How about all those solutions to the housing crisis put forward by Obama and Romney during the debates?
We actually should celebrate because there are no proposals. It was government manipulation of credit markets, social engineering, and GSE’s Fannie and Freddie that caused the housing collapse. The solutions implemented by the Obama administration only prove Reagan correct; the more the plans fail, the more the planners plan.
Had the housing market been left alone to self-correct we could be well on the way to recovery. Not to be when the central planners and the central bankers have their arms up to their shoulders into the housing business.
Tax credits for first time buyers, then expanded to move up buyers was the housing markets cash for clunkers moment. Rapid activity followed by a slump.
The question becomes what should we do, what is the solution to the housing market crisis?
Time for an adult conversation; it is what it is. Time to pay for the politician’s folly. Allow the market to self-correct and start by repealing the Dodd Frank law that has the wheels of the mortgage industry grinding to a halt under unnecessary compliance requirements, ridiculous lending guidelines, and punishment to lenders and appraisers for making bad loans or appraisals.
Order banks to release the shadow inventory of millions of homes being held back from the market. Yes that will drive down prices, however only until the inventory is absorbed. What good does it do to hold back inventory when millions more foreclosures are in the pipeline and millions more homeowners are ninety days or more delinquent?
Won’t that favor the investment class? Yes, people with money big or small who are prudent stewards of their finances will get the buys of a century. So what? Better than the taxpayer remaining on the hook.
Think of what Bernanke is doing to the dollar with his Twisting, QEternity, and printing presses. Businesses are sitting on $1.4 trillion why? They see financial Armageddon approaching; hyperinflation, fiscal cliff, Obamacare, and danger to their business if Obama gets reelected.
The same is true for housing as the dollar, both are mirages. There is no recovery in housing any more than QE3 is creating jobs. It will take the thinning of the money supply to restore the value of the dollar, and it will take the thinning of the housing inventory to restore home values.
Time for the pain, the sooner we start, the faster we finish.