I'm starting to see more and more articles spreading the gospel of "let the prices fall". Here's another,
The U.S. government should just get out of the way and allow the crash in U.S. housing; the market is too big, has too far to fall and Americans’ finances are too strained.
President Barack Obama’s measures, unveiled on Wednesday, are part of a $275 billion plan to try and stabilize the housing market and prevent foreclosures. It aims to encourage lenders and their agents to cut repayments for homeowners in difficulties to lower, more affordable levels as well as other steps.
The reasoning is that there is a largish group of borrowers within the U.S. real estate market who may slide into default because their loans are too big and expensive or because they have run into temporary cash flow issues.
Give them a cheaper loan and you break the circuit of foreclosures, more stock coming on to the housing market driving prices down further and giving other mortgage borrowers more incentive to simply walk away from their debts.
There may be some who are successfully modified out of their troubles, but they will be outnumbered by those who will only default again, or even worse in some ways, by those who keep paying on an asset that isn’t worth the underlying loan.
Prices of housing in the U.S. were driven too high by too much leverage even as supply increased. Let’s accept that, allow prices to fall, the banks to fail and start again on a new stable footing.
Amen brudda, makes sense to me!