In April 22's Detroit News, the Associated Press reported housing prices may slump more than during the Great Depression. The doom and gloom reported there will likely lead many to believe we're bound for a depression of historic proportions.
"An influential economist who long predicted the housing market bubble cautioned Tuesday that the slump in the U.S. housing market could cause prices to fall more than they did in the Great Depression, and bailouts will be needed so millions don't lose their homes."
I really hope that didn't surprise anyone.
How many more homes do you think have been built since the 1930s? How much greater a percentage of the population owns homes today than in the 1930s? How much more urban sprawl exists now than in the 1930s?
What we should be wary of is the last part of the sentence above, "... and bailouts will be needed so millions don't lose their homes."
I'm reminded of a column written by John Stossel about how some homeowners deliberately build homes too-close to the ocean because they know the government will pay to rebuild it. Because the homeowner doesn't bare the cost of the risk, and neither does the insurance company, they cavalierly build homes they couldn't afford without depending on federal bailouts. We feel bad they lose their homes, but if they were forced to bare the cost of their risk they may chose to live elsewhere--or at least with less of your tax dollars.
Maybe there were millions who weren't ready to afford their homes. Maybe there were millions who speculated with their lenders that home prices would continue skyrocketing. Do you remember the savings & loan scandal or when the dot-com bubble burst? They were only 18 and 8 years ago respectively.
Who says we don't learn from our mistakes? The government paid for the first, didn't pay for the second, and politicians and the media have all agreed having the federal government pay for our losses scores more points with voters than not--regardless the cost to the treasury.
Maybe there's an opportunity for Detroit and its inner-ring neighborhoods to help these people find more affordable accommodations. Maybe the mortgage crisis, combined with high gas prices, creates a unique opportunity to re-populate cities by creating demand for apartments, townhouses, and other more affordable homes.
So if politicians aren't blatantly lying to us, at least they spend more time telling us what we want to hear rather than what we need to hear. I believe it's possible to change that, and am always on the look-out for that politician.