Photo: Robert Shiller
The NYT implied that the Obama administration, which includes not a single economist who recognised the danger of the housing bubble, still does not understand the bubble.According to the NYT:
“the Obama administration, as well as the F.D.I.C., sees any broad settlement with the servicers [over improper foreclosure actions] as an opportunity to do more than just fix the foreclosure process. They want to stabilise the housing market, where prices are continuing to decline, and try to help bolster the economic recovery.”
Actually nationwide house prices are still 10-15 per cent above their trend levels. The housing vacancy rate, while down somewhat from its peak, is still far higher than any pre-bubble level. In other words, the Obama administration should fully anticipate that house prices will continue to fall. There is no obvious reason to want to prevent house prices from returning to more affordable levels.
Unfortunately the piece does not point out the absurdity of the position attributed to the Obama administration. Nor does it identify any of the officials holding this view so that they can be subjected to the ridicule they deserve.
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