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Housing Woes Bring New Cry: Let Market Fall [Details inside...]?

The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid. 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. ... Source: http://www.nytimes.com/2010/09/06/business/economy/06housing.html?src=busln Your thoughts?

Public Comments

1. It's called a housing bubble (or a real estate bubble if you're posh). A similar thing happened back in the 1980s in the UK and in the 1990s in Japan. They seem to come along every few decades. A crash really is the only way to get out of this since it's the only way to get people buying again.
2. Perhaps we could try to have Liberals make excuses for everybody and blame others for our misfortunes. Not sure it would help the housing market, but it would make a lot of weak people feel better about themselves....and THAT'S what's important!
3. If this is guaranteed to happen when prices drop, current homeowners need only hold out for the rebound before thinking about selling. It's definitely worth looking into, but you'd need the PR campaign of a lifetime to get people to support it.