Housing Tanks

by Patrick Appel

Felix Salmon gasps at the National Association of Realtors report:

The news ... means that there’s a big gap between buyers and sellers: the market isn’t clearing. Sellers are convinced that their homes are worth lots of money, or will rise in price if they just hold out a bit longer; buyers are happily renting, waiting for prices to come down. And entrepreneurial types, whom one would expect to arbitrage the two by buying houses with super-cheap mortgages and renting them out at a profit, don’t seem to have found those opportunities yet.

Tom Lawler evaluates the homebuyer tax credit:

[W}hat did we learn from the home buyer tax credit? (1) “if you pay them, they will come”; (2) if there is a deadline, they will rush to meet the deadline; and (3) when the deadline is over, sales will fall WAY below trend!

Some folks still like the tax credit, because (a) it helped “stabilize” home prices (short term it does appear to have); (b) it would help reduce excess inventories (for new home sales it did, but existing inventories have kept increasing); and (c) it would “generate interest” in the housing sector. On the latter score, the stabilization of home prices and reports of earlier strong sales DID appear to generate interest in housing – but mainly from previously “discouraged” sellers who decided to put their homes on the market (in many cases again) – which appears to be the major reason why active listings have INCREASED despite the tax-credit “goose” to sales!

The report compels Megan to defend her decision to buy a house:

Should we rethink buying a house?  Well, we can't; at this point, we're couch-surfing our relatives while we wait for our house to close; there's no way out but forward.  And in our case, we're planning to stay put for a long time, so as long as DC rents don't utterly collapse, this is still a good plan for us.  But this only reinforces my belief that housing is no longer a good way to generate wealth.  The government can't fix this market, which needs to find a new, lower level.  It can only very temporarily distort it.

Avent repeats himself:

[T]he biggest policy failure of the recession, on the part of either administration or Congress, was the inability to put in place measures to meaningfully address the crisis in housing markets.