Monday, September 06, 2010

Ryan Avent of The Economist gets it right (h/t to Mark Thoma)

He writes:

"'s simply not true that the administration has rolled out every programme it can think of. Economists with which administration officials are very familiar have proposed measures to deal with the real problem in housing markets: negative equity. Promising policies like mortgage cramdowns and own-to-rent programmes have yet to get a serious look from Washington leaders. But ultimately, a real fix for housing markets must address underwater mortgages. Absent some attempt to deal with negative equity, a rush of buyers into the market will accomplish little; the problem is that underwater homeowners can't afford to sell at prevailing prices. Driving those prices lower won't change that fact.

The truth is that the trouble in housing is not, for the most part, a demand-side issue. The problem is the millions of homeowners stuck in houses they can't afford to sell. These households represent a significant shadow supply of foreclosures-in-waiting. I agree that it would be silly for the administration to try to support housing prices by offering more goodies to potential homebuyers. But it doesn't follow that letting prices go their own way will magically get housing markets moving again."

John Quigley, Alan Blinder (and I for that matter) have been advocating something like a Home Owners Loan Corporation, and/or a debt equity swap for underwater mortgages for some time. We also need to deal with second liens--investors in such liens are holding up renegotiated mortgages because they will get wiped out--which is of course what is supposed to happen when one interest is subordinate to another.

(Thanks to Jim for filling me in on who RA is).


Jim said...

In case you don't know, RA is Ryan Avent.

aiya said...

Office 2010
Microsoft Office 2010
Microsoft word
Office 2007
Microsoft Office
Microsoft Office 2007
Office 2007 key
Office 2007 download
Office 2007 Professional
Outlook 2010
Microsoft outlook
Microsoft outlook 2010
Windows 7

led said...

Christian Louboutin Tall Boots
Christian Louboutin Wedges
Christian Louboutin Pumps
Christian Louboutin Sandals
Jimmy Choo Shoes
Moncler Kid's Jackets
Moncler clothing wholesale
Wholesale Moncler Jackets
discount Moncler Jackets

Ojanx said...

Iklan Gratis
Iklan Baris
Iklan Baris Gratis
Pasang Iklan Baris
Pasang Iklan Gratis

Adim said...

This article is very nice i like it this is paragraph is so nice its very informative.

Internet Marketing

Admin said...

The post is interesting. I really never thought I could have a good read by this time until I found out this site.Thanks!

Ready-Made Logo