Monthly Archives: August 2008

“The housing meltdown persists and will continue for at least another year or two,” writes David Galland. “Unless, of course, the government gets serious about ‘doing something’… in which case, the downturn could last five or 10 years.

“Why do I say that? What the market needs most of all right now is for house prices to fall, as quickly as possible, to a market-clearing price. The problem, of course, is that thanks to the self-serving exuberance shown by many appraisers during the real estate bubblemania, at this point, nobody actually knows where the bottom is. Another 10%? 20%? 30%?

“There really is only one way to find out… let the brush fire burn, as painful as that will be. But as I don’t need to tell you, ‘doing nothing’ is not a concept that politicians in an election year are very comfortable with. And so, like trained seals leaping after vote-fish, the politicians will jump through any number of hoops to keep people in their homes, even though many can’t afford the carrying costs, let alone the mortgages. That only prolongs the pain and increases the government deficits that are at the core of the current crisis.”