Tuesday, January 27, 2009

Don't Fix Housing


The financial press and market experts mostly claim that one of the most important elements of U.S. economic recovery, if not the most important, is to fix the housing market. I don't think I've written this before but I believe that the whole idea of the government being involved in the fixing is wrong.

Of course declining home values have a devastating effect on the economy. The only long term solution is for home prices to get to a level where people can afford them. The government propping up prices at an unsustainable level using tax credits or forced mortgage modifications will prolong the problem, not fix it.

If you bought a house you can't afford, you have to sell it. Period. If Obama offers you a juicy tax credit to perpetuate the myth that everyone should own a home, he is borrowing money from future generations to do it.

Those that argue that the government is helping the banks so should help the people too are wrong. The government intervened with the financials to avert a global meltdown. If you have to sell your house and rent an apartment, your husband or wife may have a meltdown but the problem pretty much ends there.


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