I suppose the NYT editorial writers don't read their editorials, or if they do, they have a hard time remembering them. How else can we explain the fact that such ardent opponents of farm price support programs are ardent supporters of a house price support program. The arguments about how a farm price support program are wasteful and counterproductive can also be applied to a house price support program, except the numbers are a couple of orders of magnitude larger in the case of a house price support program. Most agricultural commodities have worldwide markets in the low hundreds of billions, the U.S. housing market is valued at close to $20 trillion (and falling fast). The plunge in house prices at present is due to the fact that we had an enormous housing bubble, which has gotten some attention in the NYT. The bubble has led to an enormous oversupply of housing, which has shown up as record vacancy rates in both ownership and rental units. This oversupply will continue to put downward pressure on house prices until they get more in line with their long-term trend levels, unless of course the NYT has plans to pull housing off the market and outlaw new construction. (Btw, why do we want high house prices -- is the NYT an advocate of unaffordable housing?) The reality is that the housing bill in Congress will not stop the price decline, it will just allow the banks to dump some of their bad loans on the government. The time to have prevented the calamity that we are now facing was four, five, or six years ago, before then housing bubble grew to such dangerous levels. But the NYT editorial board could not be bothered by such trivia back then. The best thing that can be done for those losing their homes right now is to temporarily change the rules on foreclosure to allow moderate income homeowners the option to stay in their homes as renters, as proposed by Representative Raul Grijalva of Phoenix. This plan, which would require no bureaucracy, cost no taxpayer money, and could begin protecting homeowners the day it was passed, has been completely ignored by the NYT in favor of its Rube Goldberg house price support scheme. btw, the delay in the passage of this bill is likely to prove a huge gift to many of the homeowners who will eventually enter the bailout program. In most of the bubble markets house prices are falling very rapidly. Every month that the program is delayed means a much lower guaranteed price for the new loan, which is the basis for the homeowner's mortgage payment and eventual equity in the home. For example, in the case of Los Angeles, prices in the bottom tier of the market are falling at the rate of 4 percent a month. With houses at this end of the market selling for an average of $400,000, a one-month delay in entering the program would net a homeowner entering the program $16,000. Now that is what we call asset building.
--Dean Baker
