Let The Market Work

From: sean
To: csaid@sfchronicle.com
Subject: Home Buyers Get A Break???
Date: Sat, 26 Jan 2008 11:13:37 -0800

Carolyn,

I read your article this morning.  I believe your article took a very slanted
angle towards the housing issue in the bay area.  To me, the bigger picture is
that housing is weakening, prices are coming down, subprime is imploding, credit
is tightening, lending standards are cleaning up, house flippers are going away,
America's deficit is rising, the American consumer is saving less and
accumulating more debt.  How did the American citizen get here?  The Fed Reserve
cut and held the interest rates too low for too long, coupled with lax lending
standards, coupled with the advent of the securitized investment vehicles.  This
is all unraveling now.  So how are we going to fix it?  Let's do it all again!
Let's lower interest rates to new lows, increase American's ability to take on
more cheap debt by increasing jumbo loans from $417,000 to $730,000 at better
rates, create more government deficit spending of $150,000,000,000 in hopes that
the American tax payer gets their $600 rebate check and spends it at the mall
instead of paying down their debt. 

Here's another idea: let the market forces work!  Perhaps real estate values
need to come back down to historical norms that Dr. Robert Schiller, Yale
Economist, advocates.  Perhaps real estate is overvalued (according to many
leading economists, real estate in the bay area is 30% to 40% overvalued), needs
to come down, and that we shouldn't support government programs that are
attempting to support artificially high home prices that substantially deviate
in an unhealthy way from historical norms.  If the bay area could truly afford
current prices, then home sales and prices wouldn't be coming down when all
other fundamentals of the economy in 2007 were strong -- low unemployment, job
creation, rising corporate profits, new highs for the stock market.  When in the
history of this country has housing decreased in value while the economy was
expanding?  We need to experience some of the painful corrections that is the
natural occurrence of the excess we've experience the past 5 years. And if all
of this happened, then perhaps folks in the bay area would only need a $417,000
jumbo loan to afford a home in the bay area -- not $730,000 -- and all this talk
of the 50 year mortgage would thankfully go away.  In the long run, bay area
home owners and future home owners would "get a break" if legislation is not
passed to support these artificially high and unsustainable home prices.

At the end of the day, I don't see how it is a break for a home buyer to
consider buying a house valued at $620,000 that perhaps should only be $430,000.
Would a 30% decline in bay area home prices be a good thing for those who bought
in 2004 - 2006?  No.  But when I buy a stock for $100 that is now trading at
$70, I don't expect the government to rush in to support that company so that
its stock goes back up to $100 + dollars to give me relief from my investment
choice.  Let's let things unfold as they need to.  Over market manipulation is
only going to hurt us more in the long run.

Sean from Larkspur