Saturday, 26 January 2008

Guess which way we’re going to go

Bruce Henderson:

One of the reasons that house prices got so high here is that people could get crazy financing for huge amounts without adequate resources to pay it back. So “dumb money” bid the price too high, and now no one can buy or sell because they can’t finance their homes.

So there are two ways to fix this - the healthy way would be to let the market forces bring the prices down to what people can reasonably pay. This is the best for everyone long term as it levels out who can live in California.

The second way would be to use the government backed entities, Fannie and Freddie, to prop up these insane prices. This is akin to providing an alcoholic with discount coupons for the corner liquor store.

posted on January 26, 2008 11:57 PM




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