I have been arguing for the government to step away from propping up the housing market for several years now.
It seems that economists are finally catching up with the idea. Today’s NYT has an article, titled Housing Woes Bring New Cry: Let Market Fall. Only I would argue its not new at all, and some of us have been saying this for (literally) years.
“Over the last 18 months, the administration has rolled out just about every program it could think of to prop up the ailing housing market, using tax credits, mortgage modification programs, low interest rates, government-backed loans and other assistance intended to keep values up and delinquent borrowers out of foreclosure. The goal was to stabilize the market until a resurgent economy created new households that demanded places to live.
As the economy again sputters and potential buyers flee — July housing sales sank 26 percent from July 2009 — there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.
When prices are lower, these experts argue, buyers will pour in, creating the elusive stability the government has spent billions upon billions trying to achieve.”
Its not a crash that is needed — it is merely allowing prices to revert to their historic levels.
Source: Housing Woes Bring New Cry: Let Market Fall DAVID STREITFELD NYT, September 5, 2010 http://www.nytimes.com/2010/09/06/business/economy/06housing.html
Housing Bottoming ? (No) (December 29th, 2006)
Real Estate and the Post-Crash Economy (December 29, 2006) requires free reg.
Propping Up Home Prices, Stopping Foreclosures (November 3rd, 2008)
More Foreclosures, Please . . . (March 25th, 2010)
Why Barron’s Housing Cover Is So Terribly Wrong (July 12th, 2008)
Homes: Still Too Pricey to Stabilize (February 18th, 2009)
No Housing Recovery Before Further Price Declines (February 21st, 2009)
Intelligent Loan Mods & Foreclosure Abatement (February 18th, 2009)
$15,000 Home Buyers Credit Costs $292,000/home (October 22nd, 2009)
Stopping Counter-Productive Mortgage Mods and Foreclosure Abatements (January 5th, 2010)
A Closer Look at the Second Leg Down in Housing (June 24th, 2010)
The $4 Trillion Dollar Question (July 15th, 2010)
Originally published at The Big Picture and reproduced here with the author’s permission.