They put all their chips on black, and it kept coming up red. Maybe they should have made banks mark mortgages at their true value? But that would have made the bankers cry, so it was never a real option.
They might have made the HAMP program work instead of using it as PR cover, too. But oh well!
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.
“Housing needs to go back to reasonable levels,” said Anthony B. Sanders, a professor of real estate finance at George Mason University. “If we keep trying to stimulate the market, that’s the definition of insanity.”
The further the market descends, however, the more miserable one group — important both politically and economically — will be: the tens of millions of homeowners who have already seen their home values drop an average of 30 percent.
The poorer these owners feel, the less likely they will indulge in the sort of consumer spending the economy needs to recover. If they see an identical house down the street going for half what they owe, the temptation to default might be irresistible. That could make the market’s current malaise seem minor.
Caught in the middle is an administration that gambled on a recovery that is not happening.
“The administration made a bet that a rising economy would solve the housing problem and now they are out of chips,” said Howard Glaser, a former Clinton administration housing official with close ties to policy makers in the administration. “They are deeply worried and don’t really know what to do.”
Go read the whole thing, about the crisis of their own making. Pouring money down a hole is almost never a good strategy.
The market isn’t coming back and the buyers won’t be pouring in until ordinary people have money again to use for things like “new” housing (new to them, that is). As long as people cannot find the money to do things, like buy a house or replace breaking furniture or the once-in-a-while books, CD, etc. no market is coming back. People need economic stability in order to plan major purchases and indulge minor ones. With unemployment still where it is and people insecure in their jobs, ain’t nothing going to happen.
Paris Hilton can go to all the parties she wants, buy all the new clothes she wants, have homes in multiple areas but she is still one person and some point she isn’t increasing economic activity. The economy needs more people doing the buying.
Tsk,tsk,tsk ——-poor Obama Administration, can’t figure out what to do with the housing market. Ya didn’t take bold, decisive action in the first place to get folks back to work, and now you face the prospect of watching this happen:
“The poorer these owners feel, the less likely they will indulge in the sort of consumer spending the economy needs to recover. If they see an identical house down the street going for half what they owe, the temptation to default might be irresistible. That could make the market’s current malaise seem minor.”
open left had an interesting take on this the other day: