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.
Government can’t do it. We are too deeply in debt. It’s going to be a long hard slog out of this mess, created by us and the government (including both political parties). The government needs to be reined in (Constitutional Convention if necessary. If the Republicans win this November they better not let this go to their heads because they are just as culpable.) It’s up to us the People to do the grunt work and we can if Government will let us.
I see a Congressional shakeup coming this Fall, and the results could be disastrous for those in office. As for a convention: yeah, I think it might be needed in the long run; some basic changes do need to be made.
Even supposedly smart analysts are missing the big picture. In housing, it is this: there are about 20 million unoccupied homes in America. Given average family size, that’s enough for 70 million people, and there aren’t anything like that many people living under bridges.
If about a third of Americans rent (for assorted reasons) that leaves perhaps 200 to 210 million in the home ownership sector. Consequently we have a 35% over-capacity in houses, and for the next half-generation the demographics for house purchase will continue to worsen.
We are a long way from the bottom. After the last big real estate boom peaked in 1893, prices eventually bottomed in the 1930s and did not return to previous levels until 1982 (inflation-adjusted). The phenomenon was nearly identical, whether in the US, Norway, or other developed nations.
The economic, social and political implications of this one will absolutely sear the attitudes of at least the two rising generations.
Re # 3
That is one of the best comments I have read on this subject in a really long time.