Let The Housing Chips Fall
This guy agrees with me, which of course means he is right.
At current levels, the average American still can’t afford the average house. Despite the creativity of its new policies, Washington can’t alter that math. The only mechanism to restore balance and get the credit flowing is for prices to fall steeply to a true market level, and for losses (for consumers and corporations) to be recognized and absorbed.
Anecdotal and statistical evidence supports this. Foreclosed homes at auction quickly find buyers and financing when price declines are severe enough. February’s existing home sales figures showed the largest year-over-year price drop on record. And it was also the first month that the number of sales ticked upward in a year.
The quicker home prices find a sustainable bottom, the quicker our economy can truly recover.
Instead, the government is trying to float our allegorical collapsed beach house on a flood tide of new liquidity. But the fixes compound the problem. They’re creating runaway inflation, shrinking the value of the dollar — and heading toward unprecedented government meddling in the marketplace and a diminished sanctity of contracts.
If left unchecked, these policies may save a few mortgage holders and bail out some Wall Street firms, but they’ll also wash away the prosperity that Americans have built up over generations.
Exactly. In spite of these truths, I fear our populist federal legislators won’t be able to resist the temptation to meddle.