Saturday, December 6, 2008
The housing market
Because the UCLA game is too painful to watch I figure I might as well write a real post. The housing market is a topic that is on my mind all of the time, and inevitably ends up in lots of my conversations, and even a few arguments! For years my wife and I have been saving to buy a house. We are trying to do it the old fashioned way, saving for a 20% down payment, making sure that the payments will not exceed 28% of our gross income and that our total debt obligations will not exceed 36%. Furthermore we want to be able to do it with only one income so that when we have kids they will be able to have a parent stay in the home. After a long wait we have been excited to watch home prices move toward normal levels so that we can partake in what generations' of Americans have been able to do, own a home. Unfortunately our leaders keep trying to place roadblocks in our path. Recently I read about a plan to use Fannie and Freddie to offer 4.5% fixed interest loans to homeowners. Do they not understand that house prices ballooned because of artificially low interest rates and an artificial supply of credit? It seems that they are poised to repeat mistakes made just a few years ago. It is unbelievable that they have this misconception that solving our economic crisis involves propping up bubble era home prices, and allowing people with poor credit to stay in homes that they never should have been capable of purchasing in the first place. They are right on the point that the housing market needs to "stabilize" before we can have an economic recovery. They are just very wrong in their definition of "stabilization". The housing market will stabilize when people like my wife and I are able to buy a home. That is when housing prices return to normal. I can't remember where I read this little quip, but I like it: "The one law that the President can 't veto is the law supply and demand." Thankfully even with all of the government interference the best they can do is delay the inevitable, there are simply too many houses, prices must go down. Meanwhile we will reluctantly wait on the sidelines.