Tuesday, March 10, 2009

Affordable Housing in CA, Thanks to Market Forces

The current political stampede to stop mortgage foreclosures proceeds as if foreclosures are just something that strikes people like a bolt of lightning from the blue-- and as if the people facing foreclosures are the only people that matter.

What if the foreclosures are not stopped? Will millions of homes just sit empty? Or will new people move into those homes, now selling for lower prices-- prices perhaps more within the means of the new occupants?

The same politicians who have been talking about a need for "affordable housing" for years are now suddenly alarmed that home prices are falling. How can housing become more affordable unless prices fall?

The political meaning of "affordable housing" is housing that is made more affordable by politicians intervening to create government subsidies, rent control or other gimmicks for which politicians can take credit. Affordable housing produced by market forces provides no benefit to politicians and has no attraction for them.

In the wake of the housing debacle in California, more people are buying less expensive homes, making bigger down payments, and staying away from "creative" and risky financing (see chart above). It is amazing how fast people learn when they are not insulated from the consequences of their decisions.

Thomas Sowell's latest column "
Subsidizing Bad Decisions"


At 3/10/2009 9:52 AM, Blogger bix1951 said...

Many people should lose their houses, they really bit off too much house.
There are also many who just need some assistance.
It needs to be looked at carefully and case by case.

Like it or not, government is involved bigtime at all levels of the economy.

"Taxes Happen"
"Regulation Happens"
"Subsidies Happen"

Whatever the foreclosure prevention laws do, they haven't stopped very many foreclosures! It looks like the market is working in spite of intervention.

At 3/10/2009 10:51 AM, Blogger juandos said...

"There are also many who just need some assistance'...

Who should pay for this 'assistance' bix1951?

At 3/10/2009 1:14 PM, Blogger ExtremeHobo said...

Housing must be about the only thing affordable in CA.

bix1951 - "Shit Happens" too

At 3/10/2009 4:09 PM, Anonymous Anonymous said...

Imagine that housing that people can afford. Thank you so much for your post! You really hit the nail on the head with this one. With the economy the way it is right now with all the layoffs and more to come; government spending and deficit out of control; the continued housing slump; one wonders where to turn for help. It sure is nice to know that there are debt management companies out there that can help folks avoid bankruptcy and still keep their heads above water. Thanks so much for the taking the time to post this information

At 3/10/2009 5:10 PM, Blogger bix1951 said...

It is amazing how many things our federal government already pays for.
"SHOULD" it be paying?
Our political process decides what and where to spend.
I can't even remember what Obama's spending plan is....

"who" should pay is a good question

I know I pay a lot of income taxes, so I guess I am one who pays.

At 3/15/2009 7:47 PM, Anonymous Anonymous said...

One thing I wonder about...with all of these foreclosures happening seemingly "everywhere", and job losses are "everywhere", then where are all of these people going? They probably can't buy the more affordable houses for themselves due to bankruptcy, bad credit from being foreclosed on, etc. Are they going to rentals? Apartments? Going back home to live with family or friends? There are so many empty houses...so they aren't living in those (yet). And many of the houses that are empty need a lot of work to be habitable again or just need to be bulldozed. New houses have grinded to a near halt. So, again, where are all of these people going? I can't imagine everyone's moving to North Dakota or similar where the unemployment is below average. I don't know if there's any data helping paint the picture of whatever trend is happening.


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