Wednesday, June 16, 2010

what if we could make houses for free?

From Ferome Berryhill's letter to the editor of Reason responding to Anthony Randazzo's article "The Myth of the Recovery"...

First this: "The root problem of mortgage delinquencies has yet to be worked out."

The "root problem" of mortgage delinquencies is that A loaned $X to B so that B could buy a house. It has become clear that the house is not worth $X, and neither A nor B wants to take the loss. That is a problem for A and for B, but for the rest of us cheap housing should be good news. If a machine were developed tomorrow which could produce houses for free, would that be a national disaster?...

What is passing strange here is that a precipitous decline in the price of a very widely used product is regarded as a problem. Is anyone concerned about the failure of the "gasoline market" to "recover" so we can all pay $4 per gallon again?...

The teeth you hear being gnashed are those of A and B. It is their hope that the government will save them from the consequences of their miscalculation, by whatever means necessary. If the result is both higher taxes (for those without offsetting credits) and a return to insane house prices, that will be fine by them.

Houses are tougher than other things, since people purchase them and see them as an investment. In any case, Berryhill is right on the nose with his prescient observations!


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