Best of the Week
Most Popular
1. Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - Nadeem_Walayat
2.Gold Price Focusing on May Cycle Bottom - Jim_Curry
3.Silver, silver, and silver! There’s More Than Silver, People! - P_Radomski_CFA
4.Is the Malaysian Economy a Potemkin Village - Sam_Chee_Kong
5.Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - Troy_Bombardia
6.A Big Stock Market Shock is About to Start - Martin C
7.A Long Term Gold Very Unpopular View - Rambus_Chartology
8.Stock Market “Sell in May and go away” Study When Stocks Are Down YTD - Troy_Bombardia
9.Global Currency RESET Challenge: Ultimate Twist - Jim_Willie_CB
10.The Coming Silver Supply Crunch Is Worse Than You Know - Jeff Clark
Last 7 days
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18
The Euro Crashed Yesterday. Bearish for Euro and Bullish for USD - 15th Jun 18
Inflation Trade, in Progress Since Gold Kicked it Off - 15th Jun 18
Can Saudi Arabia Prevent The Next Oil Shock? - 15th Jun 18
The Biggest Online Gambling Companies - 15th Jun 18
Powell's Excess Reserve Change and Gold - 15th Jun 18
Is This a Big Sign of a Big Stock Market Turn? - 15th Jun 18
Will Italy Sink the EU and Boost Gold? - 15th Jun 18
Bumper Crash! Land Rover Discovery Sport vs Audi - 15th Jun 18
Stock Market Topping Pattern or Just Pause Before Going Higher? - 14th Jun 18
Is the ECB Ending QE a Good Thing? Markets Think So - 14th Jun 18
Yield Curve Continues to Flatten. A Bullish Sign for the Stock Market - 14th Jun 18
How Online Gambling has Impacted the Economy - 14th Jun 18
Crude Oil Price Targeting $58 ppb Before Finding Support - 14th Jun 18
Stock Market Near Another Top? - 14th Jun 18
Thorpe Park REAL Walking Dead Living Nightmare Zombie Car Park Ride Experience! - 14th Jun 18
More on that Gold and Silver Ratio 'Deviant Conundrum' - 13th Jun 18
Silver Shares? Nobody Cares - 13th Jun 18
What Happens to Stocks, Forex, Commodities, and Bonds When the Fed Hikes Rates - 13th Jun 18
Gold and Silver Price Setting Up for A Sleeper Breakout - 13th Jun 18
Tesla Stock Analysis - 12th Jun 18
What Happens Next to Stocks when Russell Goes up 6 Weeks in a Row - 12th Jun 18
Gold vs. Stocks: Ratios Do Not Imply Correlation - 12th Jun 18
Silver’s Not-so-subtle Outperformance - 12th Jun 18
Why You Should Brace Yourself for Big Financial Changes - 11th Jun 18
Inflation to Skyrocket When Fed Reverts to New QE & Interest Rate Cuts - 11th Jun 18
Stock Market Topping Pattern or Just Consolidation? - 11th Jun 18
Study: What Happens Next to Stocks When the Put/Call Ratio is Very Low - 11th Jun 18
G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - 11th Jun 18
SPX Unshackled - 11th Jun 18
When Trump Met Fibonacci And Won - 11th Jun 18
FREE Theme Park Entry with Cadbury's Choc's! Legoland, Alton Towers, Chessington.... - 11th Jun 18
Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - 10th Jun 18
End of the World Stock Market Chart! - 10th Jun 18
All US Homes Are Overvalued - 10th Jun 18
Thorpe Theme Park London Car Park Exit Nightmare - Drivers Beware! - 10th Jun 18
Gold Price Summer Doldrums - 9th Jun 18
How to Prepare for Economic Uncertainty with Gold and Silver - 9th Jun 18
5 "Tells" that the Stock Markets Are About to Reverse - 9th Jun 18
Billionaire Schools Teacher in NAFTA Trade Talks - 9th Jun 18
Land Rover Discovery Sport ECO Mode Real World Driving MPG Fuel Economy - 9th Jun 18
Crude Oil Bullish Weekly Reversal vs. Bearish Monthly Reversal - 8th Jun 18
Fed’s Interest Rate Hike is Short term Bearish for Stocks - 8th Jun 18
The Deviant Conundrum Called Silver - 8th Jun 18
Pleasure Island Theme Park Cleethorpes, Last Day Trip Before it Closed Down - 8th Jun 18
America’s One-sided Domestic Financial War - 8th Jun 18
Debt Consolidation Advice: When and Why to Consolidate - 8th Jun 18
Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - 8th Jun 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

Want to Fix the U.S. Housing Market? Listen to the Gipper

Housing-Market / US Housing Feb 28, 2010 - 04:02 AM GMT

By: Mike_Whitney

Housing-Market

Best Financial Markets Analysis ArticleThere is a remedy for the housing crisis. And it doesn't involve an agonizing decade of uncertainty while supply adjusts to demand. All Obama needs to do is to stop artificially propping up the market and let the chips fall where they may. That means the Fed should stop buying mortgage-backed securities to keep long-term interest rates low. That means the congress should not renew the $8,000 first-time homebuyers subsidy. That means the FHA should modify its lending standards so that mortgage applicants have to meet normal criteria for securing a mortgage.


When government stops meddling in the market, housing prices will return to long-term trend and sales will resume.

But doesn't that mean that millions of people will face foreclosure when the current price of their homes dips below the value of their mortgages?

Yes, it does. But there is a flip side to that (awful) prospect, which is this: the areas of the country with the most foreclosures, are also the markets where where sales have picked up the most. That's because--contrary to belief--people are not fools and they know that prices have to come down. When prices fall, buyers appear. The Fed knows this, the Treasury knows this, realtors know this, and Obama knows this.

So, why does the administration continue to meddle?

It's because a surge of foreclosures will put more red ink on banks balance sheets. None of the extraordinary measures the government has taken so far--HAMP, mortgage modifications, loan abatements, subsidies etc--have been designed to help the victims of fraudulent loans and bubblenomics. It's all been for the banks. That should be obvious by now. It's a simple equation: The banks get everything and the people get bupkis.

Consider this: On Tuesday the Census Bureau announced that new home sales in January fell to a "record low" of 309 thousand. This is a sharp decrease from the revised rate of 348 thousand in December. In other words, the nearly $2 trillion the Fed has pumped into housing---via quantitative easing (QE), first-time homebuyer subsidies, $300 billion in Treasury purchases, and $175 billion in Fannie and Freddie debt--has not reversed the downward direction of the market. Prices are still falling, foreclosures are still rising, and supply still far exceeds demand. It's time for the government to back-off and let the market clear.

There are ways to soften the blow for the people who will suffer from foreclosure or the loss of equity. Dean Baker, who was the first economist in the country to spot the bubble in 2002, suggests that foreclosures be mitigated by judges so that people are allowed to stay in their homes as renters at a reduced rate if they agree to do the maintenance. That does not make up for the fact that they were ripped off in a fraudulent mortgage swindle, but there are no pain-free solutions. Propping up the market just extends the misery over a longer period of time. It does not fix the problem.

So, why is it important that the government withdraw its support for the housing market now?

Perhaps, this article which appeared on Bloomberg News on Thursday will explain:
Bloomberg News: "The Obama administration may expand efforts to ease the housing crisis by banning all foreclosures on home loans unless they have been screened and rejected by the government’s Home Affordable Modification Program.

The proposal, reviewed by lenders last week on a White House conference call, “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed,” according to a Treasury Department document outlining the plan." (Bloomberg)

Obama "prohibits foreclosures"?

What's next? Will the president stand at the water's edge and try to stop the tide from coming in?

Our befuddled leaders have gone from one extreme to the other; from believing wholeheartedly in the wondrous beauty of the self-regulating market to presidential edicts which ban the business cycle. This is lunacy.


Obama should take a moment and reflect on the words of his hero Ronald Reagan who famously quipped at the 1976 Republican Convention:

"The nine most terrifying words in the English language are, 'I'm from the government and I'm here to help."

For once, the waxy-hair Gipper was right. Obama needs to "stop helping" and let the market correct.

By Mike Whitney

Email: fergiewhitney@msn.com

Mike is a well respected freelance writer living in Washington state, interested in politics and economics from a libertarian perspective.

© 2010 Copyright Mike Whitney - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Mike Whitney Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules