[quote=poorgradstudent]I’m eagerly awaiting for one of the candidates to say “Housing prices are too high, they need to fall to correct further and raise affordability”.
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That would be a false statement.
Housing prices are too high in some pockets of the country, but certainly not everywhere. There are many places where prices are “right” but too many people are upside-down, creating the potential for an overcorrection. The puzzle is how to prevent an overcorrection and at the same time avoid moral hazard.
McCain seems to be saying, let’s take all upside-down bubble owner occupied mortgages and rewrite them as fixed-rate mortgages with the amount of the loan = market value of the house. And that’s not necessarily a horrible idea. It saves low-end areas, but it does not do anything for those areas that haven’t corrected yet.
