2024-3">ignoring Ramsey's advice</a>, and others have rejected his gospel of debt-free living as <a target="_blank" href="https://www.businessinsider.com/personal-finance/gen-z-dave-ramsey-advice-doesnt-work-today-2024-2">outdated and unrealistic</a>.Yet the financial expert's principles will surely remind others of <a target="_blank" href="https://markets.businessinsider.com/news/stocks/who-is-warren-buffett-berkshire-hathaway-stocks-investing-wealth-philanthropy-2023-5">Warren Buffett</a>, the legendary investor who preaches prudence, frugality, and careful risk management when it comes to money.

It might be your fault you can't afford a house, says finance guru Dave Ramsey

<ul class="summary-list"><li>Some American workers are encountering an unpleasant surprise when they reach <keyword id="25452" type="General" weightage="20" keywordseo="retirement" source="Orion">retirement</keyword>.</li><li>Murky provisions slash <keyword id="19966945" type="General" weightage="100" keywordseo="social-security" source="keywords">Social Security</keyword> for people who work in both the government and private sector throughout their careers.</li></ul>Patrice Earnest, 66, expected to have much more money for retirement. But after her husband died, she checked her <a target="_blank" class="" href="https://www.businessinsider.com/retirement-savings-social-security-baby-boomers-without-savings-401k-poverty-2024-8">Social Security survivor benefits</a>. The total: $0. "It's absolutely stunning," Earnest said. "My husband worked all his life since he was 16 bagging groceries, and that Social Security was something we had planned to have in our retirement." Earnest won't see a penny of the benefits her husband worked for — and it's due to her work history, not his. She's one of a few million Americans who see cuts to either their own Social Security benefits or to their <keyword id="44080" type="General" weightage="20" keywordseo="survivor" source="Orion">survivor</keyword> benefits when a spouse dies because they have a career history that includes both government and private sector jobs. The idea is to ensure public servants with pensions don't get overly generous retirement benefits, keeping people like Earnest from receiving full benefits from both a government pension and Social Security. But like many people affected by this, Earnest was caught by surprise — throwing her retirement budget for a loop. The two provisions at play here are the Windfall Elimination Provision and the Government Pension Offset, or <keyword id="19921812" type="General" weightage="20" keywordseo="wep" source="keywords">WEP</keyword> and GPO for short. They typically affect middle-class workers in select states who spent some time in a public-sector job, such as teachers, firefighters, and police officers, with government pensions and no Social Security taxes. The measures reduce Social Security benefits accrued during private-sector work to compensate for the state or local government pension benefits. Even a short time with a pension can trigger cuts to Social Security that workers might have earned in a private sector role. WEP reduces a worker's own Social Security benefits, while GPO applies to spousal or widower benefits like those Earnest expected to collect. "Certainly, I could use the extra money owed to me to pay the bills that I thought we could with a two-income household," she said. Right now, the provisions are part of a political firestorm over how the US should care for its older workers, with Social Security <a target="_blank" class="" href="https://www.businessinsider.com/when-will-social-security-benefits-run-out-retirement-crisis-boomers-2024-5">already imperiled</a> and many retirees struggling to pay their bills. On September 19, a bipartisan bill to eliminate WEP and GPO received the number of signatures needed for a vote in the <keyword id="19910021" type="General" weightage="20" keywordseo="house" source="keywords">House</keyword>. While supporters of WEP and GPO say they're necessary for ensuring equity, critics say they're applied unevenly across states and professions, sometimes resulting in benefit calculation mistakes. Those advocating for eliminating the provisions say they also hurt middle-class government workers the most. <h2>Unpredictable cuts to Social Security benefits make it impossible to plan for retirement</h2>The provisions can end up slashing your Social Security payments by up to half if you have a government pension, whether you were planning on survivor and spousal payouts or your own checks from time spent in the private sector. Workers with a private-sector 401(k), on the other hand, are not barred from collecting full Social Security. <keyword id="23551078" type="General" weightage="20" keywordseo="jane-roth" source="keywords">Jane Roth</keyword>, 74, a widow in New Haven, said she may have reconsidered becoming an educator if she had known about the provisions. <keyword id="20163067" type="General" weightage="20" keywordseo="roth" source="keywords">Roth</keyword> worked in the private sector before becoming a teacher. Because she pulled money out of her teacher retirement fund after six years of teaching to help finance life with a child, she said she has to work six extra years before cashing out her full pension. She's still teaching and has another 14 years before she can receive her full pension. In the meantime, she can't afford to live off the $32,000 she gets annually through her late husband's Social Security survivor benefits. If she retired now and started receiving her partial pension, she'd get even less because the GPO would kick in and zero out her survivor benefits. "What are my choices? Do I retire with a partial pension and lose 100% of my Social Security survivor benefits, or do I work until I am 88?" Roth said. "We are not asking for a handout. This is our money. They took our money and said this will be waiting for you upon retirement, and it's not." WEP and GPO were instituted in the 1980s to make retirement income more equitable, as many believed <a target="_blank" class="" href="https://www.businessinsider.com/how-retirement-of-peak-boomers-could-affect-economy-social-security-2024-4">workers with governmentpensions</a> had an advantage over Social Security recipients. But even pensions have become less of a sure economic bet, with <a target="_blank" class="" href="https://www.brookings.edu/articles/teacher-pensions-systems-are-increasingly-underfunded-making-teachers-vulnerable-and-salaries-less-attractive/">returns less funded</a> and many states <a target="_blank" class="" href="https://www.urban.org/sites/default/files/publication/101700/how_have_teacher_pensions_changed_since_the_great_recession_0.pdf">cutting back the benefits</a> they offer to teachers. "Essentially, it's a substitute," <keyword id="23551077" type="General" weightage="20" keywordseo="karen-smith" source="keywords">Karen Smith</keyword>, a senior fellow at the Income and Benefits Policy Center at the Urban Institute, said. "The reason they don't pay Social Security is because they have this alternate pension." Today, however, major criticisms center on the uneven application, <a target="_blank" class="" href="https://oig.ssa.gov/assets/uploads/a-13-20-50970.pdf">rampant errors</a>, and <a target="_blank" class="" href="https://www.aft.org/news/retirees-advocate-fairness-retirement-benefits">poor communication</a> with those impacted. WEP and GPO impact teachers in 15 states, while state, county, and municipal employees are penalized in 26 states. An audit by the Office of the Inspector General for the Social Security Administration <a target="_blank" class="" href="https://oig.ssa.gov/assets/uploads/a-13-20-50970.pdf">found</a> that WEP and GPO were two of the "leading causes of improper payments" in the system. According to <a target="_blank" class="" href="https://scottweisbenner.web.illinois.edu/RESEARCH/PAPERS/JPEF_Brown_Weisbenner.pdf">a 2013 paper,</a> the WEP reduces benefits disproportionately for lower-earning households in some<a target="_blank" href="https://scottweisbenner.web.illinois.edu/RESEARCH/PAPERS/JPEF_Brown_Weisbenner.pdf"> cases</a>. The Bipartisan Policy Center wrote in a July paper that limitations to WEP calculations resulted in "an imprecise approach to adjusting Social Security benefits." Many who support WEP and GPO, whether in their current or modified forms, say the math still has merit, as those affected by the provisions tend to be better off. The Social Security Administration reported the average monthly check as of July 2024 is about $1,783. Meanwhile, <a target="_blank" href="https://crsreports.congress.gov/product/pdf/RS/98-35/60">nearly half</a> of WEP-affected Social Security beneficiaries had pensions above $3,000 a month in 2023. Proponents of the provisions argue that because of how Social Security <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/what-is-social-security">calculates benefits</a>, a worker who spent a short period of time in the private sector and the rest of their career working toward a public pension <a target="_blank" class="" href="https://www.urban.org/urban-wire/getting-rid-social-security-offsets-teachers-flunks-equity-test">could end up</a> getting a proportionally larger Social Security benefit than a worker making the same amount of money in the private sector for their whole career. Additionally, canceling WEP and GPO could worsen Social Security's financing, moving the depletion date for funds from 2035 to <a target="_blank" class="" href="https://www.businessinsider.com/when-will-social-security-run-out-pay-full-benefits-plan-2023-3">2034 or sooner</a>. According to the Urban Institute, this could disproportionately benefit those with higher incomes who have 401(k)s or other private retirement accounts. But some of those workers on the other end of the provision disagree. "I had a 76-year-old lady call me up. She taught for 40 years and retired, but recently her husband passed away. She lost all his earned benefits, and she's going to wind up either selling her house or lookfor a part-time job," said Janis Hernandez, a retired teacher in Louisiana, who sits on the communications committee for The National Task Force to Repeal the WEP and GPO. <h2>The future of WEP and GPO</h2>The Task Force <a target="_blank" href="https://ssfairness.org/gpo-wep-faq/">notes</a> that 83% of those penalized by the GPO are women, many of whom took time away from their careers to raise children and thus have less in Social Security than their spouses. Many impacted by the GPO also can't fully calculate their reductions until their spouse dies, like Earnest. Critics of the programs also note that there is no similar means testing for private-sector retirement plans. "If somebody is in the private sector and they've got a good 401(k), you don't tell them, 'Oh, we're not going to give you your Social Security,'" Louisiana Sen. Bill Cassidy, a Republican who's focused on Social Security solvency, told BI. WEP and GPO are front and center in Congress this month when the House of Representatives votes on the bipartisan <a target="_blank" href="https://www.congress.gov/bill/118th-congress/house-bill/82">Social Security Fairness Act</a>, which aims to eliminate both provisions. An alternative to eliminating the provisions completely is simplifying the formula for calculating Social Security benefits, which the Bipartisan Policy Center found would be less costly over time. As the Center on Budget and Policy Priorities finds, there's "widespread support" for a more proportional formula to calculate the amount these provisions shave off. But right now, any action on Social Security or altering those provisions may be a long shot, especially with the presidential election looming. Anne <keyword id="20223028" type="General" weightage="20" keywordseo="mcleod" source="keywords">McLeod</keyword>, 68, said the provisions can be punitive. In her 20s, McLeod worked various part-time and lower-paying clerical roles, all of which paid into Social Security. She then taught in New Orleans for 28 years and worked part-time jobs after school hours. She's retired now and gets $67 monthly in Social Security — $500 less than she would've gotten sans WEP. She gets $2,910 monthly in state retirement, and she creates and sells artwork for extra income. While she and her husband are up to date on their bills, they simplified their lives by selling their house and renting because it's cheaper. "It's almost like a punishment in a way because we chose to be educators or firemen or policemen," McLeod said. "They said you get a good enough retirement from the state, so you'll be OK not getting all your Social Security." Correction: October 1, 2024 — An earlier version of this article provided the wrong figure for Jane Roth's Social Security survivor benefits.

The Social Security curveballs making retirement even more confusing

In March 2023, Citigroup CEO Jane Fraser anointed Anand Selva, as the bank's chief operating officer. His mandate: oversee a deeply unsexy yet crucial initiative to regain compliance with regulators. At the time, she praised his "long track record of delivering results."So far, Selva's tenure has been rocky.In July, two regulators <a target="_blank" href="https://www.businessinsider.com/citi-jane-fraser-regulatory-citigroup-transformation-2024-7">fined Citi $135.6 million</a> for failing to make enough progress in fixing its data-management issues. The bank had agreed in 2020 to work on this problem and others, including poor risk controls, after <a target="_blank" href="https://markets.businessinsider.com/news/stocks/citigroup-slammed-400-mln-fine-longstanding-deficiencies-regulation-occ-fed-2020-10-1029660295">paying $400 million</a> in fines to the Federal Reserve and the Office of the Comptroller of the Currency. The OCC said in July that the bank had made "meaningful progress overall" but that the agency wanted to ensure Citi allocated enough resources to address the "persistent weaknesses" regarding data.These new fines are despite Citi dedicating massive resources to a firmwide initiative to overhaul the bank's technology. This program, called the <a target="_blank" href="https://www.businessinsider.com/citi-transformation-citigroup-regulatory-fine-anand-selvakesari-2024-7">"Transformation"</a> and overseen by Selva, has about 13,000 employees. Citi spent $7.4 billion on the endeavor from 2021 through 2023. This year's budget has been increased by $250 million, to more than $3 billion.The pressure is on, with Sen. Elizabeth Warren urging the OCC to "impose growth restrictions" on Citi, arguing that it has grown "too big to manage." The regulator and Citi declined to comment."We've always said that progress wouldn't be linear," Fraser said after the latest fines, "and we have no doubt that we will be successful in getting our firm where it needs to be in terms of our Transformation."For Selva, leading the Transformation is unlike any test he has faced in his three-decade career at Citi. Selva, who goes by the shortened version of his last name, Selvakesari, joined Citi as an assistant operations manager in Chennai, India, in 1991. He rose through the ranks in Asia before taking over the US consumer bank in 2019. When Fraser was made CEO in 2021, she chose Selva, who's now 57, to replace her as the global head of consumer banking.In his current role, his mandate is to make the bank safer, not to turn a profit. To do so, he has to solve for Citi's <a target="_blank" href="https://www.businessinsider.com/inside-real-reasons-behind-citi-mike-corbat-early-retirement-2020-9">decades of underinvestment</a> in its infrastructure, which affects every business line of the bank.Business Insider talked to 14 current and former Citi employees who have worked under Selva to get a picture of the challenge facing him and why he was put in charge of the bank's No. 1 priority. All but two spoke on the condition of anonymity, citing fear of reprisal or the sensitivity of regulatory matters. Three senior executives pointed to his experience navigating regulation and working with technology from running Citi's consumer bank. Gonzalo Luchetti, Selva's successor as the head of the US consumer business, told BI that serving 70 million customers required handling tremendous operational risk."If we mess it up, usually you don't mess it up for one; you mess it up for hundreds of thousands, if not millions," he said. "You have to be super good at process orientation and making sure that there's high discipline and rigor."Luchetti also emphasized Selva's longevity at Citi and experience across regions."He knows the fabric of the firm very well," Luchetti said. "The Transformation is about really repiping the machine. He's touched a lot of the machine himself."But touching the machine isn't the same as fixing it. Eight employees told BI that they were surprised that Selva was made the head of the Transformation given that he had never held a leadership role in technology or compliance. They described Citi's culture as a cliquey environment that rewards managing up over results, noting that the COO promotion followed dismal performance for the wealth unit he oversaw."The biggest job was given to a guy who with 1 ½ years in wealth wasn't able to do anything," a former managing director said.Selva has also come under scrutiny for a lawsuit filed against him and the bank by an ex-Transformation executive in May. Kathleen Martin, a former interim data chair, alleged that Selva pressured her to hide information from the OCC that would make Citi "look bad" and that she was fired in September 2023 after multiple refusals. Citi denied the accusations and filed a counterclaim in late August, alleging that Martin was fired for underperformance. Citi has recently made leadership changes to Selva's unit. The bank tapped its new tech head, <a target="_blank" href="https://www.businessinsider.com/citi-data-tim-ryan-anand-selva-memo-transformation-regulators-2024-9">Tim Ryan</a>, to lead the data effort alongside Selva and take over management of the 800-employee data team. The work on data, along with risks and controls, is paramount to the Transformation.Splitting the burden may expedite the massive task, which requires coordinating work from employees across the entire bank. Citi declined to specify a timeline, citing the confidential nature of regulatory matters. A managing director in the Transformation estimated that the work required would take about two decades.Mike Mayo, a Wells Fargo analyst, said that until Citi meets the requirements of the OCC and the Federal Reserve, the bank is in "regulatory purgatory.""Citi has thrown over 10,000 people and $3 billion and more at this problem," Mayo told BI in July. "They just have to get it done."Selva does have a long track record at Citi. Born in Madurai, a large city in southern India, he studied engineering and played basketball at the Coimbatore Institute of Technology. He earned his master's in business administration at Madurai Kamaraj University before joining Citi in 1991.Selva made his name at Citi by shaping its consumer-bank businesses across Asia. He led retail banking in China and India before taking over the Asia Pacific market in 2015. His approach was digital-first, eschewing branches for banking apps. Despite closing 60% of bank branches in Asia from 2016 through 2018, Selva grew deposits by 10%.<div type="image" title="Citi's Anand Selva speaking at a panel, seated and wearing a pinstripe suit and a red tie." height="3307" width="4960" msid="114093573" hostid="261" sizebytes="2310830"></div>"He's very tech and digital-oriented," Luchetti said. "We've been to China together to look at startups and firms that were disrupting the world. He was always very connected with learning more about technology, had that curiosity, and then the execution chops to get it done here."In 2019, Selva moved from Singapore to New York, where he now lives with his family, to run the US consumer bank. He assumed the global consumer-banking business from Fraser in 2021. Selva leaned on credit-card and lending offerings, launching products like Citi Custom Cash which allowed customers to pick their reward categories, and Flex Pay, a buy-now, pay-later service. Under Selva, Citi was the No. 2 issuer of credit cards in the US, and deposits grew by more than a third, to about $220 billion.In 2021, Citi started divesting itself of more than a dozen consumer-bank markets across Asia, Europe, and the Middle East. Selva was an important player on both sides of the table, according to Adora Tidalgo, the head of operational risk management at Citi. She said he helped find Asian acquirers that maximized value for Citi while keeping the businesses running smoothly with low attrition."That skill of balancing how much you want to bring in terms of revenue and the credit loss you want to take is really a skill that very much needs to be honed in the consumer space," she said. "That balancing, to me, I have seen Anand over the year been very successful in doing that."There have been some bumps in the road. As part of Fraser's reorganization of the bank in 2021, Selva gained oversight of a newly formed wealth unit and its new leader, Jim O'Donnell. Six current and former managing directors told BI that Selva's approach focused more on scale and digital offerings than high-touch client service. For instance, he didn't approve loans that failed to meet a certain threshold of return, even if it meant losing an important client, two former managing directors said."The way that every private banker on earth thinks about relationships is you need to invest in relationships, and then as you start to do more business with clients, you start getting more and more valuable opportunities with them," one of the former managing directors said. "You have to look at the relationship. You can't just look at every single transaction."Employees argued that Selva's playbook may have worked to build scale in Asia but not to satisfy well-heeled — and much more sought-after — US clients."I think Anand's decisions were comparing everything to what he knew from his time in Asia, and they are completely different markets," another former managing director said. "In Asia, Citi has a very recognizable brand, and people actually want to bank with Citi. You don't have to sell it that hard."<div type="image" title="Citi CEO Jane Fraser testifying at Congress" height="3828" width="5846" msid="114093582" hostid="261" sizebytes="314760"></div>The wealth business' revenue dropped by 6% year over year at the end of 2022. Fraser called the division's performance "disappointing." O'Donnell's reign over wealth was cut short in January 2023, and it was later placed under <a target="_blank" href="https://www.businessinsider.com/andy-sieg-citi-wealth-management-ceo-2024-6">Andy Sieg</a>, the former head of Merrill Wealth Management. With Citi on a campaign to divest itself of 14 international consumer-bank markets, Selva's remit shrank.His appointment as COO thrust him into the spotlight. Tidalgo told BI that he was no stranger to the task of dealing with regulators."When you are the head of a country, you are the face of Citi to the regulators. Good, bad, or indifferent, you have to face them," she said. "That's part of the job."Citi's Transformation and its challenges predate Selva's appointment as COO. It existed as a firmwide initiative before the October 2020 fines but was kicked into overdrive after Citi entered consent orders with the OCC and the Federal Reserve.It can be viewed as two parts. The most visible is the strategy to simplify and modernize the bank, such as divesting Asian consumer businesses, removing five layers of management, and <a target="_blank" href="https://www.businessinsider.com/citigroup-reorganization-layoffs-management-overhaul-reorganization-jane-fraser-stock-price-2023-9">reorganizing</a> so that the five business lines report directly to Fraser.The second part is meant to address the 2020 consent orders. The initiative is separated into seven programs, including finance, compliance, and risk and controls. While some 13,000 employees are dedicated to the Transformation, much of this work is carried out by employees across the bank. Selva sits at the center, coordinating these efforts. He's in a tough position, as much of the Transformation's work is executed by employees in other divisions."The challenge with the Transformation role is you are accountable yet not responsible," the managing director in the Transformation said. "The role is really coordinating and getting others to do what they need to do, which is very different from running a business where the entire team follows your lead, you own it, you have the ability to actually get them to do this stuff."When everyone is accountable, effectively no one is, a former senior vice president in the Transformation said. Matters got stuck in bureaucracy, bouncing from one department to another and being debated in committee for months.A senior executive in the Transformation acknowledged that the programs often rely on each other's work. For example, a delay in data work can lead to one for a finance project."When we are asked sometimes why it is challenging to execute on the Transformation, one of the challenges is the interconnectivity of those seven works," she said.The senior executive said the Transformation's successes had been overlooked, partly because the bank is limited in what it can say on regulatory matters. For instance, Citi has retired or replaced a quarter of its applications, halfway to its overall goal. The bank declined to specify the number of existing or terminated applications, but as of July, it had retired nearly 300 applications this year. The senior executive also touted the bank's streamlining its risk-management workflow.But the Transformation has earned a middling grade from Citi itself. The bank evaluates the initiative's success for the purposes of a bonus program applicable to about 200 senior employees, including Selva. In 2022, an internal committee gave it a score of 94%, citing targets it met, such as submitting remediation plans to regulators.For 2023, the score sank to 80%, calculated by measuring the timeliness of executing scheduled work, the percentage of work deemed complete by the bank's internal auditors, and a "qualitative consideration of Citi's cultural change" derived from the bank's employee surveys.<div type="image" title="Headshot of Citi's new tech head Tim Ryan, smiling and wearing a black suit jacket with a light blue shirt" height="739" width="985" msid="114093578" hostid="261" sizebytes="32120"></div>Bringing in Ryan, the bank's head of technology and business enablement, to help the bank catch up makes sense. The recruiter Phil Waxelbaum argued that a more traditional candidate to help lead the Transformation would be a seasoned, high-ranking person from a regulatory agency. But someone with a nonbanking background such as consulting or technology can work, too, according to recruiter Jeffrey Warren. Ryan joined Citi in June after seven years leading the US business of PricewaterhouseCoopers."In situations like this when you are looking to drive transformation, you need someone who can work at the intersection of people, processes, and technology," said Warren, managing director at Russell Reynolds Associates. "That includes working from within and likely driving some change with new people who have experience in new technologies or new ways of doing things."Ryan is now sharing data, a significant component of the Transformation, with Selva. Another PwC alum, Citi's head of enterprise risk management, Ashutosh Nawani, will take over the chief data office from one of Selva's lieutenants, Japan Mehta, and report to Ryan. Mehta will move to another role that the bank declined to specify.Employees told BI that they thought bringing in Ryan and Nawani would help."Sure, there might be some reservation that more consultants are coming in to run Citi, but there is a positive vibe of changing senior leadership," the former senior vice president in the Transformation said. "Legacy Citi culture is what got us into this spot in the first place."While the July fines did not meaningfully move Citi's stock, they have placed the bank and the Transformation under greater scrutiny. The OCC has ordered Citi to provide a resource-review plan each quarter to ensure the bank is providing enough resources for the effort. The Securities and Exchange Commission has also required the bank to address the Transformation's progress in future filings.The outstanding issues have also impeded Citi from expanding in China. According to <a target="_blank" href="https://www.bloomberg.com/news/articles/2024-09-23/citigroup-s-china-expansion-plan-put-on-hold-by-us-regulators">Bloomberg</a>, the bank is still waiting on a clearance letter from the Federal Reserve to set up a securities office. The bank declined to comment on the process but said it was "fully committed to supporting clients" in China.<div type="image" title="Democratic Sen. Elizabeth Warren of Massachusetts at a hearing on Capitol Hill on January 11, 2024." height="1333" width="2000" msid="114093583" hostid="261" sizebytes="96482"></div>Regulators placing an asset cap on Citi, as Senator Warren has requested, isn't out of the realm of possibility, said Timothy Coffey, an analyst with Janney Montgomery Scott."At what point do the regulators just get fed up with Citi's inability to adequately resolve these issues or stick to the timeline that they've laid out?" he said. "That's an open-ended question."But the consent orders and the lack of progress are distractions in themselves. When Fraser took over Citi nearly four years ago, she said the Transformation was her No. 1 priority and asked for patience. Now her requests for time are wearing thin. Regardless of who leads the Transformation, Fraser is still accountable."This stays out here in terms of headline risk, and I think it puts a cap on the valuation that Citi can achieve," said Stephen Biggar, an Argus Research analyst. "It's an overhang on the stock. It's an overhang on the reputation of Fraser."Do you work for Citi? Have a tip or story to share? Reach out to Hayley Cuccinello at <a target="_blank" href="mailto:hcuccinello@businessinsider.com">hcuccinello@businessinsider.com</a> or 917 740 5340, which works for calls, text, and the encrypted messaging app Signal.

Meet the executive tasked with Citi's hardest challenge: getting the bank's house in order

<ul class="summary-list"><li><a target="_blank" class="" href="https://www.businessinsider.com/kamala-harris">Vice President Kamala Harris</a> shared a plan to build 3 million new homes in her first policy speech.</li><li>Housing experts told Business Insider that targeting America's housing supply shortage is critical.</li></ul>Vice President Kamala Harris' <a target="_blank" class="" href="https://www.businessinsider.com/kamala-harris-economy-proposal-25k-first-time-homebuyers-down-payent-2024-8">newest housing proposal</a> is giving YIMBY — and that's great news for the housing market, where supply has been unable to keep pace with demand, forcing prices up and buyers out.The Democratic presidential candidate revealed the first details of her new economic agenda on Friday, which she hopes to implement during her first 100 days in office. A key part of her proposal involves building 3 million new homes over a four-year period.It slots neatly into the <a target="_blank" class="" href="https://www.businessinsider.com/yimbys-winning-lower-house-prices-rents-build-more-homes-neighborhoods-2023-9">YIMBY movement</a>, which stands for "Yes, In My BackYard," and is a pro-development movement focusing on increasing high-density and affordable housing supply by targeting barriers to new building. (It's a counter to the NIMBY, or "Not In My BackYard" movement.)Harris said Friday that her administration plans to build 3 million units by working in partnership with workers and the private sector to go after obstacles in the way of new construction at both the state and local level."There's a serious <a target="_blank" class="" href="https://www.businessinsider.com/us-housing-affordability-home-shortage-market-construction-population-cities-zillow-2024-6">housing shortage</a>," Harris said on Friday. "In many places, it's too difficult to build, and it's driving prices up. As president, I will work in partnership with industry to build the housing we need both to rent and to buy."Housing policy experts say that's the most crucial aspect of her multi-pronged plan, because what the market needs most right now is <a target="_blank" class="" href="https://www.businessinsider.com/buying-a-home-new-construction-shortage-supply-mortgage-rates-housing-2024-6">greater supply</a>.Jung Hyun Choi, principal research associate at the Urban Institute's Housing Finance Policy Center, said the lack of supply "is the root cause of the current problem" with the housing market, adding that Harris' proposal to build more homes is "really the key solution of the housing market problem."Four housing policy experts Business Insider talked to all agreed."The strongest aspect I see in this proposal is that it recognizes the key issues with housing right now and that it is very explicit on trying to improve the number of homes being built — and not just the number of homes but the <a target="_blank" class="" href="https://www.businessinsider.com/us-housing-market-home-prices-wages-mortgage-rates-affordability-crisis-2024-7">number of affordable homes</a>," John Walsh, a research analyst at the Urban Institute's Housing Finance Policy Center, told Business Insider.Homeownership is one of the most reliable ways to create <a target="_blank" class="" href="https://www.businessinsider.com/how-americans-build-wealth-changing-stocks-homes-people-missed-out-2024-8">stability in Americans' economic lives</a> and should be a priority, according to Christopher Mayer, a professor of real estate at Columbia Business School who praised Harris' emphasis on supply."I think most people should be homeowners," Mayer said, noting the falling homeownership rate among young people. "Owning a home is a proven way of building wealth. It creates stability for households."<div type="image" title="Rows of identical homes with uniform driveways and streets stretch towards the desert" height="2348" width="3131" msid="112579953" hostid="261" sizebytes="637540"></div><h2 id="4e83522f-24d6-4242-ba18-9043bcae7584">Addressing the housing shortage</h2>However, with the low supply of starter homes, those making the jump from renting to owning often have to contend with both high prices and steep mortgage rates.America is facing a significant housing shortage, with the country between 4 and 7 million homes short, <a target="_blank" href="https://www.npr.org/2024/04/23/1246623204/housing-experts-say-there-just-arent-enough-homes-in-the-u-s">NPR reported in the spring of this year</a>. Builders have cited supply chain issues, among other reasons building has stalled. Zoning also remains a large barrier to homes being built.COVID-19 only exacerbated the issue, Mayer said, as more people started working remotely. With her proposal to build 3 million new starter homes, Harris is aiming to address that critical gap.Harris' housing proposals expand on policies President Joe <a target="_blank" href="https://www.businessinsider.com/trump-biden-housing-crisis-policy-rising-home-prices-apartment-rents-2024-6">Biden has attempted to implement </a>since taking office, including loosening regulations that restrict construction. Former President Donald Trump also urged states and cities to <a target="_blank" href="https://www.bloomberg.com/news/articles/2019-06-26/trump-s-housing-order-could-worsen-affordability">pursue some zoning reform</a> while he was in office.The vice president's plan to build millions of new housing units depends on several novel methods. She intends to provide the nation's first tax incentive for builders who construct starter homes and sell them to first-time buyers. Harris also intends to create a $40 billion federal fund to incentivize local housing construction, an expansion of <a target="_blank" class="" href="https://www.businessinsider.com/biden-lower-cost-homeownership-hopeful-homebuyers-2024-3">Biden's proposed $20 billion fund</a>. To top it off, she vowed to expand existing tax incentives for businesses that construct affordable rental housing."The answer is more supply, and also the answer is more supply at the sweet spot, which is first-time ownership," said Susan Wachter, a professor of real estate and finance at the Wharton School of the University of Pennsylvania.She thinks Harris' commitment to building 3 million homes is the strongest part of her plan, as it will address what she called a "generational crisis" of rent and housing prices. The increase in home supply needs to correspond with an increase in available land, Wachter added.Part of Harris' proposed federal fund to encourage housing construction would make some federal lands eligible to be repurposed for new, affordable developments — something Trump recently promised to do as well.Both Choi and Walsh were quick to caution that while Harris' proposal is a great start to <a target="_blank" class="" href="https://www.businessinsider.com/homes-real-estate-how-to-fix-housing-crisis-factors-construction-2024-3">alleviating housing burdens</a> and reducing wealth disparity, more details are needed to determine its ultimate effectiveness."The devil is really in the detail of where these homes would actually be used," Walsh said.<div type="image" title="Kamala Harris onstage at a rally" height="3652" width="4869" msid="112579951" hostid="261" sizebytes="1685526"></div><h2 id="1a035518-d170-45f5-8192-5fec303416b6">Targeting down payments and Wall Street</h2>Harris' other flagship proposals — offering $25,000 in down-payment assistance to new homeowners and <a target="_blank" class="" href="https://www.businessinsider.com/home-equity-investments-heloc-refinance-loan-investors-homeownership-housing-market-2024-2#:~:text=Between%20the%20beginning%20of%202020,according%20to%20the%20Federal%20Reserve.">preventing investors on Wall Street</a> from buying up starter homes — drew more mixed reactions from the experts that spoke to Business Insider.In Mayer's view, the <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/mortgages/tips-for-saving-for-a-down-payment#:~:text=Some%20loan%20programs%20allow%20for,get%20a%20better%20interest%20rate.">down-payment</a> policy is rooted in good intentions but may not be particularly cost-effective. Many first-time homeowners traditionally rely on their families for help with a downpayment, Mayer said, meaning lower-income buyers often don't have access to generational wealth, and the $25,000 could significantly help them. Yet, he would rather find ways to lower down payments across the board than distribute money as Harris is proposing.Wachter, meanwhile, said she supports the effort to aid potential homeowners with their down payments but is not confident the proposal would garner broad political support.While Wachter declined to comment on Harris' proposal to limit Wall Street's ability to buy single-family homes, Mayer is less enthusiastic about it."The vast amount of single-family rentals are not owned by people on Wall Street, they are owned by people who own small numbers of houses," he said of the plan. "Institutional investors bring efficiencies to management of that, and those efficiencies generally result in better opportunities for renters."Despite lingering doubts about some aspects of Harris' proposal, the experts agreed that the basic premise of building more affordable, first-time homes is what the country needs."This would be a huge impact," Wachter said. "Right now, what's threatened is the ability to get onto that ladder to achieve housing security. And housing security where there are markets, where there are jobs, is the key issue for young Americans today."

Kamala Harris is going full YIMBY — and housing experts are optimistic

<ul class="summary-list"><li>Economists expect an interest rate cut in September, which has big implications for housing.</li><li>Lower rates would likely boost home construction.</li></ul>Federal Reserve chair Jerome Powell strongly hinted that interest rates are likely coming down soon during his much-anticipated remarks on Friday morning at the <a target="_blank" href="https://www.businessinsider.com/fed-interest-rate-cute-powell-jackson-hole-signal-us-economy-2024-8?utm_source=Iterable&amp;utm_medium=email&amp;utm_campaign=campaign_Insider%20Today,%20August%2019,%202024">annual gathering of central bankers</a> in Jackson Hole, Wyoming.<a target="_blank" class="" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html">Markets</a> and many economists believe it's all but certain the Fed will cut rates in September for the first time since post-pandemic supply chain disruptions sent prices soaring, as inflation appears under control and the <a target="_blank" class="" href="https://www.businessinsider.com/jobs-report-labor-market-hiring-layoffs-quits-recession-sahm-rule-2024-8">job market weakens</a>.One of the most painful ways higher interest rates have impacted Americans is through higher housing costs. The combination of high borrowing costs and skyrocketing home prices and rents — caused by a housing shortage — has created an enduring housing affordability crisis.But the impact of lower rates on affordability <a target="_blank" class="" href="https://www.businessinsider.com/housing-market-mistake-buyers-sellers-mortgage-rates-time-to-buy-2024-3">is complicated</a>. On the one hand, lower borrowing costs would likely make mortgages cheaper for buyers and encourage builders to construct desperately needed new homes. But in the short term, a rate cut could trigger a rush of buyers to enter the market, overwhelming any new supply and driving up competition and prices. A rate cut "would probably result in more competition because demand would grow more than supply would," Daryl Fairweather, chief economist at Redfin, told Business Insider.And borrowing costs for homebuyers likely won't come down a whole lot."Although lower mortgage rates may bring some modest relief, a material improvement to affordability conditions remains far off in the distance," Wells Fargo economists wrote in <a target="_blank" class="" href="https://wellsfargo.bluematrix.com/links2/html/0763c5b2-fe55-42fe-9dae-43db1e9ad272">a recent report</a>. "We expect a modest decline in financing costs over the next several years, but the 30-year mortgage rate should remain well above the low rates registered as recently as 2021."As mortgages get a bit cheaper, which has <a target="_blank" class="" href="https://www.businessinsider.com/mortgage-rates-30-year-refinance-applications-real-estate-housing-market-2024-8">already begun to happen</a>, prices are predicted to rise in the shorter term. <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/mortgages/home-prices-drop">Most major forecasts expect</a> home prices will be between 3.8% and 6.1% higher at the end of this year than they were last year. We're seeing this play out in other countries: In the UK, demand for homes has <a target="_blank" class="" href="https://www.theguardian.com/business/article/2024/aug/19/interest-rate-cut-fuels-immediate-upturn-in-uk-property-market">risen quickly</a> since the Bank of England cut interest rates on August 1 for the first time in four years.But rate cuts would also spur new home construction, as builders respond to higher demand and lower borrowing costs for acquisition and construction loans. That's key to solving the housing crisis, which was largely caused by underbuilding since the Great Recession. Lower rates are a prerequisite for greater affordability in the long run."Even with a single rate cut, it moves many rental projects across the country that were on the edge of feasibility now become feasible, and many homebuyers who otherwise couldn't quite make the numbers pencil all of a sudden can," Ben Metcalf, managing director of the Terner Center for Housing Innovation at UC Berkeley, told Business Insider.Building the millions of new homes that US buyers and renters need won't happen overnight. On top of high borrowing costs, builders are struggling with a severe <a target="_blank" class="" href="https://www.businessinsider.com/housing-crisis-national-shortage-construction-workers-job-demand-2024-5#:~:text=The%20construction%20industry%20is%20facing,from%20schools%20to%20construction%20sites.">shortage of construction workers</a> and high building material costs.It's not totally clear how many homes the country is short of, but the deficit is likely in the millions. Zillow estimates the shortage is around <a target="_blank" rel=" nofollow" href="https://zillow.mediaroom.com/2024-06-18-The-U-S-is-now-short-4-5-million-homes-as-the-housing-deficit-grows#:~:text=Across%20the%20country%20in%202022,of%20more%20than%204.5%20million.">4.5 million homes</a>, while Realtor.com estimates a shortage of <a target="_blank" class="" href="https://www.realtor.com/research/us-housing-supply-gap-feb-2024/">7.2 million homes</a>. While lower rates are no panacea, they're welcome."It's going to be a long time before we get enough supply out there again so that prices are dropping," Metcalf said. "We're way far away from that. I think we're still just trying to dig out."Are you struggling to afford a home? Reach out to share your story with this reporter at <a target="_blank" href="mailto:jzinkula@businessinsider.com">erelman@businessinsider.com</a>.

Don't get your hopes up about the housing market

The first full budget of the BJP-led NDA government in its third successive term will be presented by <keyword id="19956758" type="General" weightage="20" keywordseo="Finance-Minister" source="keywords">Finance Minister</keyword> <keyword id="19916618" type="General" weightage="20" keywordseo="Nirmala-Sitharaman" source="keywords">Nirmala Sitharaman</keyword> on July 23. The government on Saturday announced the dates of the budget session of Parliament which will start on July 22 and conclude on August 12. Finance Minister Nirmala Sitharaman, who will present the <keyword id="19908389" type="General" weightage="20" keywordseo="Union-Budget" source="keywords">Union Budget</keyword> 2024-25, has been holding pre-budget consultations. As part of the deliberations, she has met economists, experts in finance and capital markets, industry representatives and agriculture experts. Industry bodies, including the Confederation of Indian Industry (CII), have urged the government to increase capital expenditure in the upcoming budget. This will be Sitharaman's seventh budget in a row. She will be the first Union Finance Minister to present seven consecutive union budgets. Former Prime Minister Morarji Desai had presented six budgets in a row. Parliamentary Affairs Minister Kiran Rijuju announced the dates of budget session. "Hon'ble President of India, on the recommendation of the Government of India, has approved the proposal for summoning of both the Houses of Parliament for the Budget Session, 2024 from 22nd July 2024 to 12 August 2024 (Subject to exigencies of Parliamentary Business). Union Budget, 2024-25 will be presented in Lok Sabha on 23 July 2024," he posted on X. The <keyword id="19916814" type="General" weightage="20" keywordseo="Modi-government" source="keywords" meta.keywordsubtype="org" meta.entityname="Modi government" meta.hostid="153" meta.entityid="Modi government">Modi government</keyword> had presented an interim budget in February this year. Sitharaman had announced in the interim budget that the capital expenditure outlay for the next year is being increased by 11.1 per cent to Rs 11,11,111 crore, which would be 3.4 per cent of the GDP. The government had also announced that Rs one lakh crore corpus will be established with five-year interest free loan for youth. Newly-elected Lok Sabha members took oath in the first session of 18th Lok Sabha held from June 24 to July 2 following the results of the general elections. President Droupadi Murmu addressed the joint sitting of two Houses on June 27 and both Lok Sabha and Rajya Sabha adopted a motion of thanks on the President's address. Prime Minister Narendra Modi replied to the debate on the motion of thanks in the two Houses of Parliament. BJP-led National Democratic Alliance returned to power for the third successive term in the general elections.

FM Nirmala Sitharaman to present first budget of Modi 3.0 on July 23

The Central Board of Secondary Education (CBSE) declared the Class X results on Monday. The overall <keyword id="20123359" type="General" weightage="20" keywordseo="pass-percentage" source="keywords">pass percentage</keyword> of 93.60 per cent was recorded. Passing percentage has increased by 0.48 per cent since last year. 25724 schools gave the CBSE class X examinations at 7603 centres. The Trivandrum region registered the highest pass percentage at 99.75 per cent whereas the lowest has been recorded at Guwahati which stood at 77.94 per cent. In the overall Delhi region, a 98.61 per cent pass percentage was recorded. 94.75 per cent of Girls passed the exam whereas 92.71 per cent of boys passed the exam with the Girls outshining boys by 2.04 per cent. Students who sat for the CBSE Class 10 board exams nationwide can view their mark sheets on the <keyword id="21637011" type="General" weightage="20" keywordseo="CBSE-official-website" source="keywords">CBSE official website</keyword>, cbse.gov.in. The other official websites where CBSE 10th results can be checked are - cbseresults.nic.in, results.cbse.nic.in, cbse.nic.in, digilocker.gov.in, results.gov.in. The results can also be checked on mobile apps- Digilocker and UMANG. In regards to the Class 10 exams, CBSE stated that Science, Mathematics, and Social Science were chosen by 22,62,692 students each. These exams took place over three days at 7612 examination centres, utilising 94,279 rooms, with the assistance of 1,88,558 Assistant Superintendents. CBSE class X examinations were held from February 15 to March 13, 2024. Approximately 39 lakh students appeared for Class 10 and 12 examinations. Students must score a minimum of 33 per cent marks to pass the CBSE class 10 and 12 exams. Looking at the past year's trends, in 2023, the CBSE results were announced on May 12. While in the year 2022, it was declared on July 22. Earlier, CBSE declared Class XII. 87.98 per cent of students passed the board exams. Passing percentage increased by 0.65 per cent since last year. 18417 schools gave the CBSE class XII examinations at 7126 centres. This year the overall pass percentage is 87.98 a 0.65 percent increase since 2023. The Trivandrum region registered the highest pass percentage at 99.91 per cent. SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/aadhar-housing-finance-ipo-allotment-how-to-check-allotment-gmp-listing-date-and-more/articleshow/110071990.cms">Aadhar Housing Finance IPO allotment – How to check allotment, GMP, listing date and more</a> <a href="https://www.businessinsider.in/sports/webstories/ipl-decoded-highest-individual-scores-in-ipl-2024-so-far-from-stoinis-to-kohli/slidelist/110008351.cms">IPL Decoded: Highest individual scores in IPL 2024 so far, from Stoinis to Kohli</a> <a href="https://www.businessinsider.in/tech/mobile/news/indian-smartphone-market-up-8-5g-smartphones-account-for-over-70-of-shipments/articleshow/110002512.cms">Indian smartphone market up 8%, 5G smartphones account for over 70% of shipments</a>

CBSE Class 10 board exam results declared

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The typical home loan in America is a gift. It's also a trap.Most US homeowners have loans that guarantee they'll pay the same amount each month for decades, regardless of inflation or the shifting winds of the economy. These are called 30-year fixed-rate mortgages, and they offer rare bright spots of certainty in the housing market's endless cycle of booms and busts. Lock in a favorable rate, and you're on the steady track to prosperity.But these sweetheart deals can cause big problems. When mortgage rates shoot up, as they did over the past two years, many would-be sellers decide they don't want to move after all. Sure, a new home could be nice, but trading up would mean parting ways with a cheap mortgage rate. What may have been a welcome change suddenly sounds like a painful, expensive divorce. So they sit tight. A gummed-up housing market is good for nobody: First-time buyers can't find enough homes for sale, and wannabe sellers remain trapped in places that are either too big or too small. This is called the <a target="_blank" href="https://www.businessinsider.com/housing-market-mortgage-rates-outlook-home-prices-affordability-wealth-gap-2024-3">lock-in effect</a> — and it could linger for decades."Unfortunately, we've known about the lock-in possibility for many, many years," John Campbell, a Harvard economist, told me. "But we didn't fix the roof while the sun was shining, and now it's raining."Economists and housing wonks are obsessed with this uniquely American problem. One estimate suggests the lock-in effect prevented more than 1 million people from selling their homes in the span of just a year and a half, a steep toll considering about 5 million homes exchange hands in a typical year. I used to think of these golden handcuffs as an inevitable side effect of the magical 30-year fixed mortgage. But it doesn't have to be this way. The answer to our problems may lie thousands of miles away … in Denmark.Many homeowners in Denmark, like their American counterparts, enjoy 30-year fixed-rate mortgages. But thanks to a quirk of their housing-finance system, Danish sellers are able to earn a profit when they trade in their low mortgage rates for more-expensive ones, making it easier to move even when rates rise. As a result, the Danes dodge the lock-in effect entirely.Implementing a similar system in the US would require an overhaul of our mortgage market and would almost surely be met with lots of foot-dragging from regulators and investors. But the alternative — twiddling our thumbs until the <a target="_blank" href="https://www.businessinsider.com/housing-market-ice-age-higher-home-prices-fewer-sales-inventory-2023-5">next Housing Ice Age</a> — is far worse. Maybe it's time we take a page out of the Scandinavian playbook instead.Buyers may remember the pandemic-era housing market for its worst qualities: the bidding wars, the late-night doomscrolling on Zillow, the smug investors bragging on TikTok about how many homes they flipped that month. But regular house hunters scored a pretty good deal in at least one respect: Home loans were outrageously cheap. The typical 30-year mortgage rate plummeted to a record low of about 2.65% in late 2020, according to Freddie Mac. Existing homeowners pounced on the opportunity, too, refinancing their mortgages to get new loans with cheaper rates.As the Federal Reserve began pushing up borrowing rates in the spring of 2022, hoping to reel in rising inflation, mortgage rates went vertical. Rates doubled in less than a year, with the typical rate nearing 8% in October, a 20-year high. Rates have fallen a little since then, but they're still hovering at about 7%. In the grand scheme of things, that's not crazy at all — buyers who bought homes in the early '80s may recall rates closer to 18%. But for buyers and homeowners who got used to rock-bottom rates in the decade after the financial crisis, the reversal was chilling.A recent working paper from the Federal Housing Finance Agency estimated that the lock-in effect prevented 1.3 million home sales between mid-2022 and the end of 2023. The vast majority of US mortgages have fixed rates — about 96% at the end of last year — and 63% of those had rates below 4%. The agency estimated that with rates at about 7%, these homeowners would pay roughly $500 more each month on their mortgage if they got a new rate on a house of the same value. If you do a little convoluted math to figure out what all those extra payments would be worth in today's dollars, it'd be like taking $60,000 and lighting it on fire, according to the FHFA's calculations.Even if rates were to fall to 6% or 5.5%, "you're still going to have people who are not going to move, who are not going to give up their house forever, basically," Will Doerner, an economist at the FHFA and a coauthor of the paper, told me. "It's going to take a heck of a change for them to ever want to get rid of those mortgages."OK, so maybe you're not shedding any tears on behalf of these homeowners sitting on piles of equity and their sweet, sweet mortgage rates. But the lock-in effect warps the entire housing market. Fewer sellers means buyers compete for a smaller pool of available homes, driving up prices and locking out many first-time and low-income buyers. It means many people who want to move — to find a better job, start a family, upgrade, or downsize — don't have that option. A once theoretical hang-up has turned into a massive headache. These golden shackles are a problem only in America. In Canada, the UK, or Australia, you can get a loan with a fixed rate for maybe five or 10 years, but then it'll adjust periodically to match the swings in the economy. Homeowners in these countries may not have to grapple with the same lock-in effect, but their monthly budgets get hit when borrowing rates go up.Then there's Denmark, the only other country in which similar 30-year fixed-rate mortgages are widely available — more than half of Danish borrowers have them. And just as they have in the US, rates for those mortgages have risen sharply. Over the course of 2022, the typical rate for a 30-year mortgage in Denmark climbed by roughly 4 percentage points, the largest jump in 40 years. But Denmark's housing-finance system is almost perfectly designed to shield it from the lock-in effect. And it's all thanks to a bit of financial magic known as covered bonds. I really wish these things had sexier names, because if 30-year-fixed mortgages are gifts to homeowners, then covered bonds are straight-up miracles. Here's how they work: When a bank gives a mortgage to a homebuyer, it creates matching bonds that it sells to investors. The bank gets cash to extend more loans, and the owners of these covered bonds get a steady stream of payments from the people paying back the mortgage. The value of the bonds, and therefore the value of the underlying mortgages, rises and falls like any other asset traded in the financial markets. When borrowing rates for new mortgages go up, the value of bonds tied to older, cheaper mortgages goes down — in the eyes of investors hungry for higher returns, a loan that pays 7% interest is worth more than one that pays only 3%. This does not mean, however, that the value of the actual house has dropped; even if bond investors aren't as keen on the underlying loan, there may be plenty of regular buyers who still want the house. So far, this system of pooling together mortgage bonds and selling them to investors is pretty close to the American way of doing things. The real magic happens later, when it comes time to settle up.When US homeowners pay off their mortgages, they have only one option: pony up the amount left on the loan. But when Danish homeowners pay off their mortgages, they have two choices: pay back the balance of their home loan, same as Americans, or pay the market value, which is the amount their covered bonds would trade for on the open market. If interest rates go up and the value of those bonds falls below the amount remaining on their loan, it becomes cheaper for the Danes to pay off their mortgages.Here's an example in dollars: Let's say the face value of a mortgage, or the amount a homeowner would have to pay to get rid of it, is $500,000. But then interest rates rise by, say, 4 percentage points. In the US, this turn of events would trap many homeowners in their house; they would have to not only pay back the $500,000 but get a new mortgage with higher interest payments. In the Danish model, the same situation could work out in the homeowner's favor. That's because as general interest rates rise, the market value of the covered bonds, and therefore the underlying mortgage, drops. So instead of having to pay back the entire mortgage, the Danish homeowner could go out and buy back matching bonds for, let's say, $400,000. If they sell their home for $700,000, they get to pocket $300,000 instead of only $200,000 (not including pesky fees, of course).This lucky Danish homeowner may have to turn around and buy another home with a higher rate, sure, but the profit from paying back their loan at its market value gives them a buffer to do so. Danes don't even have to sell their house to unlock their savings — they can choose to refinance. In that case, they would have to borrow only $400,000 instead of $500,000 to pay off the original loan. Again, the interest rate on the new loan is higher, but the principal balance is lower, so the monthly payments would stay roughly the same.In essence, Danes reap all the rewards when rates go up and face none of the downside risks when rates fall. Their mortgages are also assumable, which means sellers can hand off their loans to qualifying buyers. As a result, Danish homeowners don't cling to their low-rate mortgages the way Americans do. Their setup "eliminates the lock-in effect," Campbell told me.While the Danish system may seem complex, it's not totally absurd to think we could adopt something similar here. It would take a lot of work: overhauls of Fannie Mae and Freddie Mac, a massive education campaign for consumers, and maybe even an act of Congress. It's not as if you can just wave a wand and grant homeowners permission to start paying back their mortgages at market value — the existing contracts explicitly lay out the repayment terms, and mortgage bonds are bundled together here in a way that makes it impossible to pluck one out of the pool as they do in Denmark.Anything that gives consumers protection from rising interest rates would come at a cost, too. Banks would demand borrowers pay higher interest rates from the start of their loans, Jesper Berg, the former director of the Danish Financial Supervisory Authority, told me. Danish mortgage rules are stricter in other ways that favor the lender: Borrowers are required to put down 20% of the home's price, and foreclosures are speedy thanks to a more creditor-friendly legal system. But there's still a way forward. There is some precedent for sweeping changes to mortgages — think back to the financial crisis in the mid-2000s, when the government instituted massive programs like HARP to help underwater homeowners refinance their mortgages. It required investor buy-in and lots of rule changes to rework existing loan terms, but it showed a willingness to adapt in dire circumstances.Campbell isn't some starry-eyed dreamer who thinks we can snuff out these issues overnight. Embracing the Danish approach to mortgages would require much bigger changes than the recession-era programs, and mortgage reform tends to move at a glacial pace. But the lock-in effect is the kind of intractable problem that demands big solutions. The Danish model combines the best of the US mortgage market — the stability, the cost savings for homeowners — with consumer protections to ensure they're not held hostage by those same perks. The Danes can move around during times when it would make little financial sense for US borrowers to do so. That's not just good for buyers or sellers or mortgage loan officers — it's good for everyone."I just think it's a more efficient system that will prevent problems for both individual borrowers who get stuck," Campbell told me, "and for the economy as a whole, which suffers when people get locked in."<a target="_blank" rel="" href="https://www.businessinsider.com/author/james-rodriguez">James Rodriguez</a> is a senior reporter on Business Insider's Discourse team.

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