The Politics of Falling Home Prices
That record annual decline in home prices announced on Tuesday seemed like more fresh evidence of an ailing economy that’s not set to rebound anytime soon. But Peter Viles of the Los Angeles Times blog, L.A. Land, looks at it differently, and so might others who live in bubble markets where homes appreciated dramatically during the boom. Viles points out that home prices in California, Las Vegas and elsewhere need to keep falling to go back to levels that are actually affordable to would-be homeowners. The pain just has to be endured.
Viles explains this to put in context his concern over recent remarks by Sen. Barack Obama, who told NBC’s Tom Brokaw over the weekend that there needs to a be a floor in the housing market, “a stop to the decline in housing values.” That may be helpful in Cleveland, but not in L.A., where a home remains out of reach for many people.
In some circles of Washington, and particularly the Democratic Party, this is not a controversial idea: that the government’s goal right now should be to stop the decline in housing prices. But here in Los Angeles — where housing prices remain high relative to income, and home ownership levels remain low relative to the rest of the country — there are many who believe the government should stand back and let the market determine housing prices. Example: The reader who calls himself “Home prices need to get lower,” who wrote here earlier today, “My ray of hope is that home prices will continue to slide and housing will become affordable again.” Another example: Reader “Manny,” who wrote here today that he makes $90,000 and can’t afford a decent house: “The markets are still not affordable. I hope more correction is on the way.”
Viles contends Obama’s remarks didn’t get noticed, but that he “committed some news” with them. I think Viles is picking up on something that still doesn’t get addressed in the housing bill or in other rescue ideas. The mortgage crisis is not a one-size-fits-all problem. The nearly $4 billion in the rescue plan for communities to buy up foreclosed houses won’t mean a thing in L.A. or Arizona, where buyers will soon enough scoop up bank-owned properties because they still have value. But it will be beneficial for Detroit or Buffalo, where that doesn’t happen because the properties aren’t worth it. When politicians weigh into this mess, they need to be careful their proposed solutions don’t end up offending the people they’re meant to assist.