Its funny how all this started to accelerate right after they raised the limits on what the GSE’s could buy. Congress was pushing them to buy more and more. What’s also funny was in 2003 you had the idea of cutting them back, in 2007 you force them to expand and in 2008 you buy them.
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Just one year ago we were talking about loan limits that the GSEs could buy, or FHA could insure. Some here, including Realtors, argued that such gimmicks would put a floor under home prices.
Democrats supported raising of the loan limits and expanded the GSEs. Big mistake.
BTW, I’m dead set against housing subsidies (mortgage tax deductions, bailouts, etc..) as I believe that the market just prices the benefits into houses, thus canceling the benefits. Thus the subsidies help the industry but no home buyers.
I think that best way to make housing affordable for average Americans is to phase-out the mortgage interest deduction and other tax benefits. That would reduce house prices and raise revenues to help pay for our deficit.
