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Housing Difficulties and the Free Market

Friday, November 13, 2009, 10:07 AM
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There was some important as well as aggravating housing news this week.  It is difficult to see how the US economy is going to truly pick up (I mean without the use of trillions in freshly printed government funny-money) without a recovery in housing. The government and the Federal Reserve have been doing all they can to help housing, but, unfortunately, houses do not trade on a paper exchange, where prices are more readily subject to intervention and manipulation. The Federal Reserve is on track to buy up $1,250,000,000,000 of mortgages and another $225,000,000,000 of agency debt from the GSEs (Fannie, Freddie, and the FHA). The aggravating part of the news cycle was the admission that the FHA is about to run out of cash and become (yet another) drain on the US Treasury.  I say aggravating, because many months ago I was writing about the obvious fact that their new policy of allowing 3% down and ultra-low credit scores was a dead-certain recipe for disaster.

 

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