Housing Crisis: Do Nothing?

Today’s New York Times has an interesting, and rather distressing article regarding the continuing distress in the housing market; economists, realtors and politicians cannot decide on whether or not to continue trying to support (and maybe even salvage) the housing market; neither option appears very promising.

In sum, if nothing is done, prices will correct to natural levels; that would be unpleasant for present homeowners but a boon for new purchasers; the downside, however, is that more existing owners may decide to default, if they see more negative equity.  On the other hand, continued efforts to prop up the market may not work, will cost lots of money, and are politically unpopular.

The lack of consensus may end up bringing about the old political answer: do nothing.

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