The NYT renewed its call for a house price support program, the equivalent of a farm price support program, except that the costs and economic distortions are far greater.
Whether or not house prices can or should be stabilized depends hugely on which market is being examined. In areas where there either was no bubble or the bubble has deflated, as is the case in large parts of the South and Midwest, it makes sense to talk about stabilizing prices. It would a foolish waste of money to try to stabilize prices in markets like San Diego and Las Vegas where the bubble is still deflating.
There is an enormous glut of unsold homes in these markets which can only be corrected by having the price drop, unless the NYT wants the government to spend hundreds of billions to buy up homes to keep them off the market. The government will also have to restrict new construction in order to keep prices at current levels.
It was a remarkable failure of the economics profession to miss the housing bubble as it grew. It is incredible that the NYT still doesn't recognize the bubble even after it has collapsed.
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