Colombo, Sri Lanka — This past Friday the Obama administration announced greatly expanded government assistance — this time it’s to again provide for lowered mortgages and refinancing — for homeowners who probably never should have owned homes in the first place.
Multiple rebate and other tax-break programs for first-time home buyers have run dry, yet home prices have begun to plummet again, and are now back at levels from the late 70s. Despite the facts, it looks like the White House still believes that throwing your hard-earned and highly-taxed money at the problem… just maybe this time… will finally do the trick.
“Now we’re stuck with a glut.
“The percentage of loans that were seriously delinquent — more than 90 days overdue — rose to a record 9.67 percent in the fourth quarter, according to the Mortgage Bankers Association. Rates rose in all categories of loans, including subprime, prime and government-backed loans. Those numbers aren’t adjusted for seasonal variations.
“With government programs, those who lived within their means, who bought a home they could afford, are being asked to pay for the mistakes of others. Bankers and insurance companies weren’t the only ones who were greedy.
“What’s done is done. Throwing bad money after good makes no sense. The government can’t save housing without sapping something else of needed capital.”
Any half-decent Econ 101 class will teach you that economics is all about the allocation of scarce resources. In light of the rapidly increasing national debt, there are clearly better ways to put US tax money — that’s in this case being poorly allocated towards housing — to better use.
It makes sense that it’s time to let the market work, to let prices fall… so demand and supply can meet again. To read more details you can check out Bloomberg’s coverage of how lower home prices can fix what government can’t
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