The Natural Rate of Home Ownership and Solving the Foreclosure Crisis
The Home-Buyer Tax Credit, low mortgage interest rates, cessation of most of the new home construction, time to heal and wide scale reduction in prices have allowed many housing units to be absorbed naturally in the market. The low-hanging fruit has been done at this stage.
The issue remaining is what about the rest of the crisis and inventory. The shortest answer is keeping the first time buyer credit intact a while longer (perhaps one more year) and more time at these low rates, as long as inflation isn’t being touched off. The crisis took many years to build and will take more years to pass. Individuals need time to reset their expectations, for the market to normalize and natural family formation and population growth to assist in the absorption. At these low interest rates and prices, those that have capacity to buy will do so, either for occupancy or rental to those who can’t buy. Personal credit needs to be rebuilt and those that damaged themselves financially a chance to recover. The federal government’s near