Government-imposed prices for real estate

[DanS]

Welcome back to the 70s, folks. Apparently, Obama is going to announce a housing plan with a stated goal of setting real estate prices above market prices. This despite the fact that market prices are still at unsustainable levels and need to fall.

Honestly, it appears that we're doing our level best to have a Japanese Lost Decade. The best thing to do is let the market find the floor as soon as possible. Whether that is 70% off in some markets or whatever, we need to find the sustainable price. This can't be done in Washington government offices.

Axelrod: Obama Has 'Solid' Housing Plan
By JOHN D. MCKINNON

The Obama administration this week will announce a "good, solid" plan with the goal of stemming mortgage foreclosures and putting a floor under falling real estate prices, a senior White House aide said on Sunday.

http://online.wsj.com/article/SB123471581432090221.html

[Naked Gents Rut]

Is this what it was like to live through the Carter presidency?

[Victor Galis]

The best thing to do is let the market find the floor as soon as possible.

Either that, or buy up some entire suburbs, bulldoze them then salt zone the earth so that nothing will grow there again.

[Victor Galis]

One thing I don't see in that article though is any sort of discussion on price controls. It looks like the only thing he wants to do to support prices is to prevent foreclosures so as to limit the supply of unsold homes. That's completely different from market-distorting price floors.

[The Mad Monk]

Is this what it was like to live through the Carter presidency?

Obama hasn't been chased by a rabbit.

Yet.

[Zkribbler]

Is this what it was like to live through the Carter presidency?

Carter didn't impose price controls. That was Nixon.

[Naked Gents Rut]

That was Nixon.

Even better.

[chequita guevara]

Is this what it was like to live through the Carter presidency?

Nope, under Carter the general sense of the country was doom and gloom, not hope, however misplaced.

[Naked Gents Rut]

Hope? Wasn't Obama just on TV last week telling America that it was hovering on the edge of an abyss?

[chequita guevara]

Hope starts with an honest assessment of where you are.

[One_more_turn]

[quote\Welcome back to the 70s, folks. Apparently, Obama is going to announce a housing plan with a stated goal of setting real estate prices above market prices. [/quote]

Don't spread lies, nowhere it is said that Obama wants to set prices above the market.

[Dinner]

It sounds like they want to change the foreclosure process forcing banks to renegotiate principle write downs rather then raise prices. I'm not seeing the price fixing DanS is talking about after briefly looking at the article. The only thing Axelrod said was that these reforms would eultimately restore demand and thus help prices.

[Naked Gents Rut]

Hope starts with an honest assessment of where you are.

I agree.

President Barack Obama has turned fearmongering into an art form. He has repeatedly raised the specter of another Great Depression. First, he did so to win votes in the November election. He has done so again recently to sway congressional votes for his stimulus package.

In his remarks, every gloomy statistic on the economy becomes a harbinger of doom. As he tells it, today's economy is the worst since the Great Depression. Without his Recovery and Reinvestment Act, he says, the economy will fall back into that abyss and may never recover.

This fearmongering may be good politics, but it is bad history and bad economics. It is bad history because our current economic woes don't come close to those of the 1930s. At worst, a comparison to the 1981-82 recession might be appropriate. Consider the job losses that Mr. Obama always cites. In the last year, the U.S. economy shed 3.4 million jobs. That's a grim statistic for sure, but represents just 2.2% of the labor force. From November 1981 to October 1982, 2.4 million jobs were lost -- fewer in number than today, but the labor force was smaller. So 1981-82 job losses totaled 2.2% of the labor force, the same as now.

Job losses in the Great Depression were of an entirely different magnitude. In 1930, the economy shed 4.8% of the labor force. In 1931, 6.5%. And then in 1932, another 7.1%. Jobs were being lost at double or triple the rate of 2008-09 or 1981-82.

This was reflected in unemployment rates. The latest survey pegs U.S. unemployment at 7.6%. That's more than three percentage points below the 1982 peak (10.8%) and not even a third of the peak in 1932 (25.2%). You simply can't equate 7.6% unemployment with the Great Depression.

Other economic statistics also dispel any analogy between today's economic woes and the Great Depression. Real gross domestic product (GDP) rose in 2008, despite a bad fourth quarter. The Congressional Budget Office projects a GDP decline of 2% in 2009. That's comparable to 1982, when GDP contracted by 1.9%. It is nothing like 1930, when GDP fell by 9%, or 1931, when GDP contracted by another 8%, or 1932, when it fell yet another 13%.

Auto production last year declined by roughly 25%. That looks good compared to 1932, when production shriveled by 90%. The failure of a couple of dozen banks in 2008 just doesn't compare to over 10,000 bank failures in 1933, or even the 3,000-plus bank (Savings & Loan) failures in 1987-88. Stockholders can take some solace from the fact that the recent stock market debacle doesn't come close to the 90% devaluation of the early 1930s.

http://online.wsj.com/article/SB123457303244386495.html

[DaShi]

One thing I like about Frank Riches Op-eds compared to others is that he often cites directly his sources. It's too easy to make up exaggerated claims such as "every gloomy statistic on the economy becomes a harbinger of doom." Oh well, simple answers for simple minds.

[Naked Gents Rut]