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Monday 23 December 2013

Fixing the Housing Market - Ziad Abdelnour

The scope of the problem in the American housing market is illustrated by the statistics that total negative equity is presently estimated at $750 billion, and about 15 million homes are "underwater."1 One proposal gaining traction is the concept of a "free" principal reduction for underwater borrowers.  

We argue that this and all other government and policy proposals to "fix the housing market" the last few years fail because they throw good money after bad in targeting only the most distressed and riskiest borrowers, many of whom previously acted recklessly and/or may not be able to stay in any home -- or even pay a modest rent -- without outright government subsidies. 

Such borrowers are beyond rescue and efforts to "save" them are neither worthwhile nor truly aimed at helping the housing market or the lenders whose credit is essential for real estate finance.

Continuous Reading:

Thank you

Ziad Abdelnour

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