Sunday, February 28, 2010

At least one Journalist understands

Here;s an article from Newsweek that pretty much sums up my feelings.

merica's housing market implosion was the epicenter of the Great Recession. It's hardly surprising that the federal government directed enormous resources at the market. Besides bailing out vulnerable banks, the federal government nationalized mortgage behemoths Fannie Mae and Freddie Mac, opened the lending spigot at the Federal Housing Administration (FHA), passed a first-time home buyers' tax credit, and established a mortgage modification program for troubled homeowners. The Federal Reserve embarked on a $1.25 trillion purchase of mortgage-backed securities in an effort to engineer lower mortgage rates.

The Herculean efforts may be understandable. But they were a mistake in the early months of the downturn—and now stand as a public policy blunder in the early months of a recovery. That's a harsh judgment, but it's way past the time for ending taxpayer support of the housing market.

These policies are geared toward propping up home prices, the definition of a perverse public policy. Artificially holding prices at above-market levels harms new potential buyers, from young adults starting their own households to immigrants putting down stakes in the American Dream. The subsidies wrongly delay the inevitable home market price adjustment to excess supply in many markets across the country.

"I don't see anything being gained by holding housing prices higher than the market rate," says Dean Baker, economist and co-director of the liberal Center for Economic & Policy Research in Washington. "It is difficult to see why the government would want to pursue policies that would encourage people to pay too much for homes."

4 comments:

Neudi said...

Here is another good one.

http://mortgage.freedomblogging.com/2010/03/01/foreclosures-so-far-just-tip-of-the-iceberg/27773/

Neudi said...

One more

http://www.foxnews.com/politics/2010/03/01/homeowners-say-banks-underwater-spurning-loan-program-rules/

mooglemau said...

"It is difficult to see why the government would want to pursue policies that would encourage people to pay too much for homes."
Look outside your window Dean Baker and see the lobbyists and special interest groups goose stepping all over the politicians and you'll realize who's in control of the policies and wearing the pants too. The government is being manipulated and subverted into approving these pound foolish ideas designed to trick Joe Everyman into overpaying for homes. Please, no more tricks! Silly wabbits, tricks are for NAR Ho's.

theY said...

Yes, we Americans are funny people. Our gov't props up prices while running a program called "make home affordable" which in the end helps people barely afford their unaffordable mortgage.

I don't know how to comment on society's love for Habitat for Humanity while we collectively had fun running up the prices of houses.