September 26, 2008

For all the nonsense that has been spouted regarding the housing market over the past five years, there have been many voices of reason on the issue, one of which includes Dean Baker, of the left-of-center Center for Economic and Policy Research.

Today, he responds to the absurd NY Times suggestion that home prices be stabilized. Here's his full blog post from today:

The NYT Wants the Government to Support the Price of

Unfortunately, I'm only partly kidding. The NYT apparently still does not recognize that there was a housing bubble. In its editorial today it argued for including reform of the bankruptcy laws to protect homeowners (good) and to support house prices (loony).

It is incredible that the NYT missed the $8 trillion housing bubble on the upside. (Actually some of its reporters did write about it, unfortunately the editorial writers apparently don't read the paper.) It is astounding that they still can't see the bubble even as its collapse is leading the country into a financial crisis and recession.

It makes no more sense to prop up house prices than it does prop up the price of Internet stocks. The big mistake was letting house prices get so out of line in the first place. The best that we can hope to do now is limit the pain to homeowners and the financial system.

It's getting sickening. Last week, the National Association of Home Builders (NAHB) called for once again more tax preferences for housing to stabilize prices. It is also shilling for the Treasury bailout plan.

But wait a minute…I thought the housing prices were supposed to stablize after the housing bill was passed in July? Here's what the NAHB said back then:

“Together, the first-time home buyer tax credit and foreclosure relief in the housing bill will help to reduce inventories,” said Brady. “In turn, this will firm up prices and send a signal that we are either at the bottom or very near the bottom and that there isn’t a better time to buy than today’s market.”

But it gets better. Remember when Fannie and Freddie were bailed out? It turns out we were at the bottom of the housing market then? Check out this video with Jerry Howard, president of the NAHB in which Howard calls a "bottom" to the housing market.

If there's anything good about this economic turmoil that we appear to be facing it's that hopefully people will learn that the NAHB (along with the Realtors) are nothing but a bunch of paid shills that spout nonsense all day long and pass that nonsense on to powerful policymakers that end up writing terrible laws that are merely just handouts to their already heavily subsidized industry.

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