(This is a guest post by Michael White, editor of newobservations.net and a mortgage broker.)
The federal government has tried every manner of strange intervention to foolishly support the price of real estate. The trend in unit sales shows very little evidence of success (see below).
Setting aside for a moment the massive stupidity of trying to uphold pricing created by a delirious credit bubble, the feds have failed in one obvious area: They haven’t been able to make the monthly mortgage payment for 15 per cent of homeowners.
This wildly high number of individual financial failures makes the typical inventory of homes for sale petite and pretty. The consequences for the prices of homes is obvious. Massive new supply leads to massive new losses (see below). I don’t know what fraud they are going to think up to try to cover this up, but I know it will be as dumb as what they have already tried.
The bubble began in 1990 meaning that 16 to 20 years of buyers bought a scam. How many homeowners in the United States of Mortgage Fraud are living in a make-believe world of income-not-required lending and name-your-price appraisers? When do we return to a 120-year price trend (see below)? When will trillions of unaffordable mortgage debt be written off? When do we stop sending fools in to buy both their first home and their first financial failure?
A credit bubble can be broken only one way. Burn up the fake debts. Slash the false prices. Fire sale the assets of failed banks. Rematch the price of housing to income.
We will not have a balanced economy until the massacre of debt is done. Time to get to work.
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