Let The Prices Fall

An economist offers three reasons why we should let housing prices keep falling. Here is the first:

First, the government has no business trying to make housing less affordable to ordinary Americans. Over the past 10 years, areas like New York and San Francisco, which had always been expensive, became completely out of reach. According to the National Association of Realtors, the median housing price in San Francisco was over $800,000 in 2007, and has declined to a mere $685,000 in the second quarter of 2008. The real problem is not the current price decline, but the previous price explosion.

There is no reason to hope that middle-class Americans should pay more for any basic commodity, whether that commodity is coffee or oil or housing. Government should be fighting to reduce supply-side barriers and make housing cheaper, not trying to inflate prices artificially.

The fourth reason is that if prices keep falling Joel may one day be able to afford a house.

Tuesday, October 7, 2008