“Not even the blistering summer heat has thawed the housing market, which has been kept frozen for two years by underwater homeowners and tight credit,” according to USNews and World Report.
“According to experts, a variety of factors could be key to dragging the housing market out of the doldrums: improved economic fortunes, greater assistance to indebted homeowners, and simple patience may be necessary to remove this heavy weight on the economic recovery. Here are six ways to help speed the recovery of the U.S. housing market.
It’s the Economy, Stupid
Fixing the rest of the economy first is admittedly more easily said than done. But the key point is that housing will most likely follow, not lead, the rest of the economy out of a slump.
Trim the Fat
Shrinking the oversized supply of housing will also better allow housing prices to increase, so current owners will be more able and willing to sell their homes.
Depend on Uncle Sam
Governmental intervention options are limited given the current political and budgetary constraints. But one low-cost option would be to maintain the current limits on conforming loans.
Don’t HAMP-er the Recovery
The Home Affordable Modification Program, better known as HAMP, was established a part of the larger Troubled Asset Relief Program, or TARP. Some are proponent of ending HAMP. They advocate a program combining unemployment insurance and a temporary housing voucher program.
Keep Bailing
Bailouts are not an ideal solution. However, some believe the continued housing crisis is deep enough to warrant such action.
Look to the Future
Creating a lasting recovery means learning from the mistakes of the housing collapse so that the country can avoid future crises.
The complete article is here.
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Jeff,
That last point makes WAY too much sense: It will never happen.
John
It is tough to wrap my mind around. Lord knows I try. It was blindness that got us here and it will be vision that gets us out. I having been searching out people I think are willing to look at the problem realistically. Of course that leaves out all of the “we oughta’s” because they aren’t feasible. They predict that the situation will become far more dire before the political will to take corrective action will surface. Oh well.
I predict on my own (why not after listening to everyone else who was, is, or will be wrong) that the next move will be for the Fed to try and guarantee all loans at a predetermined level to allow the market to readjust smoothly downward and make a way for some prior loan defaulters to buy again.
The housing market was based on a bubble, bubbles burst. This bubble was deemed predatory by an FBI investigation. Everyone who built up a business over the last two decades was under the illusion that this economy was stable, it was debt that fueled the economy. Debt has limits and we have hit ours in the private sector. Private debt in the US is the dirty little secret nobody is talking about. I can’t remember where I saw this stat but during the depression private debt was 1/4 of what it is today.
” … Creating a lasting recovery means learning from the mistakes of the housing collapse.”
Ben is exactly right about the housing bubble. That’s the first and most important thing to learn from “our” past mistakes. Bubbles always burst.
So, a recovery of the housing market doesn’t mean a return to the artificially inflated prices over the last decade. It probably means, rather, a return to some sensible price to income ratio.
The housing bubble was only the latest in a series of bubbles (remember the dot.com bust?) that have characterized our economic system since the inception of Reaganomics (an economic system named after a failed B-movie actor).
“Solving” the bubble economy is much larger problem.
Off topic a bit, but as I flipped away from the day ‘o Weiner on the idiot box, I caught this clip, which seems timeless – and timely, in light of our current debates.
The wisdom of Roseanne, circa 1991 –
[youtube http://www.youtube.com/watch?v=DuhUDkmFD_4&w=425&h=349
if the embed does not work, here’s the direct link:
That is incredibly prescient!
That was the year of layoffs at SFUSD, except for science and math. I had to fight like heck to keep employed as a “computer science” teacher.
This is perfect
Ain’t she great? Speaking of scabs and unions, Target made their employees watch an anti-union rant in upstate N.Y. They want to put the corporate fear in em before they get to vote to unionize. Poor employees. The hysterically funny part is that all of the actors in the “tightfright” flick were UNION MEMBERS. Roseanne was ahead of her time and you can’t make this sh%& up…Kate
I am re-reading portions of “Too Big to Fail” by Andrew Ross Sorkin and ran across this little vignette from a speech that Alan Blinder, a former Fed governor, gave at the Jackson Hole Financial Conference in 2007:
“One day a little Dutch boy was walking home when he noticed a small leak in the dike that protected the people in the surrounding town. He started to stick his finger in the hole. But then he remembered the moral hazard lesson he had learned in school…..”The companies that built this dike did a terrible job”, the boy said. “They don’t deserve a bailout, and doing so would encourage more shoddy construction. Besides, the foolish people who live here should never have built their homes on a floodplain.” So the boy continued on his way home. Before he arrived, the dike burst and everyone for miles around drowned–including the little Dutch boy.
Perhaps you’ve heard the Fed’s alternative version of this story. In this kinder, gentler version, the little Dutch boy, somewhat desperate and worried about the horrors of the flood, stuck his finger in the dike and held it there until help arrived. It was painful and not guaranteed to work–and the little boy would rather have been doing other things. But he did it anyway. And all the people who lived behind the dike were saved from the error of their ways.”
This little story is really a great parable to demonstrate the difference between the world views that play out on these blogs, on both financial and social matters.
Here’s another way to fix the housing market–build what the next generation wants and let the old farts buy down the dinosaur single family residential glut ….
http://www.businessweek.com/ap/financialnews/D9NSH5B80.htm
What the housing market really showed is how destructive fractional reserve banking can really be, especially when controlled by those who consider profit the number goal. Banks who get 0% interest loans from The Fed then lend it out in the form of subprime loans with huge ballooning interests. Profit being the motivator the entire time so at every level people were cutting corning, bad books, and misrepresenting how adjustable rate loans work. People were led to believe they too could become real estate tycoons in many occasions; but a adjustable rate loan and sell the house before the balloon payment comes due. How can this fail due to the fact that housing always goes up. We flooded the market with debt in every finger connected to the construction/ real estate industry. This is where I get in trouble with my contractor friends, I have at least 5 good friends who are contractors, who have great experience in business but their experience is base on a false economy of debt not wealth.
What this IS, is the “rent-to-own”, payday loans, “private” Trump-like “universities” scams writ FEDERALLY large. It started in urban areas to much criminal, crony success…and then Dubya and the bankster hoods brought it to the suburbs in housing. It worked criminally and beautifully for them. It still is. THEY are getting paid, THEY are warm, well fed, medically insured and not arrested. Including Dick and Dubya for war crimes…Yet…Kate
After all, it worked so well on the black folks, dontcha know? Kate