The Housing Fix : Lower Prices

The Washington Post reports:

the real problem is insufficient demand. There aren't more homes than there are Americans who want homes; that would be a true surplus. There's so much supply because many prospective customers can't buy at today's prices.

By definition, the "housing bubble" meant that home prices got too high. Easy credit, lax lending standards and panic buying raised them to foolish levels. Weak borrowers got loans. People with good credit borrowed too much. Speculators joined the circus.

Look at some numbers from the National Association of Realtors. From 2000 to 2006, median family income rose almost 14 percent, to $57,612. Over the same period, the median-priced existing home increased about 50 percent, to $221,900. By other indicators, the increase was even greater.

But home prices could not rise faster than incomes forever. Inevitably, the bust arrived. Credit standards have been tightened, and the (false) hope of perpetually rising home prices -- along with the possibility of always selling at a profit -- has evaporated. For many potential buyers, prices have to drop for housing to become affordable.

Another great one from Robert Samuelson.