Comments | the_recession: Housing Remains an Albatross Around Neck of US Economy, May Continue for Decades

cieldumort in the_recession

Housing Remains an Albatross Around Neck of US Economy, May Continue for Decades

Nov 29, 2011 16:09

Housing has triple-dipped.

The latest Case-Shiller HPI shows that the downtrend in housing values has resumed, with the seasonally-adjusted 3-month moving average 20-city index falling a sharp 0.6% in September.

There continues to be mounting evidence that the bursting of the 1980s-2000s multi-decade housing & credit bubbles are resulting in a Japan- ( Read more... )

house of cards, the |_____ club, case-shiller index, japan, bubbles

Comments 3

ragnarok20 November 30 2011, 04:34:03 UTC

The housing bubble/bust is, quite honestly, the perfect real world example of how government regulation distorts the economy.

The government wanted to encourage home ownership, so they promised special incentives to the banks to give out risky loans on the premise that were they to fail, the government would bail them out. The banks would not have ordinarily taken such a risk were it their own capital at stake, but because it was the taxpayers, the loss was socialized and the banks took the plunge. As a result of more loans being given out, this created a hike in home construction. That is, the accessibility of funds to purchase a home created a broader class of people who could own them, which diminished the existing supply thus prompting firms to increase production. Lo and behold, the increase in supply of homes caused the value of existing homes to plummet meaning that the mortgage which people were paying was far higher than the actual value of the home.

Good job, Gov'Co.

cieldumort November 30 2011, 08:35:35 UTC

Let us keep in perspective that the government was intensely lobbied by many lenders and builders to create these laws.

ragnarok20 November 30 2011, 19:30:23 UTC

Regardless of that, the fact is that government regulation distorts the market, typically in favor of larger firms which is ultimately to the detriment of smaller firms and to consumers/workers. This is even true in the case of non-specific regulations like the minimum wage, which is why firms like Wal-Mart have typically favored it as they knew that they could absorb the additional costs while putting a greater pressure on their competitors. Hikes in the minimum wage also tend to correlate with the rise of unemployment in young blacks as they are typically the least skilled of the labor force, but more generally creates a class of part-time workers and decreases the maximum hours they tend to work. I work in a small restaurant in Northern California and have seen this first hand as every week I am prevented from working additional shifts ( ... )