Wednesday, November 26, 2008

Economic Fantasy; Housing Recovery and Rewarding Bad Behavior

I keep reading what seem to be attempts to create an illusion about buying a home in many parts of the US. I'm not an expert, but it's fair enough to say that gaining equity is the objective. A real estate purchase has not historically been a way to get rich quick, but a person used to be able to preserve wealth with a home purchase, and that's called equity.

That wasn't enough for some folks and their own personal investments weren't enough either. They devised schemes to charge current prices for future equity. In other words, sellers began stealing buyer equity from many years in the future.

The only solution is massive bankruptcies for those who can not afford their homes. Where will they live? I don't know. What do you do when millions are no longer willing or able to take care of themselves? However, it's insanity to try to prop up inflated home prices that reflect inflated projections so much more than reality. Where are the jobs that can pay $1100/month mortgages and rent? Instead of focusing so hard on inflated prices, our government needs to focus on sustainable economic policy. That means looking ahead more than 3 months. Priorities need to be shifted and the practice of depending upon profit from systemic inefficiencies must end.

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