Welcome to the USSA?
Comment by Vmaxer 2007-03-31 11:14:44So many in this country preach to the rest of the world about our free market economy. If we really beleive in free market forces, then we have to allow market forces to cleanse the housing market of mispriced assets.
I would like to see talk in the MSM about debt to income being the real determinant of affordability. This point never seems to get made. If prices are allowed to correct to a point where debt to income levels are reasonable, we will see stability return to the housing market. Most discussion seems to center on how to artificially prop up already overinflated prices. Interference tends to make the problem worse and drag out the pain.
Or how about high housing prices actually being a drag on the economy. High prices mean large mortgage payments, which translates into less money available to homeowners to spend on other good and services. Lower prices for housing can actually be good long term for the economy. It frees up more of peoples earnings to be spent in the economy instead of paying interest on mortgage loans. It also make the country more competitive internationally, a lower cost of living translates into a more competive workforce. My point being, high housing prices aren’t necessarily a good thing, there are negatives also.
Comment by kerk93And I would also add, IMO, that what we need for the housing market to return to a state of being a true free-market is to also remove all those things (scroll down to the "Role of Government" section) that make it not a free-market:
Exactly. The USA would be the USSA (United Socialist States of America). The Fed and Congress, through their monetary and tax policies respectively, have determined through central planning the production of goods. In this case, it has been housing.
- Tax breaks
- Tax controls
- Mortgage assistance
- Interest rate manipulation
- "300 government programs designed to make housing affordable"
I think this housing situation and the political reaction to it is analogous to the situation of a drug addict -- the only way to avoid the pains of withdrawal is to keep taking the drug that he knows is ruining his health and quality of life; he may feel better in the short term but he would be much better off by quitting outright the drug habit. Not doing so is guaranteed to result in catastrophic failure.