NY Times contemplates letting the housing market correct itself

A recent New York Times article raises the possibility that government intervention may have done all it can, and that the market must be left alone.

Pablo Martinez Monsivais / AP
Treasury Secretary Timothy Geithner addresses the Conference on the Future of Housing Finance, Aug. 17, 2010, at the Treasury Department in Washington. Has government intervention done all it can?

You know, there are some laugh-out-loud moments in this New York Times piece that dares to imagine the unthinkable: Housing Woes Bring New Cry: Let Market Fall.

As the economy again sputters and potential buyers flee — July housing sales sank 26 percent from July 2009 — there is a growing sense of exhaustion with government intervention. 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.

Ya don’t say!

Still, the NYT, always careful to point out both sides, says that this could also be very bad because some people might actually SIN by bailing out of their current homes and paying less for the same thing down the street, which would be a disaster, since we all know that prosperity relies on paying far more than we should for housing, sinking our incomes into losing investments month after month forever!

The poorer these owners feel, the less likely they will indulge in the sort of consumer spending the economy needs to recover. If they see an identical house down the street going for half what they owe, the temptation to default might be irresistible. That could make the market’s current malaise seem minor.

Oh and please don’t forget those pour souls who believed that housing was on its way to recovery. They deserve some consideration, if only because they believed the NYT editorial page.

an unchecked drop of 10 percent or more might prove entirely discouraging to the millions of owners just hanging on, especially those who bought in the last few years under the impression that a turnaround had already begun.

Even given this sad, sad state of affairs, “there is a sense that, even with much more modest notions, government intervention is not the answer. The National Association of Realtors, the driving force behind the credit last year, is not calling for a new round of stimulus.”

Clearly, when even pressure groups representing special interests are considering the terrifying prospect of letting the market work, all is lost.

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