Filed under: Housing
Yesterday I received a great comment from long-time reader Dr. Michael Schneider of barrelomoney.com. He wrote:
Each market has buyers and sellers– so far it seems the remedies for the housing mess have been directed at helping the banks and homeowners (sellers) and, rightly or wrongly, propping up housing prices. This has the effect of helping those who created the mess or who profited from it while possibly hurting potential buyers– including 1st time home-buyers who might have to pay higher prices for homes that may still be overpriced.
This might seem like fairly obvious point but it has profound ramifications: it’s been totally missed by the people who are supposedly working to solve these problems. Propping up home prices delays the inevitable reversion to something resembling intrinsic value, and prices first time home buyers out of the market.
This was one of the effects of the subprime bubble as well: lax lending prices that made homes available to people with brand new SUVs and double-digit FICO scores made it difficult for people who wanted to do it the right way: work hard, save money, and make a 20% down payment on an affordable home with a 30-year fixed mortgage.
When you consider it like that, you have to wonder why there is so much resistance by supposedly reasonable politicians to just letting the darn prices come back down to earth: it’s a zero-sum game, and lower home prices will help just as many people as they hurt.
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