Target Fiscal Spending on U.S. Home Purchases
It’s highly unlikely the banking system will bottom until real estate values start to stabilize. The majority of toxic assets plaguing bank balance sheets are tied to residential mortgage-backed securities – mostly illiquid and still declining in value.
If the government really wants to expedite an end to this financial crisis perhaps buying homes outright might make the best sense; attacking the real estate problem outright with everything they’ve got would go a long way to putting a floor to the bear market in residential housing.
From their peak in mid-2006, U.S. residential home prices have declined 24% with some of the biggest draw-downs reflected in Miami, Los Angeles, Las Vegas and Phoenix.
For the latest data available, home prices fell in four out of every five U.S. cities during Q3, according to the National Association of Realtors.
The biggest price gain in 2008 amid a sea of red was Elmira, New York, where the median price gained 13% to $105,000.
From their peaks, Phoenix takes the booby-prize with the biggest hit as prices have a cumulative crashed 43% since mid-2006 followed by 41% in Los Angeles and 36% in Las Vegas.
Once the government is throwing almost everything it’s got at the banking crisis and spending trillions of dollars to revive domestic consumption and lending, it would seem only logical to at least spend good money on distressed real estate.
The consumer’s primary asset is real estate; as prices continue to slide and mortgage values become worth more than the underlying value of a home, more defaults and foreclosures will emerge this year. U.S. real estate remains in a serious freefall – the worst decline in the post-WW II period.
If the U.S. government would throw a few trillion dollars at housing and purchase distressed real estate in many of the worst affected areas that would at least offer some long-term price stability – especially to those consumer balance sheets that are being ripped to shreds from rapidly deflating home prices.
Supply-side spending is generally the wrong way to arrest a crisis. All we’re doing is bailing out companies and industries that really deserve to fail while amassing massive sums of debt for future generations to burden. It’s just a huge waste of money. Yet once we’re on this path why not buy homes outright from the banks and provide the precious liquidity this distressed sector requires? Outright government home purchases would go a long way to stabilizing this important asset class.
After all, is there a better investment than a home?
If the government really wants to expedite an end to this financial crisis perhaps buying homes outright might make the best sense; attacking the real estate problem outright with everything they’ve got would go a long way to putting a floor to the bear market in residential housing.
From their peak in mid-2006, U.S. residential home prices have declined 24% with some of the biggest draw-downs reflected in Miami, Los Angeles, Las Vegas and Phoenix.
For the latest data available, home prices fell in four out of every five U.S. cities during Q3, according to the National Association of Realtors.
The biggest price gain in 2008 amid a sea of red was Elmira, New York, where the median price gained 13% to $105,000.
From their peaks, Phoenix takes the booby-prize with the biggest hit as prices have a cumulative crashed 43% since mid-2006 followed by 41% in Los Angeles and 36% in Las Vegas.
Once the government is throwing almost everything it’s got at the banking crisis and spending trillions of dollars to revive domestic consumption and lending, it would seem only logical to at least spend good money on distressed real estate.
The consumer’s primary asset is real estate; as prices continue to slide and mortgage values become worth more than the underlying value of a home, more defaults and foreclosures will emerge this year. U.S. real estate remains in a serious freefall – the worst decline in the post-WW II period.
If the U.S. government would throw a few trillion dollars at housing and purchase distressed real estate in many of the worst affected areas that would at least offer some long-term price stability – especially to those consumer balance sheets that are being ripped to shreds from rapidly deflating home prices.
Supply-side spending is generally the wrong way to arrest a crisis. All we’re doing is bailing out companies and industries that really deserve to fail while amassing massive sums of debt for future generations to burden. It’s just a huge waste of money. Yet once we’re on this path why not buy homes outright from the banks and provide the precious liquidity this distressed sector requires? Outright government home purchases would go a long way to stabilizing this important asset class.
After all, is there a better investment than a home?
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