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NYTimes: Government Subsidies for Mortgage Bubble
Posted by: Jon Henke on Monday, May 12, 2008

The New York Times Editorial Board seems to think the way to fight the housing bubble is to...subsidize demand?
Earlier this year, Mr. Bush derided a modest plan to provide $4 billion to states and localities to buy foreclosed properties, saying that buying up empty homes helps only “the lenders or the speculators.” Actually, it protects entire neighborhoods and local economies from the effects of foreclosures by preventing a greater buildup of unsold homes and a further drop in prices.
Do we really want US housing policy to emulate US agricultural policy?
 
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I can see the government helping those who got the "wrong" kind of mortgage to switch to a better financial instrument, but it is not the job of the federal or state governments to maintain or raise real estate values.
 
Written By: Neo
URL: http://
I don’t know about the rest of the country, but the city of Baltimore already owns a substantial amount of residential real estate. It makes the news occasionally when the neighbors complain about the neglected state of the property, a scandal comes to light about some lucky property owner selling it to the city at above market price or buying it at below market prices, or when one of the buildings collapses. The city cannot manage the property it already has, so I do not think it needs to increase its real estate portfolio.

In case nobody noticed, the federal gov’t. already has programs to help out residential home buyers, and has a substantial inventory of single family homes. The FHA, for example, will insure 100% of a mortgage for low income first time buyers. The default rate on these mortgages is, as you might expect, higher than the national average. I have a friend, an attorney, who used to work for the fed. gov’t. in Atlanta on FHA foreclosures and mortgage defaults. Fortunately, he has a good sense of humor so the outrageous examples he related were tempered with a few laughs. We do not need more of the same.
 
Written By: timactual
URL: http://
Sure. But, instead of helping out the over-leveraged home buyers directly maybe we could pay the developers to not develop. You know, the way we pay rice farmers to not grow rice. That way, we can artificially maintain the pumped-up prices of real estate by restricting supply and reverse the awful downward slide of real estate values in the currently bubbled areas.

Personally, I would as soon pay my taxes to property developers as pay them to rice farmers.
 
Written By: Arcs
URL: http://
It always strikes me as strange how many otherwise intelligent people just don’t get the simplest facts about supply and demand. I’m not even talking about any of the elaborations, I just mean the simple relationships between price, supply, and demand.

And then they have the audacity to opine about economic policy at us?!? When they clearly have flunked the first day of Econ101?
 
Written By: Jeremy Bowers
URL: http://www.jerf.org/iri
timactual is spot on. The thinking is that empty buildings deteriorate and cause property values to go down, so someone needs to buy them up. Great. If its anyone with a profit motive maybe they will do the upkeep. But the government won’t. Are they going to mow the lawns and keep the paint from peeling on thousands of residences?
 
Written By: Harun
URL: http://
" maybe we could pay the developers to not develop. You know, the way we pay rice farmers to not grow rice"

Great idea. Just buy the land from the developers, at a slightly inflated price, and make a nature preserve or "green space" out of it. Save the housing market (maybe just the speculators, brokers, and Bear Stearns, but those are the important folks) and be environmentally friendly at the same time.
 
Written By: timactual
URL: http://
It is sad, very sad. People who should know better are suggesting this kind of thing. Houses were, and broadly speaking still are, too expensive. Until that isn’t true, such policies will merely drag the problem out and keep housing unaffordable longer, especially for the young and the poor. Expensive housing is a modest good for some, and a burden for most. Encouraging people to buy houses at prices that are economically too burdensome, and likely to eventually lose value, is what got us into this mess in the first place. Why is it a virtue for the government to do exactly what we are criticizing mortgage companies, banks and even the fed for encouraging them to do in the past?
 
Written By: Lance
URL: http://riskandreturn.net

 
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