Sustaining the Housing Recession

“Since the housing market began to turn in 2007, Washington has tried to keep prices from falling with every policy gimmick known to politics: Foreclosure mitigation, more guarantees from the FHA, higher guarantee thresholds from Fannie Mae and Freddie Mac, Fed purchase of mortgage assets, and the $8,000 home buyer’s tax credit promoted by the White House and Georgia Republican Senator Johnny Isakson.

“Their main result, other than subsidizing some Americans at the expense of others, has been to sustain the housing recession over a longer period of time. The price decline would have been sharper without them, but the recovery would have happened sooner and would probably be well underway by now.”

– “The Housing Illusion”, Wall Street Journal, June 2, 2011


“I have been through every economic (and housing) recession since 1974. Whether that makes me wise, or simply a relic, I am not sure. I do know this recession is not only worse than anything I have experienced, it is much more complex. We live in a world of cause and effect. This time, the chain of cause and effect is longer and more complex.

“Which is why we are going to rue the day we decided we were smart enough to make so many decisions, decided we were smart enough to use spending as a stimulus, and smart enough to target so many incentives. We are going to rue the day when we decided not to allow market forces to sort this out. We are going to rue the day that we decided to let people that had never run a business decide how all businesses should be run.

“It would have been painful. Companies would have failed. But, it would likely be over by now. Instead, we are four years into this mess, and we still cannot see the end.”

– “When is a buyers market not a buyers market?”, Escape from Averageness, September 27, 2010