Wednesday, March 19, 2008

The Housing Market - Dear Government, Please Stop Helping!

The bubble in the housing market has finally burst, or has it? It's more of a leak. What's needed to bring the current slog to a halt and turn it around is called "market capitulation". That's when the home sellers, whether it be the bank or private individuals, collectively acknowledge that they paid way too much and accept the loss. Home prices plunge and a new round of opportunity begins.

The problem is that everyone is holding their breath for the government bail out. Homeowners are looking for some kind of principal write-down deal and banks are looking for some sort of government assistance or subsidy. Nobody wants to mark their real estate to the market when it looks like the American taxpayer is going to help them perpetuate this fraud.

The promise of government "assistance" is only dragging out the pain. Let the market do its thing. Yes, people are going to take losses and it's going to sting, but let's just go ahead and yank that band-aid off. You can't start recovering until you recognize the failure. Let the foreclosures happen, let the bankruptcies take place, let the CEO's face the music, then let the aggressive risk-takers come back in and make something new out of the debris. We're trying to prop up a dangerously dilapidated building when we should be clearing the area and letting it fall. Just get out of the way.

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