The disingenuous vs the despair- Housing market blues

Nothing like a secure foundation, is there?

Who's going to pay for the mess? You guessed it, the next generation of homebuyers

There are few policy choices more guaranteed to hit the nervous system of America than the concept of letting the housing market find a natural level. The idea is basically sound, but does Middle America’s battered financial psyche want to have to deal with another round of perceived symptoms of Armageddon? How is this idea to be sold and what resistance can it expect?

There are likely to be some instant negative responses, starting with the financial sector, which has been an unwilling participant in all economic management issues since the meltdown. There are always good disingenuous arguments against anything in this sector, and the most likely is that it will affect the bottom line of banks, which will be depicted as being left holding assets worth much less.

The disingenuous element here is that the market is already doing that. Buying expensive houses is hardly the market’s top priority at the moment. The free market has already made a decision not to throw any more money out the window. The lending market created this unsustainable wrecker’s yard for itself.

The credit market is another major likely source of disingenuous howls. This sector has somehow managed to outdo even Wall Street with its version of “The public is the problem”. This sector penalized people who bravely tried to continue to pay their housing loans after the meltdown. Deadbeat borrowers had no problems and vanished. The honest borrowers were forced out of their homes and left with crippled credit ratings. Those ratings are now major obstacles for people trying to borrow to buy houses.

Then there’s Wall Street, the lone epitome of selfless integrity and credibility. The stock market will inevitably react to a drop in housing loan values and any domino effects through the construction and materials industries. Wall Street’s ability to play politics is apparently based on the belief in its own sanctity and its contribution will be sermons on market asset values in terms of equity. Irony is usually lost on those responsible for ironic situations. 

The most easily predictable disingenuous response is political. The bipolar disorder previously known as American politics has attained a level of simple- mindedness previously unknown. Whatever is suggested will be wrong. Many long serving politicians on both sides have now been screaming at the top of their voices for nearly a decade that polarized politics paralyzes Washington. Another day, another irony.

The truly disingenuous element was built in to this market during the boom. The housing prices which created the mess were always delusive relative to real buying capacity. Even without a crash, those top dollar prices were always a risk. The market was always going to hit a wall somewhere.  The only real novelty in the housing bust was that the lenders brought along a way of crashing themselves as well, in the form of the overblown mortgage securities. Banks and other lenders created a Ponzi scheme based on a myth of ever-increasing house prices. The result was inevitable.

The housing market has already single-handedly decimated the real assets of Middle America, and there’s no working logic in helping it continue to do so by artificially trying to sustain prices. Nor should free marketers be in any hurry to support the industries which insanely milked the biggest, healthiest cash cow in American history to death. If anyone wants to see a good free market again anytime soon, start looking at realistic housing prices. America has been dealt out of its biggest capital sector, and it needs to get back in the game.

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Hello, hello, profile image

Hello, hello, 6 years ago from London, UK

A very true and down to earth hub. Thank you for a great read.

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