The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.The Obama administration has been trying to pull a rabbit out of the hat when it comes to the falling value of American homes and poor market demand.
Over the last 18 months, the administration has rolled out just about every program it could think of to prop up the ailing housing market, using tax credits, mortgage modification programs, low interest rates, government-backed loans and other assistance intended to keep values up and delinquent borrowers out of foreclosure. The goal was to stabilize the market until a resurgent economy created new households that demanded places to live.With the exception of the tax credits gimmick, these programs have not been successful. The mortgage modification program has been an outright disaster. Maybe drastic action is in order.
Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.
When prices are lower, these experts argue, buyers will pour in, creating the elusive stability the government has spent billions upon billions trying to achieve.There is a lot at play here; financially and emotionally. We've complained before about "strategic defaults" where a homeowner walks away from his home because its market value has fallen below the value of the mortgage. And we've mentioned that every seller thinks her home is worth a million dollars when it's listed for sale.
Maybe the "shock therapy" is what is needed.
Read the full column, and let us know what you think.
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