But the best way to do so would be to allow housing prices to fall to a market clearing level. As long as home prices remain artificially high, the risks of mortgage lending will keep credit tight, and the high costs of mortgage payments will keep potential buyers on the side-lines.
This is the crux of the problem, but it’s probably best to get there slowly. Managing the collateral damage is now the preoccupation, amidst the treacherous swirl of the negative feedback loop. It amazes me how the notion of “affordable housing” still somehow manages to escape the debate. There is still this pervading belief that house values are ‘suffering’, and therefore the victim, rather than the cause.
There seems to be a consensus that the bail out was necessary, as the consequences of not doing so are just too frightening to contemplate. How this is going to shape the future, is what I’d focus on, and pressuring the two presidential candidates, to telling us what the plan is.
