Reuters-blogs (yes, Reuters has blogs like everyone else) is running a James Saft op-ed piece today that bears a stinging but cogent message: Let Housing Crash.
Ok, it might be a bit late, housing already has crashed, but supporting a broken market is useless and expensive. Let's just get this out of the way: asset prices in housing were made of fog. Bringing them back is simply beyond the capacity of any central planner. No one has a sufficiently large checkbook.
The Mortgage Bankers Association did a study in 2008 that found 70 percent of foreclosures were on properties either not occupied by owners, were on borrowers who could not be found or did not respond, or on borrowers who had already had a modification and were defaulting again. Of the 30 percent not in those categories must surely be quite a few of tomorrow's re-defaulters!
The housing rescue plan is in part an attempt to rescue banks, whose balance sheets will be further undermined by falls in house prices and defaults causing many more failures. The bottom line is that many Americans who now have mortgages would be better off renting.
But, but... what would become of the American Dream of Home Ownership?
Let Housing find its clearing price [Reuters]