The news that Michael Stegman will be taking a leave from MacArthur to advise Tim Geithner on housing is very good. It is important for three reasons: (1) Mike has been a leading sensible voice on housing issues for at least 30 years; (2) Treasury has recognized the importance of having an in-house housing person at a senior level; (3) Mike will remind Geithner than users of housing are at least as important as those who lend for housing.
Dear Richard - on reading about the housing bubble bursting in Shanghai and the unfortunate effect it had had on young couples who borrowed substantial amounts to purchase their first home (in China, women will not marry unless the man owns an apartment), and reflecting on my own experience many years ago in Australia trying to acquire my first property in the face of rising property prices, I wonder why the central bank doesn't act against "inflationary" residential asset prices. Not suggesting that central banks raise interest rates to counter rising house prices. But why not regulate the leverage ratio? As you specialise in property and also have a broad interest in the economy generally, what do you think of the notion that central banks (or a prudential regulator) should regulate leverage to control housing bubbles? BTW, I don't accept the argument that regulators cannot tell whether there is a housing bubble. Sure, they din't have perfect knowledge, but they can at least regulate the rate of change in residential asset prices in a counter-cyclical manner , possibly following some kind of Taylor Rule.
ReplyDeleteHappy new year and thank you for maintaining your blog. I like reading your posts.
Best wishes, Kien
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