How to rescue housing? The Obama administration doesn’t have a plan — or, more accurately, it has only half a plan. It presupposes that preventing or minimizing home foreclosures is a formula for revival. It isn’t.
The Bare Market - Scenes of economic desolation
Almost everyone agrees that a housing recovery is essential for a broader economic upswing, in part because housing’s collapse brought on the recession. Mortgage delinquencies triggered the financial crisis. Tumbling home prices (down 26 percent from their peak) ravaged consumer confidence, borrowing and spending. Since late 2007, housing-related jobs — carpenters, real estate agents, appraisers — have dropped by 1 million, a quarter of all lost jobs.
Housing’s distress is too much supply chasing too little demand. Huge inventories of unsold homes have depressed prices and construction. Given that prices rose too high in the “bubble” — homes were affordable only because credit was dispensed so recklessly — much of this painful adjustment was unavoidable. But that process should be mostly complete.
Quantcast
Here’s a little-known fact: Housing may be more affordable now than at any recent time, thanks to lower prices and falling mortgage rates (now about 5 percent). The National Association of Realtors has an “affordability index” that estimates the family income needed to buy a median-price house, assuming a 20 percent down payment and monthly mortgage payments equal to 25 percent of income. Affordability is now the highest since the index’s start in 1970.
Unfortunately, demand hasn’t followed affordability. In January, sales of new and existing homes continued prolonged declines, dropping 10.2 percent and 5.3 percent, respectively, from December. There’s a buyers’ strike. Why? Shouldn’t lower prices spur demand?
Well, yes. There are many theories as to why they haven’t. Perhaps prospective buyers can’t get loans. Or people are so gloomy that they’re afraid to buy. But the most important explanation is probably deflationary psychology. If yesterday’s $250,000 house is now $200,000, it may be $175,000 by June. Waiting is better.
Unless such deflationary psychology is broken, it becomes self-fulfilling. The more buyers wait, the more prices fall; and the more prices fall, the more buyers wait. The Obama administration essentially ignores this problem, though it can be addressed.
The simplest way is to bribe prospective buyers not to wait. For example: Give them a 10 percent tax credit, up to $15,000, on the purchase of a new home. Anyone who bought a $150,000 home would get a $15,000 tax break. The credit would expire in a year. Waiting would be costly. Buyers would delay only if they thought home prices would drop as much or more.
By Robert J. Samuelson
Source: Newsweek – U.S.A.
Marzo 6th, 2009 a las 6:20 am
[...] Original post by Blog – Veo y Alquilo [...]