Fix Housing?
Everyone has been and continues to be focused on “arresting the downward spiral in home prices”. In fact, the Fed is now purchasing MBS (Mortgage-backed Securities) to the tune of about $4B per day. This is in an effort to lower the rates used to generate new mortgage lending and thereby support the purchase of homes and hopefully the prices.
I’ve said this before, but I’m going to say it again because it bears repeating -
Our problem is not home prices. They are SYMPTOMATIC of the larger problem that is plaguing our economy. Wage growth in this country has largely been stagnant for THREE DECADES. Until our economy turns around and wage growth returns to a normal trajectory, there will be no bottom in home prices. Even once we fix the demand problem, we’ll still have an inventory problem.
Eventually this will be publicly recognized by legislators and bankers.
Additional reading:
Falling prices have appeal to those with stagnant pay
http://www.latimes.com/business/la-fi-lazarus17-2008dec17,0,2715648.column
A little dated but a seminal paper from 2006
http://www.epi.org/publications/entry/bp195/
