I’ve written a lot in recent years about housing and home prices. I have been disdainful of just about every move the federal government has made — even those like the homebuyer tax credits that enjoyed broad bipartisan support.
None of the efforts at the federal level, much less efforts at the state and local level, have come even close to matching the enormity of our problems, which include recent overbuilding, large numbers of homeowners underwater because of declines in prices, many banks still struggling, the weak job market, declines in 401k retirement accounts that have furthered the shock for many Americans of declines in home values, listed inventories that are far too high, a large shadow inventory of homes that are owned by banks or in the foreclosure pipeline, and so forth and so on.
Temporary measures designed to boost sales are the worst possible directions for us to go.
The powers that be finally seem to realize this, and — very late in the game — seem to realize that the fallout from the housing crisis is going to continue to plague our economy for years.
From Bernanke shares concerns on European debt, action on housing in the Washington Post:
Feinstein and Sen. Mark Warner (D-Va.) said they pressed Bernanke for his thoughts on how to help homeowners, given the consensus that failure to move more quickly to stem foreclosures has slowed the economic recovery.
Warner said it is now conventional wisdom that actions taken to improve the housing market after the 2008 collapse were not dramatic enough.
â€œThe administration made good-faith efforts; they just havenâ€™t been very successfully,â€ Warner said after their weekly luncheon focusing on policy issues. â€œAnd then there was a long period of kind of like, â€˜Do no harm; the housing crisis will just work itâ€™s way through the snake.â€™ It just hasnâ€™t. I think thereâ€™s a growing recognition that that is a huge overhang on our economy.â€
He said much of the senatorsâ€™ conversation with Bernanke revolved around â€œthe growing recognition from everyoneâ€”economists across the boardâ€”that there needs to be some more dramatic action in housing.â€
One possible move is that the Federal Housing Finance Agency will announce plans, maybe as early as next week, “to enable homeowners who are under water to refinance.”
Federal Reserve Governor Daniel Tarullo has also suggested that the Fed is considering buying more mortgage-backed securities, which should support lending generally.
Without seeing more details on such proposals, I’m very skeptical that they’ll make a substantive dent in our problems, but even modest measures could make dramatic differences for some Americans without taking a toll on the market as a whole as other measures like the tax credits have done.