Thursday, February 19, 2009

Sullivan on the Housing Plan

Many liberals think that the plan is too small. Many conservatives and libertarians think it will prove wasteful, ultimately ineffective, and that we shouldn't be trying to prop up housing values anyway. And this is surely the fear behind the gist of what Obama has done so far: it avoids the brutal re-balancing of the right while lacking the full metal Krugmanism of the left. Maybe this is a pragmatic sweet spot. Or maybe it's falling into some kind of ghastly, protracted abyss. I do not pretend to know.
Amazingly, I tend to fall slightly to the right of Andrew here - if only because I was wary enough to steer clear of that nonsense (which reminds me to figure out where I was reading that too much home ownership (as seen in the states, 70%) is bad in a macro-sense on top of being illogical at the micro level, for a similar reason: that it is too much wealth AND people being illiquid). Housing prices have to fall back in line with fundamentals, otherwise they shall remain UNaffordable, and frankly NOT at market rate. We have to find the true value of homes to allow the homes/properties in the right places to survive, the rest? To whither.

My optimistic guess is that the Obama team is merely applying a parachute to the prices because it is economically wrong to improperly inflate the prices and amoral if not downright toxic to many neighborhoods/communities to toss people on the street.

Personally, I like the plan put forward by the woman interviewed on Dan Rather Reports the other night suggesting that if refinancing can't be achieved that home owners are given the option to rent the place at fair market rental value.