The Government of the USA is in Denial Regarding Housing!

Clearly, the government of the United States is in denial and is seeking advice from individuals from the Ivy League schools who are giving bad advice. The bad advice is that government should stabilize house prices in the United States. This advice is extremely flawed, because house prices are too expensive. Any efforts to stabilize house prices runs the risk of freezing up the market even further.  If a house is only worth pre 2001 prices, say 200 thousand dollars for Los Angeles, and the government wishes to freeze the price at today's level, which is around 350 thousand dollars, buyers will not accept this. We have seen the average price in California fall from over 500 thousand dollars down to 350k.

We are only half way through the correction. I repeat, we are only half way through the correction. Yet the government wants to stop this correction. If a buyer is an investor the buyer will no longer want to get ripped off by possible futher declines. And the down payment requirements for a 350k house is far greater than for a 200k house. It is in the interest of the real estate industry that house prices fall to their real, and sustainable levels. It does not matter what the interest rate is if the house price is too expensive and if the down payment requirement is too steep.

This is my advice to potential home owners: Do not buy, do not buy. I am all for the government helping the business sector, but I am not for an artificial propping up of housing prices, which became the reason why the house of cards crashed down in the first place. While banks may continue to suffer the United States cannot spend money propping up housing prices when it would be better just to give money to banks and individuals to offset the losses. How the government chooses to do this is certainly open to debate. My final warning, unless prices are pre bubble my opinion is that you don't buy. And if you think that mortgages will be hard to come by for years, don't buy either. Finding a buyer when you want to sell may become very challenging in the near term, maybe for years and years.