Both new home sales and existing home sales are down again this month. What’s different is that the declines in sales have become so regular that they are no longer a surprise. The surprise is that anyone expected them to do anything else in this economy. There has been a lot of happy talk for the last year or so about how the economy is recovering, yet the numbers don’t support those claims, and I don’t see anything happening that would lead me to think so. When an economy recovers business picks up and employment with it. Now we have the Administration telling us that 10+% unemployment is the new normal. Given that those numbers are jiggered to start with and that here in California it is actually higher than that it is no surprise that housing is down. I am not the only one to notice all those For Lease signs along the commercial districts I drive through every day and the ever growing squads of homeless folks where there were none before. Makes me long for the good old days of 2004 when we were told that 5.1% unemployment was last seen during the Great Depression (which actually was about 17% over the course of those 12 years, and those were pre-jiggered numbers).
But a solution has been found! Here in the Land of the Bust (no, not the Playboy Mansion) the California legislature has allocated $200,000,000 for more State tax credits to first time home buyers, doubling the amount allocated to the purpose last year. No, seriously, and Governator signed it.
Full speed ahead! This time the Titanic really is unsinkable. We don’t need no steenkin common sense! We’re going to re-inflate the housing bubble to save us from the lingering effects of the housing bubble! Yay! Break out the bubbly, let’s celebrate!
Say, what?
Oh my goodness, where do I start?
Housing inventories are down. Nobody who has equity and can help it wants to sell in this market, and most people don’t have equity and so can’t sell in the traditional way. Thousands and thousands of people who should have been foreclosed on over the course of the last year and a half are still in their homes and not paying their mortgages. These people should be dong short sales but are just riding it out until something happens to put an end to their misery. A lot has happened: moratoria, freezes, false hopes based on weak and ill-conceived government programs, the banks’ unwillingness to acknowledge their losses. Meanwhile there are still loads of buyers out there who think that the market has bottomed out and want to get their $8000 of “free” government cheese.
Meanwhile California has dug itself into a $20,000,000,000 hole and can’t get out. With tax revenues plunging despite substantial tax increases, continuing job losses, skilled workers and entire businesses fleeing the State for sunnier economic skies and impending bankruptcy what do our political masters do? They do what they always do: double down on deficit spending. Why do you ask? Still clinging to the Keynesian economic model (which was discredited seventy years ago and repeatedly since then) they seek to stimulate the goose to lay more golden eggs not by feeding it, but by giving it a suppository.
This will only drag the crisis out even further, as it always does when government tries to solve government created problems with taxpayer dollars. The system is clogged with toxic assets which need to be purged. Keeping people who can’t afford their homes from experiencing the pain of foreclosure makes as much sense as helping people suffering from food poisoning retain the meal that gave it to them. The process is unpleasant, messy and smelly, but it is necessary. The sooner it gets done the sooner its over. So lets stop with the phony solutions and do what we all know has to be done.
