Are Countercyclical Housing Downpayments A Dead-Simple Tool For Ending Future Housing Bubbles

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Photo: The Aleph Blog/Bill Foster

One of the topics being discusses today at The Treasury’s “Future of Housing FInance” panel (regarding Fannie and Freddie) is an idea put forth by the American Enterprise Institute for countercyclical housing regulations.Basically, when prices are going up, downpayment requirements would be hiked, having a levelling out effect. There are problems with this idea, especially if they’re only applied to the GSEs (and don’t apply to private regulators.

Also, as MIke Konczal has pointed out, one simple point is that higher interest rates during the boom times (ideally) will have this effect automatically.

Anyway, this summer, Illinois Congressman Bill Foster gave a presentation on hous countercyclical housing policies would work. It’s worth going through, just to get the basic idea.

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