How would you fix the economy and budget issues?

[saden1]

Originally Posted by Schneed10

There is no solution. The housing market is a symptom of a weak economy, not a cause of a weak economy.

We had a bubble on home prices for a number of reasons, which all started because creditors were too aggressive in providing funding to people who couldn't afford to make the payments. More people had access to more money, flooding the market with buyers and driving the prices up. Consequently builders saw the prices going up and realized they could make money, so they built tons of homes, driving up inventory. Further, speculators saw the prices going up and placed bets in the market, further driving up home prices.

All of that was possible because people who didn't have the means to pay off the loans were given the loans. Also, most of them had jobs.

Now we have high unemployment taking plenty of people out of the market, so until the job market turns around, you won't have that demand impetus to drive up home prices. And on top of that, we've now instituted sanity into the home loan process, you actually have to be in good credit standing to get a loan at a reasonable rate (imagine that). So all those people who were given the opportunity to shop for homes in the 2000s are no longer able to. As it should be. And consequently home prices are today at the same place they were in 2003-2004. As they should be.

It's such a fallacy to think government can do anything about it at all. You can maybe set tax policy in such a way to encourage hiring and job growth. But you can't do anything to prop up home prices permanently; the first time home buyer credit kicked prices up for a year or so, but you saw what happened when it expired, prices came right back down again.

It costs a lot of money to buy a house. The government can't force people to realize the importance of saving their money and living within their means. If people want to be in the housing market, they need to have jobs and they need to be smart with their money. Judging by the nation's credit card debt and savings rates, it's easy to see that right now too many Americans fall short in those categories.

As unemployment drops, home prices will come up. It will be a very, very gradual process. Just the way it is.

Economic downturn is usually caused by loss of confidence and the housing bubble was a huge confidence buster. I mean, we were talking trillions not billions.